Yet Another Value Podcast - Pershing Square Challenge 2026 third place: Celsius $CELH

Episode Date: May 28, 2026

Celsius trades at ~20x earnings while growing ~18% a year, cheaper than Monster (~34x) and even Coke (~25x) despite faster growth. The Pershing Square Challenge third-place team makes the long case for $CELH: the market is sleeping on the Alani Nu acquisition, and their 500-person proprietary survey says the brand loyalty is real. Andrew pushes back hard on the Costco/Kirkland private-label threat, the heavy reliance on Pepsi distribution, and whether energy drinks are just the next "protein" fad waiting to be disrupted.CELH pitch deck: https://www.dropbox.com/scl/fo/rsyotzf7g2efkj9rfmg23/AHHk4_h_6CU12R-dTrAOtH4?rlkey=664lkpggv77rwkzh3rh78826q&e=2&st=0s4tiwjy&dl=0This episode is sponsored by Trata. Trata is buy-siders interviewing each other; it is the fastest way I know to ramp up on a name. See a sample here: https://www.trata.com/celhChapters:0:00 Why energy drinks (and Celsius) are a passion1:13 Sponsor: Trata2:46 Meet team Celsius, third place at the Pershing Square Challenge4:23 Why they picked Celsius for the pitch7:19 The setup: ~20x earnings, ~18% growth, an underpriced Alani8:47 Why the market is discounting Celsius10:09 The Costco/Kirkland private-label crash, and the rebuttal12:26 Andrew's pushback: don't loyal buyers just order in bulk?16:14 The proprietary 500-person survey18:48 Distribution vs. brand: is the survey actually a bear case?22:31 The Pepsi relationship: Rockstar, the 11% stake, and the risk26:08 The Alani acquisition: sugar high or smart capital allocation?31:24 Are energy drinks the next protein? The fad debate38:40 Valuation: the Coke and Monster arbitrage43:38 Wrap-upLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

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You're about to listen to yet another value podcast with your host, me, Andrew Walker. Today we have, I am so excited. One of my passion projects, do not, whatever you do, do not tell my wife, do not tell my mother, but what of my true passions, energy drinks? We have, from the Pershing Square Challenge team Celsius is coming on. They came in third in the Persian Square Challenge contest, and we're going to talk about their pitch on Celsius. And all of the interesting work they did, they did a really interesting proprietary survey, talking about consumers.

They survey over 500 energy users consumers. they're willing to switch. What happens if it's out of stock, all this sort of stuff? So we're going to talk that. We're going to talk at the Alani acquisition. We're going to talk upside. It's really interesting because this is a company that is growing, let's call it 10% per year.

It's forecast to grow. It's trading at a 20 XP, and that growth is in line with to Monster, their best peer that is trading for 35 XP, and it's much higher than peers like Pepsi or Coke, who are trading for similar or better peas despite much more growth. So it is an interesting story in terms of, A, it's a product. I love. It's a product.

and can understand. It's an interesting story where they've got an acquisition, they've got an integration risk, they've got risks of new entrants, they've got all sorts of us. So we're going to talk about it on the podcast. Why am I telling you that? But so we'll get there in one second, but first, a word from our sponsoring. You know what? I'll just do the library now. This product, this podcast is sponsored by Trada. That's t-r-a-ta.com. You've heard me mention it multiple times on the podcast over the past few months. Trada is a product that I really have come to love and enjoy. It is it is bysiders interviewing each other. So you get a bowl and a bear on. a stock, a bear in a bear, a bull and a bull. They come together and say, hey, I want to talk

about Celsius. And they talk about it. And if you are an investor and you have access to this network, it is by far the best way I know of to ramp up on a stock. You know, reading the company's 10K is one thing, but seeing two investors who have actually thought about invested in our falling in a stock, talk about in real time all the risks, all the rewards, all the opportunities, what they're seeing, what their market might be missing. Seeing that on one page, it is the best way I know to think of a stock, and, you know, particularly if you're a journalist like me and you come into a company, they're going to point out 15 different things that you've never thought of or 15 industry specific things that are really going to treat your memory. So if you are interested, go to

Trata, T-R-A-T-A-com slash C-E-L-H. That's the Salsia sticker. And if you go there, you're going to see part of a interview that I read to prep for this transcript between two bysiders who are a little skeptical of the Celsius story. And they're by-siders who are really good at CPG. And they're going to tell you all the reasons why, including, hey, you. energy drink right now, just like protein three to four years ago, where there were a lot of new entrants that really disrupted incumbent. So I'm rambling, trada.com, trataata.com. I think you're going to like it. I know I love it. And if you like this podcast, I think you're going to like it. So thank you Trotta for sponsoring this episode. And let's get to the Celsius podcast.

All right. Hello. And welcome to the yet another value podcast. I'm your host, Andrew Walker. Today I'm happy to have, I'm going to call them Team Celsius. Team Celsius from the Persian Square Challenge. I believe you guys place third in the Persian Square Challenge with Celsius. So congratulations. Thank you. I'm going to let you assure yourself in one second, but let's just get the disclaimer out the way. Remind everyone, nothing on this podcast.

Investing advice. There's a disclaimer on the show notes, full disclaimer at the end of the podcast so people can listen to that. So guys, again, congrats. I'd love to, if you guys could just take, you guys might have been at a disadvantage because most of the other teams are three or maybe even four. You're a team of two, but I'd love if you just take a second, introduce yourselves, give a little a quick background if that makes sense.

Thanks so much, Andrew, for having us on the podcast, big sign of the podcast, and it's a pleasure to be on this. I'm Jast Thothlani. I'm originally from Mumbai and India. I spent about three years in private credit to venture debt and private equity back home, focusing on financial services and consumer products in general. And, yeah, I came to Columbia Business School with the aim of working in the public market space going forward.

Thank you again for having this. My name is Hideo Okada. I'm originally from Tokyo, Japan. Before coming to CBS, I work at the Japanese Commercial Bank as a credit analyst. I'm here as CBS as a company-sponsored student. At CBS, I have been taking a range of investing classes to broaden my understanding across the asset classes.

I joined to the Person Square Challenge, mainly as a learning opportunity, and I was fortunate to team up with jazz. He is a so strong analyst. Well, that's awesome. And, Jess, by the way, I've got to congratulate you on the timing because you mentioned private credit in your background. And, you know, if Columbia, I know first year starts in around August, leaving private credit to go get your MBA around August of 2025 is in benefit of hindsight. That's about as good a trade as you can make.

So let's dive into it, guys. I'd love to just start with, you know, the purchase square challenge. You want to value NDA, all this sort of stuff. But picking the stock is one of the critical things. You know, that's a strategic choice. you could pick, I think, pretty much any stock in the world above a certain size. So let's just start, what made you guys kind of zero in Celsius as your choice? So let me quickly walk you through our thought process initially.

So we wanted to basically try to do something in a domain that we were comfortable with, given my background was more than consumer investing, you know, internet companies, financial services companies are consumer discretionary with the three main sectors you were looking at. and we did evaluate, I think, two companies in each of those sectors. But I think we landed on Celsius because there was so much noise on both sides of the field

in terms of it being a potential short as well as a potential long. And we felt that as a company, there was avenue for us to do research and figure out which way we can get onto based on up the plightly understanding of students. So like the survey we did, for example, which you can talk about later in the podcast,

as part of our pitch, that gave us some great insights. And I think had that come out to be negative, you could have easily gone short on this company. That was the main idea for this. And also we're going to do something pretty fun. So I think it sort of tick both buckets. Look, in terms of tactics, I just think the great thing is Celsius.

You say Celsius energy drink and any American consumer, I know the international is just being served, but any Americans can be like, oh, I walked by it. They've got an idea. And as you mentioned, the first thing that jumped out to me when I was reading the deck, and listeners can go, there'll be a link to the deck and the show notes and everything. But it was, it starts on page eight, I believe, the proprietary survey you did. Like, when I saw that, I was like, hey, you know, in terms of tactics, understanding like this is the thing you want in a contest, something that is something that's completely unique, something that shows you did the work and really drives a thesis woman. I just thought that was great.

I did. Did you want to add anything to that? Well, it's the reason why we choose energy drink. One thing I wanted to ask is, I'm probably one of the most experienced energy drink consumers at CBS. So that is another reason. You and me both, my friend. And so I'm tempted to go run to my backpack. In prep for this podcast, I bought an Alani, and I will admit, oh, I like it.

They've got the little Celsius packs now, you know, it's just a pack. And every morning, instead of buying these cans and having to, every morning, I just get some cold water out the fridge. I take a Celsius pack, strawberry coconut's my go-to, but I've got a few flavors, get them auto-ordered from Amazon. And long-time listeners will know I'm a big fan of energy. It is good to me to fellow brethren there. Okay. So I don't think we need to talk about what Celsius is. And everyone, it would be shocking to me if there's anyone who doesn't know what Celsius is.

Why don't we go to the more important question? We've talked about why you chose. People know what it is. What makes Celsius interesting as a stock right now? I think I could take that and he could add on. What we found pretty interesting about the stock was that Celsius has recently acquired this plan called Alani Nu, but the market is not really value that in too much in terms of its growth prospects going forward. So what we found is that the company continues.

on its growth directly primarily from the Alani acquisition. And I think Q1 results have come in. The brand has grown about 60% Y-O-Y on that quarter. And if it continues on this plan, then it's pretty looking at, you know, 18% type of three-year forward growth, which the market is just not valuing today, given its forward multiple, it's only 20x today.

So that's below market multiple for the company that's growing way above market expectations, way above the overall market in general, as well as expanding operating margins. So I think a mix of both of them is what makes this company really cheap today. Monster today is at a 34x forward. Coca-Cola today is also like a 25x or 24-X forward multiple. So we're way lower than both of these companies, in spite of having growth estimates, even if you just trust the analysts and not look at us,

they believe this is going to grow in terms of earnings as much as Monster. So that's just a great arbitrage opportunity from our perspective. So it's awesome to me what you're saying is, look, You've got this company that is trading below the Coke multiple, below the monster multiple. It's growing faster. So the market is clearly missing it. Why do you think the market, like, again, these are, I don't think you're unique in saying this, right? Like, this is the type of thing you pull up Bloomberg and you can see in five seconds,

oh, monsters, oh, I got X percent growth and trades at 30x. Celsius says X plus 6 percent growth and trades for 25 bucks. Why do you think the market is discounting the Celsius story? So I think two main factors. One is, like we mentioned, that maybe the market is not focusing so much on the newly acquired brand, Alani and is focusing more on the course Celsius brand, which has only grown about 6% the last year and has continued to do so this quarter. So Celsius on its own is sort of like legacy brand now market level type of growth going forward. So maybe the market is pricing that in without focusing too much in the newly acquired brand. And number two might be a terminal value type of problem.

saying that, you know, there's a lot of competition in the space. You have a lot of new competitors coming in, like Bloom is on the rise. You have update, for example, the new Kim Kardashian brand that's on the rise. You have ghost with the tie-up with KDP. So a lot of incumbents are coming in. And maybe like Kirkland Energy also, for example, the private label launch, which crashed the Celsius stock quite a bit. So this could maybe post questions on terminal value.

We don't believe so. And our survey has found strong brand recall, like you said, every or no Celsius today. So we don't think it's a product that's really going to go away the next five years, you think about a consumer discretionary, but maybe that's what the market is pricing in. Hita, did you want to add anything there? No, I think. Just the question is sorry. You actually were hitting on a lot of things that I wanted to build on.

So let's start. I don't think this is the biggest one, but the stock did crash, you know, in February, March, about 15% when Kurtwin, when Costco slash Kirkland rolled out, you know, it's never, hey, this is the Celsius knockoff, but it is, like, hey, this is Celsius. You know, back in my college days, I liked the five-hour energies. And Kirkland comes out, and it was like a five-hour energy. They just didn't call that. You guys have an interesting rebuttal to the Costco as a bare-case thesis. So why don't we just go into that?

And again, I don't think that's the biggest bear thesis, but it is the most approximate one. So why don't we start there? I agree with you. And, you know, when that came out, we are in the middle of our pitch. We're like, okay, we got to do some work about this for sure to try and see if for long or not. And I think the work we did show that we're on the right track. It's basically this. There's two main reasons why we believe Kirkland energy is not going to pose a medium to long-term set.

Number one is most consumers typically buy energy drinks as an impulse purchase. 70% about your convenience stores. Like you said, you know, you're driving around. You're going to go to the gym. Your construction worker heading to work. They pick up an energy drink. They want to have a good, they want to just drink it, get that energy bus and go on, right? You're not going to order this in bulk.

You won't go to Costco and buy this in bulk unless you're a diehard fan in general. So for this to work, you're going to have a big change in consumer habits to have to kick in. And number two is if you look at private labels on its own, right? They typically work pretty well for staple products, which are very price sensitive in nature. Like toilet paper, for example, packaged water, for example. Not so much when brand values in effect. We saw this play out with Kirkland sodas, you know, Coke and Pepsi. they do pretty well against it.

They also saw this with light beers. So we think that this is going to continue for the energy drinks as well. And like you said, if they decided to copy Celsius now and not Monster and Red Bull, then Celsius on the light path, right? Why would you copy something that's not working? You know, so on the one hand,

I had a pushback to that and an agreement of that. So my pushback would be, you know, He'de, I'm sure, can enjoy me. If you're a real energy drink user, you order these things in bulk, and you're drinking them. You know, I like to have one, if I'm drinking up the can, I like to have it cold in the morning and I'll get an Amazon 24 pack.

And moving on for me, like, I was reading to prep for this, I was reading them at recent conferences and they talk about, hey, Celsius and Alani, they, one of the interesting things about them is they skew much more heavily female, right? And they were talking about Celsius is a millennial target. A lot of times it's a working woman and it's instead of drinking coffee in the morning, you know, she wakes up and they talk about, hey, we over index the Amazon, right? because the person buys a 12-pack of Celsius, gets it delivered, they have it daily in the morning.

And when you start thinking about that consumer, whether it's me, power chugging these things, or the more professional working woman, that is somebody who is buying them in bulk. So I kind of like a monster, I do kind of get a few, wrote-up bulk monsters, a monster is much more the convenience store. I don't know with Celsius. I don't know about that. So I'll pause there because I do have a support for what you said, but I'll pause there on that pushback because when I was reading, I kept hearing them say, cost is not a big. big deal, but a lot of our, and they are even pushing back on, like, credit card data saying,

hey, ignore the credit card data because a lot of our people are ordering from Amazon. And when I hear order from Amazon, I am hearing we order in bulk and that Costco is a risk. I'll pause there and then I have a positive support. So for sure, we do agree that, you know, compared to other energy things, I think Celsius is revenue, 10% of that comes from Costco. The industry average is five. So you're not incorrect to say that, but 10% on its own is still a pretty small number. if you look at, I mean, the entire pie.

And number two is just to say that as a habit, like usually what we found from our survey also, is that this is more impulsish in nature. And again, Celsius and Alani are today still sold at a Costco. So it's not that the customer, if they're really brand loyal, which is again, what our survey said. They're not going to pick up another drink because it's going to be cheaper because they want that flavor profile that Celsius gives them and the feel that Celsius will give them. So that's what we believe will go forward. And I think quarter one's data has shown that growth has not really fallen. Quarter two will be super strong again because the slowout has not happened as much.

I think that will be a great indicator for that taste as per se. And then on the support side of this, I mean, to what you're saying, there is a long history of private label rands, whether you go back to Sam's Club, Coke or, you know, whatever it is, it's just even if you have the exact same flavor, which it's not, but even if it was the exact same flavor, There is something about when you're eating something, when you're consuming and especially drink. Like beer is another great example. Like there just is something about the brand that the store club doesn't match. Whereas if it's something, you know, a paper towel is a paper towel, whether it's the PNG brand or the costo brand.

You don't even know once it's on the roller, but once on the roller for the most part. So I think history does suggest like, hey, these private label brands just with drinks in particular, it's very difficult. and I think you guys did a great job of pointing that out in your rebuttal. Anything else on the Costco risk or the private label risk you want to talk about, or there's plenty of other things I want to talk about here. Now you're spot on. I think he did, do you want to add something? Well, having some data point regarding the energy drink,

private label brands, and we have like 0.5% share overall. So, yeah, as we discuss, I think the customer nature is pretty different from other consumer products. So yeah, we are comfortable about. So far, the private label brands are not a huge risk for our thesis. We've mentioned the proprietary survey that you guys did a few times. And again, I thought this was great. And it was so interesting reading and seeing the difference.

Why don't we talk about, I want to step back and we'll come back to the stock and everything in a second. But why don't we talk a little bit about the proprietary survey you did? And I want to talk about all pieces of it. Hey, you know, again, the listeners can go see. It's page eight of this slide deck, all include a link. too, but what was the proprietary data? What were the learnings?

And kind of how did you guys, let's talk about the methodology, how did you go about structuring this, getting it commissioned, all this or stuff. So let's talk about the whole overview, kind of from soup to knots, if that makes sense. Yeah, so let me talk about the overall characteristic of the survey. So we run a proprietary survey through a professional resource panel called prolific. So three findings stood out. First, Alani have the highest repurchase score in the entire category. Second, Celsius score was probably in line with Monster and Rutball.

So, Celts is not a fat brand. It's this with the established incumbents on loyalty. And third, and this was an interesting one, but newer brand like Blue or Goals show weak loyalty, so their own buyers rate established brand higher. So that tells us entrants in the female segments are struggling to build real loyalty, while Alani already has it. We also look at repeat behavior, repurchase behavior. For Elani, new, meaningful share of a consumer said

they expect to buy the brand more often over the next six month. Saleses also show the positive signs, although it is already a more mature brand than Elani. And another important point from Arsenal is what consumers do when their favorite energy drink is not available. I think we discussed about this already, but this matters because it tells us whether any drinks are planned purchase or impulse purchase. The result were fairly clear. 63% of consumers said they would switch brands and buy their second preference.

Another 8% said they would just buy whatever drink is available. So more than 70% of buyers are willing to switch on the spot rather than walk out empty-handed. So the main point is that availability matters a lot. And if the product is not on the shelf, many consumers will not wait. They will switch. So this is why distribution as shell presence are so important in this category. Strong brands matter, but the brands also need to be available at the moment of purchase. So this will bleed into, so Celsius for those who don't know is distributed by Pepsi, monsters distributed by Coke.

Well, I'll talk about that later, but this will kind of bleed into it. you know, I thought it was interesting. A, you know, when you're reading it and you read the first, the first line in the proprietary survey, which is look how strong the survey says that Celsius and Alani are in terms of retention of brand loyalty versus others. You read that and you're like, oh, that's Nirvana for a brand, right? If you're a brand, if your people are more loyal, like you grab more sure, all the, it's just a really great time. But then I read slide 10. And as Heide mentioned, I'll just kind of round it. If you really break down, you've got five different things that people can do.

and if you break it down, if somebody goes and their preferred flavor is unavailable, it kind of rounds to 90% of the people are going to buy another energy drink right there and then, and 10% of the people will, it's actually 12%. 8% of them will go to another store to find the brand that they want, and that's where you're really talking, right?

I'm going across the street to find it, and then 4% of them will skip buying energy drink all to doubt. And you guys were using this as kind of a bulk of, case, and when I read it, I actually was kind of thinking, oh, this is an example of distribution is much more powerful because, you know, if somebody goes in there saying, I want a Celsius, and there are no Celsius, there are just ghosts and monsters. I'm just picking it off the top of my head. There's a nine and ten chance. They're going to buy that. So, you know, if I'm a ghost or monster brand and I can go to 7-11 and say, hey, we're going to buy you out, right? No Celsius for you.

We're going to give you advantage pricing. And 7-11 might say, oh, but we're going to lose sales. And they say, no, the survey says nine out of ten people are going to eat it and still buy the monster. So I was kind of looking at that as a bear case, that, you know, people are less sticky. Because just to ramble for one more second, you know, I'm sure we've all gone, been with friends, gone to a restaurant. And the friend says, I want to diet Coke. And the waitress says, oh, I'm sorry, sir. We only have diet Pepsi.

Can I bring you about Diet Pepsi? I will tell you it's way higher than one intent friends are saying no. Like it's probably two-thirds saying no, one-third saying yes. And that was just an example to me of, hey, I don't know if these brands are as strong. So I rambled a lot. I'd love to just toss those thoughts over to you because you all said bull case and I was kind of seeing a bear case there. That's a good point. And I'm glad you brought that up.

So the reason why we put that as a bull case is to highlight that brand loyalty is super important if all options are available to you. Right. Now, through Pepsi's distribution network and our research found, that Pepsi has one of the most penetrated in the US and North America today. So you're very more likely to find a product that is distributed by them, which is going to be Celsius and Alani on your shelves today. To your example, if a ghost would go to a 7-Eleven and say, I want to buy out everything, they're going to be like, hey, you know, we have relationships with Monster, that Bull and Celsius or like Pepsi.

And they're not going to let us do that, right? Because those guys just come and say, hey, you know what? We'll give you a better discount. We'll give you a better promo. And this is what we got when we, spoke to a current sales lab that used to work at Alani and now works at Monster. So this is their sales strategy in general, like when they need to move a product or when they want more shell space, they simply lower prices, put out of promos and get that done.

So having that distribution is super, super important. And like we said, when the main competitors over here, which are your ghost or your Bloom, for example, if they are more likely go to Alani, then that's sentence Alani's own brand standing. Another bear case point is that Alani is just a fad. Hey, it was just the Fed, and they're going to lose to incumbents. The incumbents, like Alani, almost as much, if not more. So that was our thinking on this.

He did you want to ask you that? I think, yes, if questions are thorough, but our point is Celsius has both of the brand and the distribution network. So if you look at the other competitors, someone who has both is pretty rare. so we thought this is the moat. Let's spell off distribution then. So Celsius is distributed by Pepsi, and Pepsi and Celsius, I mean, they are intertwined,

right? I think in 2025, Pepsi has Rockstar, which I don't think it's crazy to say they mismanaged. You know, Rockstar was a burgeoning brand in like kind of 2008 to 2012 range, if I remember correctly. It never took, it kind of sold out as soon as the Rockstar got it, it never took off, and they sold it to Celsius. So Pepsi has an equity investment of Pepsi. They're really tied up. You know, there is a parallel. Monster and Coke have had a similar type relationship for a while where Monster's independent,

but Coke owns a bunch of equity. And Coke's basically said, Monster is our energy. That's basically where Pepsi and Celsius is. But, you know, it does kind of strike you based on my bare case where I say, hey, it seems like distribution matters more than brand. Right now Celsius is their brand. But we're talking about it. If you say 20x multiple, right, you kind of need 20 years plus of earnings to just get your money back.

20 years is a long time. Pepsi might change the strategy seven years from now. You know, maybe they want to watch. How do you think about the dynamics and the risks of the Pepsi relationship when you're lying so heavily on that distribution? And like, you know, the last thing I'll say there is, if you lose Pepsi, there's Pepsi. Coke's locked up with Monster, so you don't have Coke. There's cured Dr. Pepper, but they've got ghosts and they don't have great distribution.

I think they lean on kind of the Coke and Pepsi dish really lot. So if you lose Pepsi, there's kind of no one else. So it feels like all the powers over there. How did you all think about that? I think you did hit the nail on the head on that, that it is super important for an energy drink plant to have, you know, that distribution network in place, and Pepsi is literally everywhere in North America today.

Why we believe that Pepsi is not going to start its own energy drink plant is two main reasons. Number one is when we spoke to an ex-redible EVP. He said that, you know, typically innovation is pretty tough to come by by existing legacy brands. as a reason for why that Bull Monster could not capture the market Celsius was in. Given it was a duopoly for so long, Celsius became so big, they could have easily copied it, and they've tried to put out products competing against it.

They've not done as well because you need that DNA, you need the understanding of consumer, you need the team to be at it in order to get that done. And that's been difficult. Now, similarly, Pepsi and Coca-Cola have also faced the same issues. If you look at what they've done the last 10 years with the soda business going down as much, Coca-Cola's focused a lot more on the acquisitions. Not all have worked out, some have worked out brilliantly well, but it's all been acquisition focused.

It's not been, we're going to start our own division, or we're going to start our own, thought up vertical targeting towards this, mainly for this issue. That's what we've noticed, and that's why we believe that it's not going to be likely that Pepsi's going to do this. And number two is the equity stake as well.

Pepsi has 11% stake in Celsius. So for it to start its own energy-drink company would be for it to devalue its own equity stake in the same. company, even though it's easier for them to really lie on saying, hey, you know, we have a great distribution network today. Let's continue backing the product, penshoring it guests everywhere. These guys seem to be doing something correct.

And they're the largest sugar-free company that is today in the space. Then I don't see a reason why they don't want to compete against that. No, look, I certainly hear you, though, it's an 11% stake. Let's just round it and say it's worth a billion dollars in Celsius is a $10 billion market cap, right? I definitely hear you, but it does always jump out to me as it's like, hey, they've got the equity stake. They're not incentivized. It's like, well, yeah, but would they rather, like, build their own thing and own 100% of something?

Or would they rather own 11% of this thing that, you know, they still want to control the brand. And it's just the tough one. Let me go to two other race sound like that. If I go back to earlier in the presentation, you guys, it seems are really bullish on the Alani acquisition. And, you know, I think your bullishness, I think a lot of people are worried that Alani grew and the Pepsi distribution will help them, right? But I think a lot of people are worried that the growth is, it's funny to say this about Celsius because they're a sugar-free company and Alani is a sugar-free-free-go.

I think they're worried it's a sugar-high-type growth, right, where they were doing a lot of LTO's, Lumberet-only's, a lot of special flavors, maybe a lot of discounting. I think people are worried that the growth there is temporary. it's a sugar high. And then the other worry I tack on is, Jess, I believe you mentioned, hey, Celsius is kind of hitting the mature phase.

And I think a lot of bears would say, hey, Celsius is supposed to be this great growth product. There's still a lot of shares to capture, whether it's domestically or particularly internationally. And they went out and bought Alani. And people generally go do like bulton acquisitions. Not when there's a lot of growth left on the core product.

They kind of do it when the growth is starting to solve and they say, we need a new vector. So I think those are the two bear points, say on the Ilani acquisition, I'll toss it over to you guys to address either one in whichever way you want to. So just before answering that question, I think another point that just struck me about the previous topic of conversation was Pepsi did have lock star, right? So if it did want to grow an energy drink plan, it did have the option to do so, but it

chose not to do so and it didn't work over you. There you go. So, yeah, I think that's like more enough for maybe the next five years. Of course, you can't predict the future like you said, 20 years out. But I think for the next five years, that is the case. And Monsters multiple has never deflected this guess such, right? Like, Monsters face the same of this for the last 10 years, 15 years, never faced that issue. So I think it'll be a little unfair just to be less healthy or something like.

If I can add on, I mean, look, I think once or twice, and I can't remember. I hadn't brushed up on my notes in Monster. I think once or twice Monster and Coke went to the brink. Now, Coke owns more of Monster, but I think your real bull point would be both what you said, hey, Pepsi got out of the game. They gave Rockstar over to Celsius and then B. Monster and Coke got to the brink. And every time both of them came up back to the table,

and Monster Stock has been a rock star to use an interview. So, like, even though I look at it and say, hey, it seems like the distribution is way more important. You know, the brand has been able to pull through here. So I think there's a, you know, if there was no Monster Coke relationship, I would think this was a much bigger risk, but you had stress it. Anyway, I was hitting on the Alani acquisition, both the sugar high piece of it and the Hays, the Celsius piece, start out.

I'd love to hear what your all's thoughts are on that. Do you want to go first on this? Yes, please go first for me. Okay, sure, no worries. Yeah, basically, I think first on the acquisition, if you want to talk about it, I think what Celsius, the management realized, was that their product, like you said, was targeting most of the millennial women as well as Gen Z, like most of the Gen Z males. They realized there was a big hole in terms of targeting Gen Z women.

They realized Alani was the biggest brand in that space. And that's a growing sector in Chandwell. So I think we had a couple of slides detailing also where growth in sugar free is coming from. And it was this area. So we then to get an asset at $1.8 billion for a brand that then went on to do $1.3 billion of sales the same year. It was pretty effective use of capital at that point. So it was more of addressing a market that they were not to winning at, a market that was going pretty big and recognizing a brand that had potential to go on and supplement its own

offerings pretty efficient capital allocation two is on the international growth piece i think the company management has also had a lot of messaging about how they want to go about this in a pretty cautious manner international expansion has never been super big per se on their plans recently they did enter into a lot of planning agreements like they are sponsoring the astin martin f1 team, for example, similar to what Red Bull and Monster have been doing. They have distribution agreements in Centauri available out there. But it's not going to be super big. And I think it's going to be a three to five year forward type of vision given international revenues only 5% of the business today. So their main focus is going to be the US domestic markets. And number three would

just be, if you look at Celsius on its own, right? I mean, 6% is broadly market level type of growth. So they've achieved like, you know, a standalone brand share of about 10% in the total market. they've got on another brand that is going to continue to grow, and they're focusing on more of a portfolio of brands approach rather than a one brand company approach. So that's what we think is going to be the main key aspect of this going forward. Me is switch a little bit. So I've got two last questions, then we maybe talk international for a second,

then Rhett's up. But I was prepping for this call on reading a Trotter call, and there was one thing in it that just really jumped out to me. somebody, it was an ALSU followed a consumer for a while, and he came out and he said, hey, the energy drinks right now remind me of protein a few years ago. And he mentioned, look, there were the old incumbents. There was, like, insure which your parents, your grandparents, when they couldn't eat, like the insured price of drink.

There was muscle milk, which I took a lot of in college. I was a big muscle milk guy. The cookies and cream flavor. And what they said was, look, they all got disrupted by newcomers. And then over the past three years, because, like, the pace is accelerating. and, you know, the brand is easier to build than ever with Instagram and influencers all this. The newcomers got disrupted by the new newcomers, right? So, and I would just give a brief anecdote.

When I was in college, which was 20 years ago, which actually works nicely for the story, I worked at a vitamin world. You know, I was selling vitamins and a vitamin world just opened underneath my little shoebox office that I have in New York City. And I go there, you know, once, twice a week to get an energy drink. But when I walk by the protein, I don't recognize 95% of the brand. right. Now, 20 years is a long time, but we've mentioned Celsius trading at a 20x multiple. You're underwriting 20 plus years of terminal value. And to bring it back to the Trinacal, they were saying,

look, it reminds energy drinks right now remind me of that then. Like you had Red Bull and Monster, and then you had Celsius company, now we've got Alani. Now we've got ghosts. And guess what? There's a lot of brands coming underneath that. Liquid death is coming out with an energy drink. And liquid death, you know, if they can sell freaking bottled water in a can't? Like, what can they not sell? You know, Liquid Death's coming out. You guys mentioned Bloom. C4 has been pretty popular. I think that's been around for a while. There's form, which I thought was a 7-11 house brand, because I only saw it at 7-11. I guess it's an energy but there's a lot of others. And if you go Google, you'll see a lot of others coming up.

Bucked Up is out there. There's bomb energy. I think bucked up is Jocko. I don't really know him. But all these influencers are starting to come out. I think Jake Paul had one. So I worry that we talked about the distribution mode, but I do worry that there's, that there's There's just a lot of brands coming out here, and it's going to get really competitive in that protein thing. Now, protein is a different thing than protein is a lot lighter, easier to ship, a lot easier to put in a small space. But I really have worries that there's a lot of competition coming.

So, again, I ramble a lot. I'd love to hear what y'all's thoughts on that is. For sure. So I think in a nutshell, what you're trying to say is that there's a lot of fads going on right now, right? There's a lot of new and Celsius, just a fad. And I think we did have a slide to cover this because this was this point that we also considered when we were thinking about, hey, should we go short the stock? Because it was just a fad.

It could go to zero. 20x is way too high for something like this. But I think we had two main data points that contradicted the fad view that we had. Number one is both the Celsius and the Alani brand have reached some sort of escape velocity in terms of revenue. They're both about $1.5 billion to date. No energy drink company has got to that size and has failed. All of them have then only gone on to be bigger. And I know you're saying that if you look at a forward view perspective,

so let's take prime energy for example. You mentioned that that was Jake Paul's brand, for example. It had a huge upsell. You know, they had insanely loyal customers for a short period of time. They were the number one Google trending brand, even above Monster and that pull at some point. But they fell equally as fast because there was no real market for them. And because customers beyond a point,

it's like, okay, you know, we tried it once because the influencer told us to not so much anymore. It's so funny because Prime is just like the perfect example where I remember I walked in. I was like, what is this brand? I had no idea. And then I saw I was Jake Ball and like three weeks later at the CPS. So it was like, buy one, get $5,000 free.

Please take all the Prime drinks from us. So it is a great example. And another one I would just throw on to bang energy drink. You know, that was a big one. They did a lot of viral marketing on Instagrams with a, there was a crazy article detailing it. It was girls and bikinis to sell these things. It was very hot for a while.

It was not sustainable and that's gone. But to your point, like Monster, Red Bull and probably Celsius, once you kind of hit over a billion dollars, it's probably sustainable. So I'm sorry for interrupting. Please continue. But you're part on with that. So the core aspects for this is like you said, it's pretty easy to get a lot of traction early on.

But what differentiates a fad from actual loyalty is continuous-repeed customer purchase? without spending marketing dollars on that, right? Now we're seeing early signs of that. Like this quarter, for example, SG&A as a percentage of revenue, has fallen by about 500 pips for the company. So they're not throwing money in marketing to get the sales that they're getting to right now.

The loyalty survey thing that we did, right? It shows that, hey, customers really want to buy this product and increased frequency was what they indicated, saying that, hey, you know what, we're going to continue buying this product. You won't really do that for something that's just a fad. Or when you have so many options available, they may say, hey, you know, what you're going to try something else, or maybe there is an alternative flavor you're going to try or things like that.

There was not a lot of negative sentiment per se, especially towards Alani. So that's why we thought that this brand has proven to be, you know, a company that has come up from a community base of just how they're building themselves. They've always put community first. A lot of their own flavor offerings also, for example, have come out from the community itself. So the cotton candy flavor, which is one of Alani's top selling SKUs. came up from the community because a lot of people were just commenting on TikTok saying,

hey, you know what, less like cotton candy. They put that the test and they've actually gone about to do it. So they focused on community building. They have enough scale. The Pepsi distribution is going to get them into more places as such. And that's why we think this one is not going to be a fad in channel, but it's going to be one of the companies to stay quite a bit. So yeah. I asked this as my fellow energy, brethren, do you like Celsius or Awani? Well, I'm almost addicted to Celsius and I'm really jealous because I'm from Japan and so far Celsius and Elani are not available in Japan, so I'm waiting for their international expansion. One of the bull cases where Celsius is 5% international sales, the monsters at 40.

So you're just laying out why the bull case exists. I don't know, like, the one thing is, Alani and Celsius are, their flavor-proof oil is so different than everything else on the market. You know, Alani is really effing sweet. And Celsius, it's like, I don't even know how to describe the flavor. It's weird fruit flavors for the most part. They're very strange. I'm not a big fan compared to all of them, but I just think it's interesting how a ghost versus a rain versus a monster,

I couldn't really tell the difference. I hate Red Bull. I could obviously tell the difference I drink Red Bull. But when I drink a Celsius or a lot, like there's something about it. I would instantly know that it was that. So I don't know. It's probably neither here nor there for the stock, but it's interesting. Last question.

Let's talk valuation, quick. This is a, I call the 10. It's actually, I think, a 7.5 billion market cap right now. Evie rounds to about 10 billion. You know, I'm just looking if you forward estimates are probably high to high single digit to low single digit revenue growth. You know, I'm looking at Bloomberg. They've got $2 per share of EPS in 2007. So on a $30 stock that's like two-year-forward out, let's just call it 15 times EPS.

It's not expensive. That's cheaper than the market multiple. But also, you know, when I look at those numbers and I talk about the distribution risk from Pepsi that might reared set at some point, I talk about the market is getting competitive risk, the risk with the particularly the Alani fat risk. You know, it's not screaming at me, hey. This is smashing me in the face of opportunity. So I'd love to just ask you guys, how do you guys think about valuation here? Yeah.

Okay. So I think interesting point on the consensus numbers. And I think a lot of the consensus numbers are going to change, given how the next couple of quarters are going to be, because there's going to be an effect of how they're going to take in the Alani acquisition in terms of how that's coming along. It's going to be an effect of the private label. Like you said, the biggest risk that they're facing is that really working, is they really not? So I think there are a lot of triggers or catalysts.

is that can really push the stock upwards or can change the earnings estimates as such. If you were to look at how we've gone out to build our model, we basically said, hey, operating margin to expand by about 200 bibs over the next three years. Sayas is going to grow by about 18% Kaggle of the next three years, mainly led by Alani. We don't think those numbers are that he didn't say,

and like, okay, one quarter is only gone by, but Alani has met that number, so has Celsius. And then we get a scenario, which is, I think, 2.6 In terms of where the 28th numbers are going to be at another 27 number, so slightly higher. But that's basically how we've done it more in terms of like a fundamental approach. And then we're like, okay, if you were to give it

the multiple it had before the Kirkland associated clash, it would then give you the aisle of what we had about 25%. That, now that multiple, I guess, is pretty much everything saying, okay, you know, why would that company get the multiple? And I think that's when the bulk case starts to come and saying, you know, if three years down the line, this company is going to have about four to five billion dollars

total sales, it can then start looking at international expansion. And then is what the monster story starts kicking in, in our opinion, saying, hey, you know, Monster went from about 5 to 10% to 10% international to 40% in 10 years. Can this company also do the same thing? Pretty much so. I mean, I don't see any reason why, like Asia has a very low-hanging fruit about that. Like Eide said, Japan loves energy drinks. I love the Asian countries to create avenue to enter.

The flavor flow files are pretty similar. So it's just a matter of finding the distribution partner. and I think that's where we came from per se. So, yeah, it's basically diverged in some of these estimate numbers is where we're coming from. No, in many ways, look, I think you guys, I mean, this is a one-stock pitch, but in many ways, I think the more interesting thing about Celsius,

and I'll remind everyone nothing on this podcast, as investing advice, but it's almost the arbitrage of point out, right? Like, hey, this is trading at, let's just say 20, 20 times P.E. And Coke, which is much slower growth, is trading, And probably, you know, GLP1, sugarhead wins. It may be a sugar. I mean, I'd love it if we tax sugar in the future. But, you know, Coke is forecasting 8% forward to growth.

So Coke trades at a bigger multiple and it's growing slow. Now, Coke also has the Lindy effect of 100 years of the Coke brand and international with Mosser. You know, I think it's got a similar revenue estimate growth. And it's trading for 35 times speed. And you Celsius, again, trading at 20. So, like, even if you said, hey, Andrew, I'm with you, there are distribution where here, there's competition. Well, guess what?

The competition concerns play double for Monster because Monsters got more of the market. So if this is fragmenting and, you know, monsters probably a little less, as I said, it takes monster and rain tastes the same. Now Monster and Rain are owned by the same people, but Monster might be a little less differentiating in Celsius, so

the competition concerns might hit them harder. To me, like, it makes sense as long pieces, but almost it's unfortunate you can pitch like the long short side of it, you know, because it seems like in the basket or for KDB is a completely different animal. Let's see.

Yeah, I think we remember anything else on valuation you would talk about? I think you had the nail on the relative part. I mean, I spoke a little bit more on the insinsect part where we came from, but yeah, relative scale to any XP, if you look at just the broader market, like we said, yeah, you have this, but so that's the broader market in general today, especially at these valuations. Even if you were to, let's say, discount growth a little bit, you look at the operating margin expansion component, you're still looking at a double-digit earnings quo type of flow file

of 12, 15% at a lower-than-market multiple, which is still pretty fair. So it's still a unique opportunity to enter this company, definitely. Perfect. Well, guys, look, unless you have anything else you want to talk about, I think we can go ahead and wrap it up here. But anything else we should have hit or anything? Anything from your side? No, nothing from me.

Well, look, A, I want to tell you guys, congrats again. And I've said it in some of the other pods, but every judge is telling me this is by far the best set of entrance just from both the finalist, but even before the finalist. So congratulations on, and third place, I mean, that's awesome. So congratulations on that. Thank you guys so much for coming on. Again, I'll include a link in the show notes to their deck, which I keep looking over here at their deck and everything in the show notes. And we'll have some contact info in there if anybody wants to reach out anything. But just Ida, this has been awesome.

so much for criminal and we'll talk soon. Thank you, Andrew. Appreciate it. Thank you so much, Andrew. A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor.

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