The company reported $36.84 million in revenue in its third quarter of 2020, which represents an 80.4% rise over the $20.4 million reported in same period a year previously. The company was able to post the strong returns despite coronavirus-related closures of vending and health club and natural channel retailer locations, which together had brought in almost a quarter of the company’s total revenue.
Sales in that channel declined 23% in the quarter but were more than offset with gains elsewhere. The fact that Celsius was able to prosper despite that channel being hamstrung is a sign of how far the company has come in its transformation from a niche sports fitness offering to a mainstream active lifestyle brand. The company reports that a full 50% of its customers are now women.
“In the third in the second quarter earnings call, despite these two channels, essentially shutdown, our consumers shifted their purchasing patterns of CELSIUS to other channels, which did not only replace the sales in these channels, but drove record revenues and accelerated revenue growth,” Fieldy told stock analysts on an earnings call. A transcript of the call was posted on the site seekingalpha.com.
Celsius manufacturers a line of supplements in RTD form as well as in new stick packs. The company’s two main lines are its Celsius brand, which features guarana extract, green tea extract and vitamins and minerals, and Celsius Heat, which features more caffeine than the base formulation and 2 grams of L-citrulline.
Concentrating on distribution
In recent years Celsius has concentrated more on operational efficiencies rather than new product development, except in the matter of new flavors, which the company continues to roll out. The Heat product was the last new formulation launched by the company in early 2017.
The company has focused in recent years expanding its store footprint and on reforming its distribution system, converting many accounts to direct store delivery, in which distributors service stores directly rather than shipping products to a retailer’s distribution warehouse. The switchover is part of the streamlining of the company under CEO John Fieldy’s leadership. Fieldy was brought on to help refocus the company when it hit a rough patch in the early 2010s.
Among the moves that Fieldy undertook was to transition the company’s Chinese distribution to a licensing/royalty model. Celsius had invested a significant amount of capital into entering the market without significant return before Fieldy decided early in 2019 to essentially cut the company’s losses.
Fieldy’s moves have been greeted with enthusiasm by stock traders. Celsius stock traded in the penny stock category from late 2010 to early 2015, only breaking the dollar-per-share barrier in February 2015. The company’s stock entered 2020 trading at about $4.60 a share. With the positive earnings reports this year, the company’s share price has skyrocketed to more than $32 a share. It’s the highest share price in the company’s history after a brief post-IPO price spike in early 2007.
Can shortage
Fieldy reported only one dark cloud on the horizon: an aluminum can shortage that has affected all drink manufacturers in 2020, which is one of the many market distortions that can be attributed to the pandemic. More people are drinking alcoholic beverages at home and not in bars, which sent demand soaring. Fieldy said the industry will be short as many as 30 million cans in 2021. Fieldy said suppliers had told Celsius that they could support the company’s needs through 2021, but could not supply the additional cans needed to realize the company’s projected growth. To compensate, Fieldy said Celsius has deals in place to source cans from overseas suppliers, but that will cost more, cutting into the company’s bottom line to some degree.
