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Celsius is a ‘disruptive’ force in the energy drink market, CEO says

Celsius CEO John Fieldly joins Yahoo Finance Live to discuss the energy drink's second-quarter earnings beat, positioning in the energy drink sector, and its partnership with Pepsi.

Video transcript

AKIKO FUJITA: We want to shift to another company here. Celsius Holdings recently posting promising second quarter results on the back of a considerable investment from PepsiCo. Here to tell us more is the company's CEO, John Fieldly.

John, it's good to talk to you today. Looking at the stock today, certainly, you saw a big pop in the quarter. When you look at the sector that you're competing in or the space in the beverage space, I mean, this is a fast, fast growing business. Talk to me a bit about some of the tailwinds that you've been seeing as you continue to monitor this growth.

JOHN FIELDLY: Yeah, no, absolutely. And thanks for having us. We're really excited. What's interesting about Celsius, we're capitalizing on three of the fastest trends in food and beverage. It's better for you. Everyone wants better for you. We have over seven essential vitamins with green tea, ginger, guarana. We all want more function in the foods we consume. Celsius is a clinically proven thermogenic to help you burn calories and body fat and accomplish your health and wellness goals. And we're born in fitness, and fitness is a megatrend. So that's what we've been capitalizing on over the last several years.

And as we've been gaining more broader distribution, the brand is resonating with a much broader consumer base than ever before. Really excited about this partnership with PepsiCo as well. That's going to take us to more consumers than ever-- than we could have imagined. So as we look at US, the health and wellness trends here are the same health and wellness trends on a global base, and this partnership opens up a global opportunity for us now.

RACHELLE AKUFFO: So, John, why now in terms of this partnership with Pepsi? And what does this do for the brand to partner with, obviously, this legacy brand in Pepsi?

JOHN FIELDLY: Yeah, well, what's interesting, this gives Pepsi a real big opportunity to disrupt the beverage category and energy. And energy is one of the fastest growing categories in food and beverage. And when you really look at their portfolio, they don't have something that's disruptive. Celsius is disruptive. We're the number two energy drink brand on Amazon, one of the fastest growing brands in the category.

And if you look at the latest Nielsen scan data, as of last month, Celsius's growth in the category contributed to 34% of the category growth, number one growth driver. So, it really gives them an opportunity to be a mate with a brand, a fast growing brand in the better for you space to capture more consumers that are entering the category than ever before.

AKIKO FUJITA: John, I mean, it certainly makes sense for Pepsi to get into the space. As you point out, it is really growing rapidly. But what does it mean for Celsius specifically? I mean, you're already in this energy space.

JOHN FIELDLY: We are.

AKIKO FUJITA: Do you see this partnership as a way for you to capture a part of the market maybe you want to move a little more aggressively on?

JOHN FIELDLY: Yeah, you're absolutely right. So what this partnership does, if you look at the energy sales in the category overall, the largest portion of category sales, really about 67% of the latest data is coming for convenience. We have about 50,000 convenience locations right now, mainly in tier one accounts when you look at, like, 7-Eleven, Racetrack, and Speedway. We're doing very well.

But we want to gain further breadth and depth in the category. And PepsiCo will be able to get us there. Their breadth and distribution and convenience is second to none. And also, when you see college campuses, they have access to over 61% of the college population.

And Celsius is resonating with the new consumer in the energy category. So that's a great benefit for us, and food and beverage. Before, we didn't really have access to food and beverage. We feel the food and beverage opportunity is massive for Celsius, as Celsius is being consumed during launch by a lot of consumers, and really opens up a new frontier for us.

RACHELLE AKUFFO: And John, I want to ask you about inflation. Obviously, consumers having to really make some tough choices right now until things get better. So talk about how inflation is impacting your business and input costs and things like labor.

JOHN FIELDLY: Yeah, I mean, inflation has been tough. It's affecting all of us at the gas pump. You look at gas prices. They're up over double last 12 months. We ship a lot in logistics, so trucking has been really tough on us. We've been feeling the impacts. If you look at our margins, have been impacted in the second quarter. That's reflected in our financial statements. We're taking precautionary, really, initiatives to optimize that.

We're gaining more scale. As we gain more scale, we gain more efficiencies in our supply chain. Also partnering with Pepsi will allow us to streamline our supply chain. We're shipping almost over 2,500 locations now. We'll be able to streamline that down with the PepsiCo partnership. So that should add more efficiencies.

But like any company, we're feeling the pain of all the inflation. We did take a price increase. We'll start to roll that out in the back half of this year. But it's something we're dealing with. And unfortunately, everyone's going to have to deal with it, it seems like, for some time now.

AKIKO FUJITA: And what's the calculation with that price increase? I mean, this is something every company is having to consider. I mean, you think there's enough cushion there that customers are willing to pay for the slight hike for the drink?

JOHN FIELDLY: Yeah, we do. What we see, one thing about Celsius, we're really about living fit. We're essential energy for life, a part of a daily routine, a daily lifestyle. Kind of like when you look at Starbucks and you look at coffee, we feel that we're not a discretionary spend, like a travel, a vacation. Maybe going out to dinner to a particular restaurant, you might choose an alternative.

We do see our consumers are extremely loyal with Celsius. And we feel that we're confident-- we're fairly confident that even if we enter a tough recession, we'll be able to maintain some of our momentum, given the data points we know today. But every recession is different. So we're watching it closely.

RACHELLE AKUFFO: Well, community is everything right now, especially for businesses. A big thank you there to Celsius CEO John Fieldly. Thanks for joining.