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Diving overview:
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Chelsea Holdings spent $75 million to acquire longtime co-packaging partner Big Beverages Contract Manufacturing. The deal closed on November 1.
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This purchase will provide greater control over the supply chain, accelerate innovation cycles and expand production flexibility.
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The deal comes amid a slowdown across the energy drinks sector as consumers spend less and fewer visits to convenience stores, a popular channel for purchasing beverages.
Dive Insights:
Despite the challenges currently facing the energy drinks sector, Chelsea is laying the foundations for an even more promising future.
This transaction will give Celesius a 170,000 square foot modern manufacturing and warehouse facility, providing great flexibility for the business.
Chelsea has the ability to expand its location as your business grows and you need additional capacity. It makes it easier to change production depending on consumer demand for a particular product, or if Chelsea wants to release a limited-time product. In an extremely competitive space led by Monster and Red Bull, unique flavors have proven to play a key role in attracting and retaining consumers, especially younger individuals.
Chelsea also pointed out that controlling more of the supply chain provides an opportunity to improve margins and profitability.
“We believe this acquisition gives Chelsea fantastic leverage to accelerate product innovation and production capabilities to continue growing the energy drink category with great-tasting, functional and high-performing energy drinks.” said Chelsea CEO John Fieldly. , said in a statement.
Charlotte-based Big Beverages has been a longtime Chelsea co-packer, and the facility will continue to be primarily dedicated to manufacturing Chelsea products. Big Beverages management and personnel are expected to continue operations.
Celsius is scheduled to report third quarter earnings on November 6. With the $19 billion energy drinks market struggling with headwinds impacting the broader economy, Celsius must prepare for future growth in the category. Mintel estimates that energy drinks will become a $30 billion business within the next five years. Once relegated to the gym, the research firm noted that nearly half of consumers drink energy drinks several times a week.
Celsius has seen strong growth in recent years as consumer interest in products with better features accelerates – a trend that has intensified during the pandemic. Celsius fits into this category, a drink that’s low in sugar and calories but packed with ingredients that claim to provide exercise and energy benefits without the crash. Last year, sales were $1.3 billion, up from $131 million in 2020.
