More distribution, esports deal helps drive rapid growth for Celsius

16-Aug-2019 - Last updated on 15-Aug-2019 at 15:20 GMT

Celsius photo.

Energy drink company Celsius continues its meteoric rise with a greater emphasis on marketing spend, distribution growth and a new tie in with an esports organization. And like many other beverage companies, Celsius has a CBD product waiting in the wings.

Celsius reported revenues of $30.6 million for the first half of 2019, which represents a 40% rise for the same period a year ago. The earnings report continues a trend of rapid growth for the company; in all of fiscal 2017 the company reported $36.2 million in revenue, and notched $24.1 million the year before that.

Greater distribution in NYC; China deal comes on line

Celsius signed a distribution deal in the second quarter with Big Geyser, which services 20,000 locations in the greater New York City area, an area with a population of more than 12 million people. Celsius CEO John Fieldy said he expects the brand will achieve nationwide distribution within 12 to 15 months.

In China, Fieldy said the partnership with Qifeng Foods is now operational. The deal will pay Celsius $6.9 million over five years with the arrangement converting to a straight royalty payment in the sixth. Through Qifeng, which will also manufacture the products sold in China, Celsius will have distribution in 65,000 locations in as many as 65 cities. The deal will help Celsius recoup some of the $12 million it spent in trying to develop the Chinese market.

Fieldy said the company is also expanding its customer base in Hong Kong and is entering the Malaysian market.

Esports partnership

On the esports front, Fieldy told analysts in an earnings call that the company has developed some important partnerships in this rapidly growing segment. Fieldy said Celsius has been named by esports organization Echo Fox as its official drink partner.

“Echo Fox is home to some of the world's top e-sports athletes and fields teams across a variety of titles including League of Legends. The organization focuses on player development, competitive achievement and effective training practices aligned directly with our mission to provide functional healthy fitness drinks to a new generation of athletes,” Fieldy told analysts, based on a transcript of the earnings call posted on the site seekingalpha.com.

Esports is becoming a huge business and one that is increasingly being taken seriously by investors. EchoFox recently announced that one of its ten team slots, roughly analogous to a franchise in the NFL or other sports leagues, was for sale and reportedly had received a bid of more than $30 million from billionaire Stan Kroenke, who owns such ‘real world’ franchises as the Los Angeles Rams of the NFL, soccer club Arsenal of the English Premiere League, the Colorado Avalanche of NHL and the Denver Nuggets of the NBA.

“It is estimated that esports reached 335 million people worldwide in 2017 and is predicted to grow to over 600 million consumers by 2023. This signing represents our first venture in the esports arena,” Fieldy said.

Ready to roll on CBD

In response to a question from a stock analyst, Fieldy said Celsius is ready to go on the CBD front just as soon as the regulatory fog clears.

“CBD is definitely something we've been working on for some time. We do have a CBD product in our portfolio ready. We are watching the regulations. We don't have a definitive timeline today, but we will be ready,” he said.