I boosted my Celsius stake by 50% today and brought it from about 1.75% of holdings to 2.50%. I was highly encouraged by the most recent interview that its Chief of Staff gave.

For review, he talked about signs of industry growth and convenience store traffic both bottoming. That’s seen in scanner data, but also conversations with large chains. He spoke about continued shelf gains for 2025 and how stronger category growth would actually allow them to financially enjoy all of the 2024 shelf gains. A healthier sector will mean less discounting, which Celsius is less aggressive with than others. That will be good for them.

But most importantly? He told us that Pepsi inventory resets would wrap up in 2024 and this “wouldn’t be a topic of conversation” in 2025. If Pepsi stops shrinking their CELH inventory position, that means Celsius 3rd party volume data will again track Celsius’s own revenue growth. While this inventory reset process has unfolded, lower Pepsi purchase levels have vastly weighed on this company’s results. Celsius generates revenue when Pepsi makes an order… not when a can is purchased at a store.

These headwinds are all beginning to abate as we distance ourselves from strong Alani and Red Bull competitive product launches that led to temporary market share gains for both of those players; this weighed on Celsius sentiment even further and those short-term boosts should now be normalizing.

Celsius is the clear #3 in energy drinks and is at the very beginning of its international expansion. 2025 should be a big year there. Recall that it built a 5% market share in Canada in less than 2 months of operating. This led to supply shortages that are being fixed as we head into the new year, positioning Celsius for explosive growth there. It’s entering several more countries, but it takes a very slow approach to expansion, so for 2025, Canada is the most exciting opportunity.

Finally, at 25x GAAP EBIT and a forward 2-year EBIT CAGR of about 32% expected, this is cheap. I think a category re-acceleration would have a sharply positive impact on estimate revisions and a clear end to Pepsi resets would too. The most important source of Celsius leverage comes from revenue outperformance & coinciding fixed cost efficiency.

Taking all of this together, I was motivated to meaningfully add to my stake. I do think that interview brightened the forward-looking fundamental picture enough to warrant taking this off of my do not add list. I do not plan on adding again in the near future based on all of the current information I have. That could always change. This remains speculative and the brand remains in “prove it mode” to demonstrate Celsius is as healthy as I think it is. If Celsius is hibernating as we await better macro for its niche, this should do very well. If Celsius is structurally decaying as a brand, it won’t. These recent developments simply made me want to take that risk with a modestly larger position. Here’s how things currently look:

I will keep saying it. I do not expect this 20% annualized S&P lead to be sustainable. I’d love to be wrong, but I don’t think I am. There will be periods of outperformance & periods of underperformance.