Move over Celsius Holdings(NASDAQ: CELH), there's a new growth story in the energy drink space. Alani Nu is an energy drink with similar branding to Celsius that only launched in 2018. And it's clear that the latter is outgrowing Celsius (and others) by a mile.
Alani Nu is owned by privately held Congo Brands, which means that retail investors don't have access to precise and up-to-date numbers from the company. But there have been peeks behind the curtain every now and then.
For example, Alani Nu is headquartered in Louisville, Kentucky, and Louisville Business First listed it among the fastest-growing businesses in the area. According to this publication, Alani Nu grew revenue by an astounding 271% in 2021, reaching $228 million.
For perspective, 2021 was a great year for Celsius as well, but it wasn't as good as it was for Alani Nu. For its part, Celsius' revenue was up 140% to $314 million. In short, Alani Nu took more market share than Celsius in 2021.
Unfortunately for Celsius' investors, it seems this trend has continued. Again, precise numbers are hard to come by. But in Celsius' own investor presentations, Alani Nu is seen as a fast-growing brand. In the first quarter of 2024, Celsius estimated Alani Nu's market share at 2.9%. In Q3, Celsius estimated Alani Nu's market share at 3.5%.
The emergence of Alani Nu has investors worried for Celsius. In fact, professional analyst Robert Moscow from TD Cowen downgraded his outlook for Celsius stock specifically citing competitive pressures from Alani Nu, according to Seeking Alpha. And while it would be too much to say that this is the only factor involved, it's clear that this partly explains why Celsius stock has plunged 74% from its all-time high -- the competition is gaining.
Be that as it may, I believe it's premature to abandon Celsius stock simply because of competition from Alani Nu and others. Celsius has some under-appreciated strengths that can help it win this game.
What Celsius has going for it
It's important to mention that according to the same investor presentations I cited earlier, Celsius is also gaining market share in the energy drink space. According to the company, from Q1 to Q3 its market share went from 11.4% to 12.1%, which is a meaningful jump.
Therefore, Alani Nu is rising fast. But it seems to be rising more at the expense of other players in the space and not so much at the expense of Celsius.
Here's another thing to remember: Celsius has grown into quite a financial powerhouse that's capable of defending itself. The company has more than $900 million in cash and cash equivalents and zero debt. And through the first three quarters of 2024, it earned $164 million in net income.
A business's financial position isn't everything. But having a strong financial position, as Celsius does, certainly helps in times of heightened competition. Financially stronger companies can spend more to keep and acquire customers, can sustain longer periods of pressure on profit margins, and more.
Finally, part of Celsius' robust cash position is due to an equity investment from PepsiCo. Yes, Pepsi is an investor in Celsius, giving it a vested interest in the success of this energy-drink company. For this reason, I find it unlikely that Pepsi would allow smaller, upstart companies to simply waltz in and take Celsius down.
To summarize, Celsius is still taking market share, it's in a position of financial strength, and it has beverage titan Pepsi on its team. To me, this suggests that Celsius will be just fine for years to come.
What this means for investors
If fears about Celsius' future are overblown, that's where things get interesting for investors. Right now, the stock has dropped considerably, as mentioned. And it now trades at a much lower valuation. In fact, from a price-to-sales perspective, Celsius stock is 36% cheaper than larger rival Monster. And Celsius stock is more than 50% cheaper than its 10-year average valuation.
Without going into detail, I believe Celsius still has many years of growth potential before it. It's still a relatively small player with opportunities it can exploit. If it does indeed continue on a growth trajectory, then Celsius stock is quite the bargain today for long-term investors.
For what it's worth, I believe this will ultimately be the case for Celsius stock. While competition is real, the company is still in a good spot to grow long term. And in light of this, the stock is a great value for those who buy today.
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Jon Quast has positions in Celsius. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.
