8-K: Celsius Expands PepsiCo Partnership, Acquires Rockstar Brand

Celsius Holdings strengthens its strategic alliance with PepsiCo, acquiring the Rockstar Energy brand in the U.S. and Canada and expanding PepsiCo's distribution rights for Celsius, Alani Nu, and Rockstar products.

Summary

• Celsius Holdings, Inc. (Celsius) and PepsiCo, Inc. (PepsiCo) have entered into an Amended and Restated Distribution Agreement, effective August 28, 2025, significantly expanding their commercial relationship.
• Celsius acquired the Rockstar Energy brand in the U.S. and Canada from PepsiCo and its subsidiaries.
• PepsiCo's exclusive distribution rights now include Celsius Licensed Products, Alani Nu Licensed Products, and the newly acquired Rockstar Licensed Products across the U.S. (excluding Puerto Rico and U.S. Virgin Islands) and Canada.
• Celsius issued and sold 390,000 shares of Series B Convertible Preferred Stock to PepsiCo for an aggregate purchase price of $585.0 million in cash.
• The $585.0 million purchase price for the Rockstar acquisition and expanded distribution was set off against the $585.0 million paid by PepsiCo for the Series B Preferred Stock, resulting in a net cashless exchange for these specific transactions.
• The Series B Preferred Stock is initially convertible into 11,304,348 shares of Common Stock and carries a cumulative dividend of 5.00% per annum, payable quarterly in cash, in-kind, or a combination.
• PepsiCo's distribution commitment, termed 'Captaincy,' requires commercially reasonable efforts to sell and distribute Licensed Products in the U.S., including adherence to annual planograms and period priorities.
• PepsiCo's targeted margin under the U.S. Distribution Agreement will increase from [***] to [***], with further increases to [***] or [***] if Licensed Products achieve specific dollar share thresholds (e.g., [***] or [***]) of the U.S. LRB Energy Category.
• Celsius will receive an 'Energy Product Fee' of [***] of any 'Energy Fee Product' sold by PepsiCo in the U.S. or Canada during the Captaincy Period.
• Michael Del Pozzo, PepsiCo's President of North America Commercial and Customer, was appointed to Celsius's Board of Directors, increasing the board size from nine to ten members.
• PepsiCo retains the right to designate two directors to Celsius's Board, which may reduce to one or zero based on its beneficial ownership of Celsius's common stock (as-converted) or Captaincy termination.
• Celsius has the right to require PepsiCo to carry up to [***] Licensed Product SKUs.
• PepsiCo is restricted from selling or distributing certain competing energy drinks in the Territory during the Captaincy Period, with specific exceptions and potential accrual amounts for Celsius if market share thresholds are met after [***].
• Celsius will fund [***]% of Celsius-branded coolers, while PepsiCo will fund [***]% of Distributor-owned energy portfolio coolers.
• Financial statements for the acquired Rockstar business will be filed by amendment to the 8-K within 71 calendar days.

Sentiment

Score: 9

Explanation: The filing indicates a highly positive strategic development for Celsius, significantly expanding its brand portfolio with Rockstar Energy, securing enhanced long-term distribution with PepsiCo, and receiving a substantial capital infusion. These moves are expected to drive significant growth and market presence.

Positives

• Acquisition of the established Rockstar Energy brand expands Celsius's product portfolio and market reach in the energy drink sector.
• Expanded exclusive distribution by PepsiCo for Celsius, Alani Nu, and Rockstar products significantly enhances market penetration and leverages PepsiCo's extensive distribution network in the U.S. and Canada.
• The 'Captaincy' commitment from PepsiCo ensures dedicated focus and commercially reasonable efforts for Celsius's brands within PepsiCo's distribution system.
• Increased targeted margins for PepsiCo under the U.S. Distribution Agreement incentivize stronger performance and market share growth for Celsius's products.
• The issuance of Series B Preferred Stock to PepsiCo for $585.0 million provides a substantial capital infusion to Celsius, strengthening its balance sheet and supporting future growth initiatives.
• PepsiCo's board representation aligns strategic interests and provides valuable industry expertise and oversight.
• The 'Energy Product Fee' and potential 'Management Fee' create additional revenue streams for Celsius from PepsiCo's sales of certain energy products.
• The right of first refusal for Celsius on new channel distribution and for PepsiCo on certain acquired products ensures strategic alignment and potential for further growth.

Negatives

• The complexity of integrating the Rockstar brand and managing expanded distribution agreements could pose operational challenges.
• PepsiCo's increased influence through board representation and significant preferred stock ownership could dilute control for existing common shareholders.
• The targeted margin increases for PepsiCo, while incentivizing, could potentially reduce Celsius's own margins on distributed products.
• The non-compete clauses for PepsiCo have specific limitations and potential termination conditions, which could allow PepsiCo to introduce competing products in the future under certain circumstances.
• The requirement for Celsius to offer employment to Business Employees from the acquired Rockstar brand could entail integration costs and potential HR complexities.

Risks

• Failure to successfully integrate the Rockstar Energy brand into Celsius's operations and product portfolio could impact expected synergies and profitability.
• Challenges in transitioning Alani Nu distribution rights from existing distributors to PepsiCo, potentially leading to legal disputes or delays.
• Reliance on PepsiCo's 'commercially reasonable efforts' for distribution, which, while strong, may not always align perfectly with Celsius's aggressive growth targets.
• Market share targets for increased targeted margins and non-compete conditions are subject to competitive pressures and consumer preferences, and failure to meet them could impact financial incentives.
• Potential for conflicts of interest arising from PepsiCo's significant ownership stake and board representation, particularly concerning competitive product development or distribution priorities.
• Regulatory scrutiny or delays in obtaining necessary approvals for the various agreements and transactions, although the filing indicates HSR Act compliance is a factor.
• The need for stockholder approval under NASDAQ Marketplace Rule 5635 for full conversion of preferred stock, which could introduce uncertainty or limitations on PepsiCo's ownership until obtained.

Future Outlook

The expanded partnership with PepsiCo, including the 'Captaincy' commitment, is expected to significantly enhance Celsius's market presence and distribution capabilities for its core Celsius, Alani Nu, and newly acquired Rockstar brands. The tiered targeted margin structure incentivizes PepsiCo to drive market share growth for Celsius's products. Celsius anticipates leveraging PepsiCo's extensive network to achieve greater scale and profitability, with ongoing strategic collaboration on planograms, marketing, and product innovation. The capital raise through Series B Preferred Stock provides financial flexibility for future growth.

Management Comments

• The parties acknowledge that the harm to Celsius resulting from a breach of the financial statement delivery obligation may be difficult or impossible to determine accurately and, therefore, the $15,000,000 payment constitutes liquidated damages, not a penalty.

Industry Context

This announcement positions Celsius as a stronger contender in the highly competitive liquid refreshment beverage (LRB) energy category. By acquiring the Rockstar brand, Celsius gains an established player with existing market share, complementing its rapidly growing Celsius and Alani Nu brands. The deepened partnership with PepsiCo, a global beverage giant, provides unparalleled distribution reach and marketing muscle, which is critical for scaling in the fragmented and dynamic energy drink market. This move could intensify competition with other major players like Monster Beverage (distributed by Coca-Cola) and Red Bull, potentially leading to further consolidation or strategic alliances in the industry.

Comparison to Industry Standards

• The strategic alliance with PepsiCo, a major beverage distributor, is comparable to Monster Beverage's long-standing distribution agreement with The Coca-Cola Company, providing Celsius with a similar competitive advantage in terms of market reach and logistics.
• The acquisition of an established brand like Rockstar Energy is a common strategy in the beverage industry for companies seeking to expand their portfolio and capture additional market share, similar to how larger players acquire smaller, niche brands to diversify offerings.
• The tiered incentive structure for PepsiCo's distribution margins, tied to market share achievements, is an advanced form of performance-based partnership, aiming to align the distributor's interests directly with the brand's growth, a practice increasingly adopted in high-growth consumer goods sectors.
• The board representation granted to PepsiCo, a significant investor, is a standard corporate governance practice for strategic partnerships and substantial equity investments, ensuring alignment and oversight at the highest level.

Management Changes

Corporate Governance

Related Party Transactions

• Celsius Holdings, Inc. (Company) and PepsiCo, Inc. (Distributor/Purchaser) are entering into multiple agreements, including the acquisition of the Rockstar brand by Celsius from PepsiCo, the issuance of Series B Preferred Stock by Celsius to PepsiCo, and expanded distribution agreements. These are significant transactions between related parties due to PepsiCo's existing and expanded equity stake and board representation in Celsius.

Stakeholder Impact

• **Shareholders:** The acquisition of Rockstar and expanded PepsiCo distribution are expected to drive significant growth and market share, potentially increasing shareholder value. The issuance of Series B Preferred Stock to PepsiCo provides capital but also introduces a new class of preferred shares with specific rights.
• **Employees:** Celsius will offer employment to Business Employees from the acquired Rockstar operations, potentially expanding its workforce. PepsiCo employees previously involved with Rockstar will transition or be managed by PepsiCo.
• **Customers:** Consumers will see Celsius, Alani Nu, and Rockstar products more widely distributed through PepsiCo's extensive network, potentially increasing product availability and choice.
• **Suppliers:** The expanded operations and brand portfolio may lead to increased demand for raw materials and co-packing services, impacting existing and new suppliers.
• **Creditors:** The $585.0 million capital raise from PepsiCo strengthens Celsius's financial position, potentially improving its creditworthiness.

Next Steps

• Celsius and PepsiCo will cooperate to obtain any necessary third-party consents for the transfer of Non-Transferable Assets.
• Celsius will prepare and deliver a Proposed Final Closing Statement for the Rockstar acquisition, detailing the Closing Net Working Capital and Purchase Price adjustment.
• PepsiCo will deliver audited and unaudited financial statements for the acquired Rockstar business to Celsius by November 4, 2025, to assist Celsius with SEC reporting.
• Celsius will offer employment to Business Employees from the acquired Rockstar operations.
• The parties will agree and implement a Separation Plan for the transfer of Transferred Assets and Liabilities.
• Celsius will remove or obscure PepsiCo Trademarks from promotional materials and facilities within one year, while depleting existing inventory.
• Celsius and PepsiCo will cooperate on annual planograms and period priorities to maximize distribution and sales of Licensed Products.
• Celsius and PepsiCo will discuss and agree upon payment mechanics for additional margin due under the U.S. Distribution Agreement.

Key Dates

Recommendation

This filing represents a transformative strategic move for Celsius. The acquisition of the Rockstar Energy brand immediately expands Celsius's market share and product portfolio, diversifying its offerings within the high-growth energy drink sector. More importantly, the deepened 'Captaincy' partnership with PepsiCo, a global distribution powerhouse, provides unparalleled access to markets and distribution channels in the U.S. and Canada for Celsius, Alani Nu, and Rockstar products. The $585.0 million capital infusion from PepsiCo, coupled with performance-based incentives for distribution, significantly strengthens Celsius's financial position and aligns PepsiCo's interests with Celsius's growth. This strategic alignment and enhanced distribution capability are critical for long-term success in the competitive beverage industry, making Celsius a 'strong buy' for investors seeking growth in this sector.

Keywords

Energy Drink, Distribution Agreement, Acquisition, Preferred Stock, PepsiCo, Celsius, Rockstar Energy, Alani Nu, Beverage Industry, Strategic Partnership, Capital Raise, Corporate Governance