Celsius Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 29, 2024

There are 11 speakers on the call.

Operator

Greetings, and welcome to Celsius' Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Paul Wiseman, Investor Relations for Celsius.

Operator

Thank you. You may begin.

Speaker 1

Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings 4th quarter 2023 earnings conference call. Joining me on the call today are John Fieldly, Chairman and Chief Executive Officer and Jared Langans, Chief Financial Officer. The call will open to questions following the prepared remarks. The company released its 4th quarter earnings press release earlier this morning and all materials are available on the company's website, celsiusholdingsinc.com, as well as on the SEC's website, sec.gov.

Speaker 1

As a reminder, an audio replay of this call will be available later today and can be accessed with the same live webcast link in our conference call announcement release. Please be aware that this call may contain forward looking statements which are based on forecasts, expectations and other information available to management at this time. These statements involve numerous risks and uncertainties, including many that are beyond the Company's control. Except to the extent as required by law, Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward looking statements. We encourage you to review in full our Safe Harbor statements contained in today's press release and in our quarterly filings with the SEC for additional information.

Speaker 1

Additionally, management will share operating results on both a GAAP and non GAAP basis. Descriptions of the non GAAP financial measures that we use such as non GAAP adjusted EBITDA and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release for the Q4 of 2023. With that, I'd like to turn the call over to Chairman and Chief Executive Officer, John Fieldly for his prepared remarks.

Speaker 2

Thank you and welcome everyone to today's call. Also welcome to Paul Wiseman, who recently joined Celsius as our Senior Vice President of Communications. Celsius had a stellar 2023 Q4, the best earnings year in our company's history. We have achieved nearly complete distribution coverage in the United States, topping 98% ACV, which is a major achievement, putting our products in reach of more consumers and more consumption occasions with greater flavors and size options than ever before. In 2023, Celsius set a new yearly revenue record growing more than 102 percent or $664,000,000 in sales to finish the year at just over $1,300,000,000 Celsius is now truly a $1,000,000,000 brand.

Speaker 2

Our impressive share gains in 2023 have resulted in Celsius becoming the 1st company to break the 10 share barrier in more than a decade. According to Sukana, IRI's recent 4 week read ending February 11, 2024, in total energy US, Celsius held a new record of 11.5 share nationwide in MULAC. The energy drink category is now a 3 team race. As of January 2024, Celsius had exceeded a 15 share in over a dozen US markets and a few of those we are within just a few points of our next closest competitor or have already taken them. Our strong innovation pipeline continues to delight consumers whose taste for 0 sugar energy drinks has nearly tripled the overall category sales to a 0 sugar majority.

Speaker 2

Although this year we have launched 2 new core SKUs, Sparkling Raspberry Peach and Fizz Free Blue Raspberry Lemonade. In addition, 2 new Celsius vibe flavors, Astro Vibe and Galaxy Vibe, which has taken our Space Odyssey Trilogy even further with the launch of our cosmic vibe in 2023 in Circle K. Celsius also launched Celsius Essentials product line, which has proven essential performance energy with essential amidos. We are executing our plans to grow the business internationally, taking a methodical approach in each new market we enter. We're very pleased with our sales in Canada after 2 months in the country, consumer enthusiasm and acceptance has exceeded our expectations.

Speaker 2

We're pursuing disciplined growth in our best in class sales and marketing organizations. And just 2 weeks ago, Celsius was recognized with the 711's prestigious 2023 Supplier of the Year Award in a non alcoholic category. This is a tremendous achievement. And I want to thank all of our dedicated team members on achieving this great top industry award. Best in class teams drive best in class results.

Speaker 2

With nearly full distribution, we're focusing on driving growth through 3 areas, increasing total distribution points at each location, growing in non track channels and international expansion over the long term horizon. Celsius was again the top driver of the energy category in dollars and units sold in Moolock, ending in the 4th quarter, up 126.6% and up 140.2% for the full year of 2023, supporting a 30.6% of all the energy category growth for the year. Already this year, we've launched several new and exciting innovations, as well as a brand update to our line of fizz free beverages, which have a strong and loyal consumer base. A new fizz free multi pack available now in Target stores brings together refreshing selection to our consumers who prefer the non carbonated energy drinks. Sales of Celsius Essentials, our new line of performance orientated energy, a 16 ounce beverage products launched in the Q4 at 711 stores across the United States.

Speaker 2

And our 2 new flavors Sparkling Mango Tango and Sparkling Fruit Burst bring the Celsius Essential line to 6 unique SKUs. As of January 2024, Celsius Essentials has achieved a record 40% ACV. Year to date, February 18, it's at 49% ACV, continuing to see greater acceptance across retailers across the country. Also in January, our Celsius on the grow powders claimed the number one position in the energy powder category according to Serkanis IRI commanding a 23.1 share, having increased 5.6% compared to the prior period. We have several new On the Grow powder innovations planned for this year and see great opportunities with our Versatile On the Grow product line.

Speaker 2

In 2024, spring resets began in January and typically run through May. We are very pleased with the incremental space we're gaining, which will be reflected across the 1st and second quarters of 2024. As a reminder, planograms used for most of 2023 when our dollar sales grew 140% were created while we were holding and held approximately a 4.5 share in the category. For 2024, shelf space planning was conducted with retail partners in Q3 of 2023, when we held a digital double digit share position. Celsius is also now fully integrated into PepsiCo's annual planning cycle and we anticipate ongoing close collaboration with our primary North American distribution partner and expanded key accounts team.

Speaker 2

Our pursuit of our perfect store resulted in a 60% increase in display activity across the United States, and we placed more than over 10,000 Celsius branded coolers in 2023, and an increase of over 300% year over year. We intend to continue growing our base of branded coolers throughout this year. Non tracked channels continue to be a tailwind for us as well. Club sales for the Q4 were $77,100,000 up 64% year over year. Club sales for the full year 2023 were 254 point 6,000,000 representing an 83.6% increase year over year.

Speaker 2

We achieved the number one energy drink position on Amazon in 2023, finishing the full year revenue at $100,100,000 a 72.9% increase year over year. Our refreshing, great tasting products are a deal for the meal occasion. And today, more than 12.5% of our PepsiCo sales is to the foodservice channel. For example, in 2023, we gained distribution in over 2,000 Jersey Mike's stores and are authorized to sell in more than 3,000 Dunkin' Donut locations nationwide. We believe there is incremental growth opportunities for Celsius and non tracked outlets, such as vending, hospitals, corporate cafeterias, and college campuses and more.

Speaker 2

Turning to international, we began distribution and sales in Canada through the Pepsi in mid January, as we had previously signaled. After approximately 1 month of sales, we are very pleased with the results and even more so to delight our Canadian consumers who have embraced our products. International sales reached $14,600,000 in the Q4 of 2023 $54,700,000 for the full year. Also in January, we announced a sales and distribution agreement with Suntory Beverage for Great Britain and Ireland. We expect sales in the United Kingdom to begin gradually, starting in the Finnish channel in the second quarter.

Speaker 2

We expect additional international expansion this year. And as previously stated, we're taking a methodical approach to our international growth, and we will be following our international growth playbook in each new market we enter. Before I hand it over to Jared to discuss financial highlights for the quarter and the full year, we have several exciting marketing developments and achievements to be proud of. Celsius recently announced a renewed multi year global team sponsorship with Formula 1's iconic Ferrari racing team. Major League Soccer kicked off its regular season last week and Celsius is a proud league partner as well as key sponsor of multiple teams and players across the United States and Canada.

Speaker 2

These strategic investments place our premium brand in the front of consumers who share our passion to live fit. With that, I'll pass it over to our Chief Financial Officer, Jared Langans to discuss our Q4 2023 full year financial results. Jared?

Speaker 3

Thanks, John. It was another great quarter in which we continue to exceed both internal and external expectations. Not only are we continuing to benefit from Pepsi's distribution

Speaker 4

system, but we are also delivering

Speaker 3

on increased SKU count, improved velocities. As we look to Q1 and beyond, we will continue to invest in our growth. Turning to our Q4 financial highlights. Revenue for the 3 months ended December 31, 2023 was approximately $347,000,000 an increase of 95% from $178,000,000 for the 3 months ended December 31, 2022 driven by our North American business where 4th quarter revenues were $333,000,000 an increase of 97% from the same period in 2022. International revenue grew 68% to $15,000,000 as velocity continued to increase.

Speaker 3

As it relates to days on hand with our primary distributor, our inventory turns relative to depletions was consistent with our Q3 2023 turnover. We attribute our sales volume growth for the quarter compared to 2022 to several key drivers, including successful integration into the Pepsi distribution system, which has resulted in broader availability, increased SKU mix and improved placement. We're also benefiting from robust expansion in our traditional distribution channels and club channels with SKU increases in placement improvements contributing significantly. Moreover, our products are now found in several new channels within CNG and Foodservice. Gross profit for the 3 months ended December 31, 2023 increased 110% to $166,000,000 up from $79,000,000 in the year ago quarter.

Speaker 3

Gross profit margins in the 4th quarter were approximately 48% of revenues compared to approximately 44% for the prior year Q4. The improvement in gross profit margins is attributed to efficiencies in raw material sourcing, product waste reduction and benefits from improved leverage across promotional allowances. Q4 was the 5th consecutive quarter that we were operating within the Pepsi distribution system and we expect to continue driving efficiencies while maintaining our number one goal of keeping the shelves stocked to meet strong consumer demand. Sales and marketing expenses for the quarter were approximately $80,000,000 a decrease of approximately 11% compared to the Q4 of 2022. The decrease was due to prior year costs associated with termination of legacy distributors as part of the transition to the Pepsi network.

Speaker 3

We continued to invest behind our growth in Q4, incurring sales and marketing costs in line with historical rates. As a percentage of sales, sales and marketing was 23% compared to 29% in the prior year, adjusted for distributor termination expenses in 2022. We plan to continue investment in our sales and marketing and plan a similar spend as a percentage of sales in the Q1 of 2024. General and administrative expenses for the 3 months ended December 31, 2023 were approximately $27,000,000 an increase of 24% relative to Q4 2022. As a percentage of sales, G and A was 8% compared to 12% in the prior year as we continue to leverage our G and A against our significant growth.

Speaker 3

And looking back at prior even with our historical growth rates, we do tend to see some seasonality within the Q4 relative to the Q3. We saw similar activities in the Q4, whereby we are not able to capitalize on the great work from our sales and marketing teams as it relates to displays on hand and other promotional activities that we are able to take advantage of during the summer selling season. Even with this, we ended the year strong and have since well exceeded the 10 share marker as noted by John earlier in the call. Looking at the full year 2023, as you will see in the 10 ks issued this morning, we made great progress in our remediation efforts around our internal control environment. We were successful in remediating the prior period controls associated with IT general controls as well as creating and delivering a much more robust COSO environment.

Speaker 3

Although we made huge strides in 2023, there are still a handful of areas where components of larger areas of the control environment need some additional time to fully remediate. With that said, I'd like to thank the entire Celsius team for the great effort and in particular our finance and IT teams for their focus and dedication to this matter in 2023. I look forward to our continued progress in 2024. Now to the results. Revenue for the 12 months ended December 31, 2023 was approximately $1,300,000,000 an increase of 102% from $654,000,000 for the 12 months ended December 31, 2022, driven by our North American business.

Speaker 3

North America full year 2023 revenues were $1,270,000,000 an increase of 105 percent from the same period in 2022. International revenue grew 52% to $55,000,000 in 2023 relative to full year 2022. Gross profit for the 12 months ended December 31, 2023 increased 134% to $633,000,000 up from $271,000,000 in the prior year period. Gross profit margins in the full year of 2023 were approximately 48% of revenues compared to approximately 41% for the prior year period. The improvement in gross profit margins is attributed to lower package and raw material costs.

Speaker 3

As things stand today, we would expect 2024 gross profit margins to be fairly consistent with the Q4 and full year margin profile as we are confident in maintaining the great progress that was made in 2023. We are always shooting for the moon, but with the uncertainty around the macro environment from both an operational and promotional perspective, we believe that it is prudent to give ourselves some additional time into 2024. As a percentage of sales, sales and marketing was 20% in the 12 months of 2023 compared to 24% in the prior year same period adjusted for distributor termination expenses. This demonstrated the leverage that we can obtain within our sales and marketing costs. We made great progress in 2023, but we are now moving to the next level and the next target beyond 10% market share.

Speaker 3

And to do that, we will need to continue to invest in our growth and our brand as seen with the multiple Super Bowl activations that we did in February, our recently announced multi year partnership with Ferrari within Formula 1, as well as our multi year MLS partnership. G and A expense as a percentage of sales was 8% for the 12 months of 2023 versus 12% in the prior year same period. We will continue to invest in our back shop and build out a team that is value added to our operations, sales and marketing programs. There will be opportunity to further leverage G and A in 2024 and beyond, but it will be at a thoughtful and methodical pace. Focusing now on liquidity and capital resources, as of December 31, 2023 we had cash in excess of $755,000,000 and net working capital in excess of $928,000,000 Cash flows provided by operating activities totaled in excess of $140,000,000 for the 12 months ended December 31, 2023, which compares to $108,000,000 in net cash provided by operating activities for the 12 months ended December 31, 2022.

Speaker 3

We will continue to invest in our business

Operator

Our first question comes from the line of Mark Astrachan with Stifel. Please proceed with your question.

Speaker 5

Yes. Hey, morning guys.

Operator

Two questions

Speaker 5

for me. One, just on gross margin. Maybe talk a little bit about why it stepped back in 4Q relative to 3Q even after adjusting for the promotional allowance accrual last quarter, meaning would have expected to see a little bit better. Was there some sort of one offs in that number? And how do we think about progression of that into 'twenty four?

Speaker 5

And then the second question, I appreciate the commentary on inventories from a channel standpoint with your largest customer. But if I take a look at what the sales look like in the scanner data track channels in addition to what you disclosed in the regulatory filings on Amazon and Costco sales, I still get a fairly big disconnect between what it looks like you should have sold in the quarter and what you actually did meaning that you under shipped somewhere in the channel. So maybe you could help with that too? Thank you.

Speaker 2

Yes. Thank you, Mark. I'll join in on the first parts of the question and we'll throw it over to Jared as well. I think when you look at the overall margins, I think we're really pleased with the margins, especially for the full year, up over 6.60 basis points. Just a phenomenal job on behalf of the team on supply chain and our key accounts team.

Speaker 2

We're maintaining a pricing promotional architecture within the category. When you look at the really the Q4, we did launch a new line, our Celsius Essentials line, which is a 16 ounce line and we had a variety of innovational launches that were executed during the quarter. So I think we're pretty pleased where the margins came in and there's opportunities to improve going forward. But at this point in time, I think that's a team did a really good job for the year. And in regards to inventory by channel, we did have some seasonal impact in Q4 that we did experience.

Speaker 2

We did have good results on Amazon and within the club channel, but we did see especially impacted mainly in food and really large format. A lot of our volume, we've done a great job on half of our distribution partners as well, really keeping the amount of cases on display up. We're still gaining we hope to gain additional placements and additional expansion in the upcoming sets that are being reset, but we do rely heavily especially in large format on display activity. And when you look at the Q4, we do see a lot of display activity coming from seasonal items that we're competing with outside of the summer or the rest of the year. So those are some headwinds we experienced in the Q4, but I'll throw it over to Jared for any additional highlights.

Speaker 3

No, you're right, John. It's when we're looking at kind of just more of a days on hand perspective with our largest distributor, we did have the innovations that we filled the pipe with that would offset, I would say, maybe some reductions you're talking about, Mark. But on a net net basis, the days on hand in total for us was in good shape. And to John's point, the Q4 tends to be a little bit of pressurized just because of the inventory on hand across our retail customers and our mass and grocery customers.

Speaker 5

Got it. Maybe just one follow-up then, if we think about the innovation and your comments you just made about the net net kind of equaling out, it sounds like you're saying then the innovation offsets the legacy products. Is that the case as you think about the shelf resets and incremental distribution, meaning it can't be a one to one, so you're going to add more space. So why wouldn't the Pepsi system take more of the products, meaning take the innovation plus the legacy because you got to backfill the legacy sales?

Speaker 2

Yes, I think when we looked at our number one customer, we look at their inventory levels, they're fairly consistent with Q3 to Q4. So even though we did take some innovation on. So it's I think if we look at the scan data, we had really strong scan data in the Q4 and it's we'll see how this continues to evolve.

Speaker 3

Yes, it's a good question, Mark. I think we can just tell you where we were as of twelvethirty one and on a net net basis in total. Our days on hand were consistent and in good shape. And as we got to January, we started rolling out all of the innovation that you can see all across the U. S.

Speaker 3

And it's being very successful and being very good and it has been incremental thus far.

Operator

Our next question comes from the line of Peter Grom with UBS. Please proceed with your question.

Speaker 6

Thanks, operator. Good morning, everyone. So I was hoping to get some perspective on how you're thinking about the market share trajectory from here. Obviously, things sort of leveled out towards the latter portion of 'twenty three, but we've actually seen some nice improvement to start the year. Maybe just to start, is the improvement we've seen year to date largely a function of kind of that innovation you've touched on rather than shelf resets?

Speaker 6

And then I guess with more resets to come, how do you think investors should think about the share trajectory as you look out to March and into the spring? Jared, you mentioned that you've now surpassed 10%. You're now focusing on a new target. So just any color on what that new target might be from a share perspective?

Speaker 2

Yes. No, thank you, Peter. I mean, we're not going to give any forward guidance on the future share but we do look at the current trajectories and where we are currently at within different category within the variety of segments and categories and you mentioned Amazon, we disclosed Amazon, we're close to a 20 share within the energy category on Amazon. And then if you also look at I mentioned in my script, we have 12 key markets that we're tracking ahead of 15 share within the category and that's MULARC data. So there is a good trajectory there.

Speaker 2

I think the biggest opportunity for us when you look at it is really inconvenience and we've built this brand going through the variety of channels and the last the biggest opportunity is inconvenience where you got 50 about 56%, 57% of all sales are sold. So that's where we anticipate the biggest resets to take place in the coming resets. Right now in the convenience channel, we are just at a 10 share. So we're really excited about the opportunities you have there versus if you just look at the food category, we're roughly around a 16 share within the energy category. So those are some recent data points that we have that we've shared within the script as well as in the earnings release.

Speaker 2

And we've talked before, we're somewhere between the average, as Jared mentioned. We're about we closed at about a 10 share and we're on close to a 20 share within Amazon. So we're working hard, the team is working hard and we're executing and that doesn't include the new 16 ounce essentials line, which is just getting started this year, which we're excited about.

Speaker 6

That's really helpful. And then I guess just one follow-up just on international. Can you maybe help us understand how we should think about the contribution from a revenue perspective? Are you exploring any additional markets for this year or would anything else kind of be more of a 25, narrative? And then just within that, I'm sure a lot of people and you've gotten this question a lot, but just maybe explain why Suntory was the distributor of choice for the U.

Speaker 6

K. And Ireland?

Speaker 2

Yes. Thank you, Peter. I think number 1, when we look at international expansion, we just went into Canada. We talked about that into on the script. We're really excited on the consumer acceptance.

Speaker 2

We're also excited about the we're in 711 and Couche Chart. Its product is doing really well and we're expanding. So our partner is excited. Canada should be a great market. U.

Speaker 2

K, we did announce Suntory for our partner there. They we're looking for the best partners to align with on our go to market strategy. One thing that was very attractive about Centuri is their access to the gym community. And we're really focused on a methodical approach as we expand and grow, really about building awareness, trial, that foundational base of loyalty and then scaling. So as we look to see the size and the timing and sequencing of international, I think that's we'll know that as we go through these markets and expand in these markets and how quickly we are accepted.

Speaker 2

We can move as fast as we can, but we want to be very cognizant on entering new markets through our methodical approach about building that loyal foundation before we go in overall scale. So those are the comments there in regards and we're really excited about our partnership with Suntory.

Speaker 4

Sounds good. Thanks so much. I'll pass it on.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Speaker 7

Thank you. Good morning.

Speaker 2

Good morning. Good morning.

Speaker 7

You touched on unmeasured channels as one of your big opportunities and gave some examples, corporate cafeterias, universities, vending. There's lots of physical distribution points under all that. And just would love to get a sense of how we should think about how quickly how close to hand those are? How quickly those could ramp up? Kind of what the trajectory might look like for momentum in those areas?

Speaker 2

Yes. I think everyone's really excited about how if you look at our PepsiCo revenues, over 12% is coming from, really the food service. We internally here, we think there's a big opportunity there. We see that Celsius is much broader opportunity when you look at the TAM versus, say, traditional energy. We're seeing consumers consumer consumption increase outside of that energy need state.

Speaker 2

We're seeing the product being paired with sandwiches and smoothies and bowls and a variety of opportunities for fast casual. So I think it's a little bit too early for us to really know how big that quick service as well as expand in additional food service quick service as well as expand in additional food service accounts and then universities and hospitals as well is a huge opportunity for us. Not able to quantify that at this time, but we do see it as a big opportunity.

Speaker 7

Okay. Thanks. And just on the Canada, UK, Ireland launches, as we think about margins for 2024, obviously, you'd spend ahead of really ramping those revenues. And so all else equal, should we expect a dip in EBITDA margins for or EBIT margins for 2024 versus 2023? Or can you just give a sense of how to think about the spending or what's in your plans for how that looks?

Speaker 2

Yes, I'll turn that over to Jared for additional comments.

Speaker 3

Yes, so they're going to be a little different. Canada, where most of the population is, I think, within 80 miles of the U. S. Border, and also being so close, We actually already had a co packer in Canada that we were using as a backup for our U. S.

Speaker 3

Business. So that rollout and that growth we think will be at a different trajectory than the U. K, which we're kind of launching from 0. So there will be investment in both markets as we build brand awareness and as we really build out the system. We won't have the same scale and leverage advantages within the manufacturing as we do in the U.

Speaker 3

S. So there is going to be some cost and some investment there. But it'll be, let's call it, it's not going to be a significant component of either our growth or our cost infrastructure this year. So we do believe that the numbers that we discussed on our prepared remarks will be able to handle those investments as well.

Speaker 2

Yes. And I'll just in regards to when you look at it, Michael, one thing we've noticed is the brand awareness, even though we're not in the U. K, there is an underlying brand awareness just associated with the world is really so small these days and one click away. So a lot of our influencers and social media activations are actually being picked up with our potential consumers in the U. K.

Speaker 2

So we had a little bit we have more brand awareness than we actually initially anticipated based on our research. So we're excited. Things can be a great market for us.

Speaker 5

Okay, great.

Operator

Thanks so much.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Gerald Pasquale with Wedbush Securities. Please proceed with your question.

Speaker 8

Great. Thanks very much. Good morning, guys. Just one on gross margin, another quarter in the high 40s here. But in the energy category, you've already had a larger competitor take a rate increase.

Speaker 8

There's sentiment that your other larger competitor will ultimately follow suit. So, in the event this happens, how do you think about managing your price gaps relative to peers? I guess, just curious on your thoughts around a potential rate increase this year as that would obviously imply upside to your high 40s margin target? Any color there would be great. Thanks.

Speaker 2

Yes. Thank you, Gerald. There's opportunities. We want to be a premium priced product. I think if you look at a per ounce basis, we feel we're very competitively priced.

Speaker 2

There's a variety of different levers than just taking frontline pricing. So you have And then you also you have your pricing architecture by channel as well, so impact size. So there's ways to navigate that. I think we're very pleased with the way we finished the year with margins and we're really focused on driving share and revenue growth and continuing to drive consumer consumption and ultimately that daily consumption we're looking for. And we're just really getting started here when you look at just now a 10 share in the energy category, inconvenience.

Speaker 2

So there's a long runway ahead, but it's something we watch closely. At this point, we're not going to make any comments on future price increases at this time.

Speaker 8

Understood. Thanks. Just one more from me. I think your non measured channel revenue came in a little better than expected specifically related to Amazon, at least what we were modeling for. On a lower seasonal quarter, your 4Q absolute revenue was almost in line with your 2nd quarter, which obviously benefited from Prime Day.

Speaker 8

So, any incremental color on the drivers in the quarter within that channel would be helpful, if you could provide any. Thank you. Yes.

Speaker 2

I mean, Amazon, we had a great in the quarter was a great period. And there is a lot of timing as well within shipments and how the Amazon kind of controls or feeds inventory through their warehouses based on their algorithms. So we're going to keep shipping them. We're going to we're one energy drink right now, roughly about a 20 share in the energy category. I don't really have much color than that, but we continue to drive further revenues through that channel.

Speaker 2

It is a omnichannel world and that's something we really focus here on at Celsius. We want to deliver Celsius to consumers when they want it, how they want it.

Speaker 3

I think it does show too that there's still opportunity for continued growth within the Amazon channel. So it's not necessarily slowing down suddenly just because we got to a certain spot within that. So I do see that as a continued growth opportunity for us as we look out into 2024.

Speaker 8

Got it. Thanks very much guys.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Sean McGowan with ROTH Capital Partners. Please proceed with your question.

Speaker 4

Thank you very much. A couple of quickies here on the sales and marketing, give some good color on what to expect in the Q1 and I think that rate 23% is a little higher than you had talked about for some periods in the past. Is that a good number to use for the full year of 2024?

Speaker 3

I think I referred to Q1 and Q4 in my prepared remarks and if you look at our Q1 activations and activity, we've got the Super Bowl activations we did that we believe were very successful. We've actually got a Jake Paul fight this weekend down in Puerto Rico with another number of influencers that we support. We kicked off the MLS last week or a couple of weeks ago. We kicked off the F1 partnership. So we've got a number of things that are really rolling in Q1 to keep the momentum going.

Speaker 3

As we look at a full year basis, historically we've been in the 22% to 24% range. We were at 20% on a year to date basis in 2023. I think those are kind of the data points to stick to. If we've got opportunity to invest ahead of growth, we're going to continue to invest it. We're going to spend our money wisely.

Speaker 3

John and I require an ROI on everything we do, so we're not going to spend foolishly. But if we see opportunity to push growth, push growth. If we don't see it, we'll continue to lever.

Speaker 4

Okay. Thank you. And then on the essentials line, could you give us I mean, that's pretty rapid acceleration of ACV. Where do you think that goes? And basically, more generally, what is the plan for additional SKUs and additional outlets for that line?

Speaker 4

I'm seeing it in its own cooler or a separate cooler in some stores. Do you think this can double that? Can you get to 80% plus ACV by the end of the year?

Speaker 2

That's a well, we don't we have never launched a new line with our new distribution partner, so I think we have a lot to learn. We are working hard. We think it can definitely be incremental. There is a lot of existing sales. So we are bringing in additional new consumers and can existing sales.

Speaker 2

So we are bringing in additional new consumers and converting new consumers into the Celsius portfolio. So that has us really excited. It's not we're not trading our existing consumers. So the initial data, it's still early. When you look at it, you're only talking like 8 weeks, 12 weeks of data we have at best in certain stores.

Speaker 2

So we really need to get a little bit more data underneath our belts as we move into get through Q1 and most importantly, see what these resets bring that are coming up. So I think this summer we'll have a better read on how this portfolio is going to perform the Celsius central line within our overall global portfolio.

Speaker 3

Yes, it's great product. You should get out and taste it if you haven't yet. It tastes great.

Speaker 4

I have some in my office. Thank you.

Operator

Our next question comes from the line of Eric Saroda with Morgan Stanley. Please proceed with your question.

Speaker 9

Great. Thanks so much, guys. So could you give a little bit more granularity as to what drove the step up in Pepsi revenue through the foodservice channel? I think it has been running at 10%, now it's at 12.5%. I think Jersey Mike's and Dunkin' are still very early days and I'm not sure if those go through Pepsi.

Speaker 9

So maybe you could clarify that. But what specific channels are you seeing traction in foodservice through Pepsi? And then broader question in terms of the new SKUs that you're adding, particularly on the VIBES and the core flavors, what are you seeing in terms of incrementality there? How are the sort of legacy flavors and VIBES legacy core and VIBE flavors performing as you're introducing these new SKUs? And then sort of what do you see as the limit for SKU count or flavor variety here?

Speaker 9

You're still a long way from Monster and Red Bull? Thanks.

Speaker 3

I'll start with the food service one, John can have all the other ones. So foodservice, I look at that as just continued momentum. I mean, if you look at our club program, once we start launching with them, we've got good progress, good momentum, but then you really see the volumes and velocities growing. We're seeing the same thing across foodservice. We also had the college program fully in place in Q4.

Speaker 3

So as we talked about last quarter over the summer season, it tends to die down a bit when the college campus is empty out. We're also seeing great progress in the other channels within food service that we're in. You mentioned Mike's, you mentioned Dunkin', there's also hospitals, there's a variety of other food establishments. And so we're just continuing to see ongoing momentum across that channel and we're really seeing that grow and be built out and our distributors really been helping significantly with that. So continued momentum and we're doing great there.

Speaker 3

But let me throw the other ones over to John.

Speaker 2

Yes. And just a further detail on that. I think we're also seeing great momentum and you talk about the step up and Jared you mentioned college universities as a big opportunity and seeing growth there. But also vending, keep in mind, vending is also going through that food service and the vending, we've expanded in vending. We're seeing great results in vending.

Speaker 2

And at work micro markets, we talked about those prior on several calls prior. The at work micro market I agree with you, Eric. I think seeing that go from 10% to 12% just shows you the growth opportunity we have on an overall basis in this non track channel opportunity. Looking at new SKUs, the VIBELINE, we're excited about the VIBELINE, talk about the success we had. I mentioned on the comments on the call earlier that Cosmic Vibe we launched at Circle K and really going intergalactic with the theme space the Space Odyssey with our 2 new Vibe flavors that have a space theme.

Speaker 2

We're really excited on rolling that out. We're going to have some events coming up at Coachella and a variety of neat things to that you guys will be able to see. The vibe line is going to be a totally separate line. We're going to scale and grow that. I think there's a lot of opportunities to bring out innovative flavors and experiences with every sip.

Speaker 2

And then our core flavors, the team continues to come out with great flavors. I mean, you look at core even expanding the core into our no fibs line as well, where there's blue raspberry lemonade that we launched at 711 in Q1 has been phenomenal. I mean, the product tastes great and really expands this non fizz or non carb opportunity that could be in wholly another revenue stream and ultimately an extension of our portfolio as well. So we were monitoring the SKUs. Obviously, you need to do SKU rationalization.

Speaker 2

So that's something we talk internally at innovation meetings. We'll be doing that each year. We want to we'll cut our as they call it, our tail, our slow moving SKUs. But we do see consumers looking for new innovation and staying within our portfolio, which is great. So our new sparkling peach, raspberry peach is phenomenal, great flavor.

Speaker 2

Eric, if you haven't tried it, please go out and try it. I think you'll enjoy as much as we do.

Speaker 9

Great. Thanks so much.

Speaker 2

Thank you.

Operator

Our next question comes from the line of Jim Zallara with Stephens. Please proceed with your question.

Speaker 10

Hi, guys. Good morning. Thanks for taking our question. I wanted to drill down a little bit on the coolers, because I live in Cleveland, Ohio, and I was very surprised to see a Celsius branded cooler very prominently displayed at the cash wrap of a local grocer here. And so can you just talk about kind of the channel strategy there?

Speaker 10

How you want to get those coolers placed? And then maybe as a part 2 to that question, just any color you can offer on incremental uplift, velocity, repeat rates, trial buys in locations that do have the branded fridges?

Speaker 2

Yes. No, Jim, it's a big, big initiative we've had over the years trying to get more cold placement. If you've been tracking the company over the years, we've been historically sold warm. So we had to build a loyal consumer that would actually have to take the product home and chill it and then drink of a daily lifestyle and routine. And that really shows you the loyalty around the Celsius consumer.

Speaker 2

Cold availability is key to the success in order to compete in the energy category, especially with the impulse purchases. That is the biggest opportunity for us and of mentioning it prior to the question, we look at the convenience channel, that impulse purchase is key to the success of where we want to go and who we want to be in the category. So we have we placed about 10,000 coolers. We are investing in more coolers. We're working on placing more coolers.

Speaker 2

We want to be right at checkout. Eye level is critical. We're talking to a variety of retailers as well to gain additional checkout coolers. I think that's a big opportunity. Most recently down in South Florida, if you look at Publix, we've gained checkout coolers and we're looking to gain checkout coolers on the next reset.

Speaker 2

So that's a big opportunity. We do see uplift. If you're by the register and you're cold, kind of the saying we say internally here, if it's cold, it's sold. So, the other thing is stack it high and watch it fly, some comments we make around displays. But definitely a lift.

Speaker 2

The exact lift is hard to say, because each channel and each store and each region is quite different on the velocity levels, but there is a substantial lift.

Speaker 10

Okay, great. And maybe one follow-up on that. Are all of the actual SKUs in the cooler consistent across the portfolio? Or do you guys make changes on that based on channel, local geography? Like could we see Essentials lines in there or some of the other product innovation show up in the coolers?

Speaker 2

Yes, that's a great question. So we do have planograms and progressions we work on based on the size of the cooler. There is a little bit of regional seasonality that based on the retailer, we do exclusive flavors. So like at Circle K, we did our Cosmic Vibe. I talked about 711, the new launch with the raspberry lemonade, so fizz free.

Speaker 2

So you will potentially unique flavors in giving coolers, but we do have a standard national planogram that's being followed, probably not always followed to the T, but that is something we work on as an overall organization and work with our PepsiCo partners to keep the progressions in the coolers in accordance to our planograms. So the core should be have its own planogram, the VIBE should have a planogram and also our Fizz Free line should have a planogram as well as our Celsius essentials 16 ounce. So that's kind of how our go to market strategy.

Speaker 10

Great. That's very helpful. Appreciate the color guys. Thanks.

Speaker 2

Thank you. Thanks, Jim.

Operator

That's all the time we have for questions. I'd like to hand it back to John Fieldy for closing remarks.

Speaker 2

Thank you, Doug, and thank you, everyone, for joining us today on our Celsius Holdings Q4 2023 earnings call. I'd like to thank and close by thanking all of our employees. Your dedication to Celsius has helped to create the success we're enjoying today and together we'll continue to provide essential energy to more consumers so they can pursue their own live fit lifestyles with a cold Celsius in their hands. Celsius will be participating in several upcoming conferences, details of which will be published on our Investor Relations corporate website. We look forward to seeing many of you there.

Speaker 2

Thank you for your interest in Celsius. Stay healthy and live fit.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Earnings Conference Call
Celsius Q4 2023
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