The Doors of Perception
Last week was rough for Celsius.
Stock price dropped 25% after earnings despite revenue jumping 173% from the Alani Nu acquisition. The biggest issue was their inventory change over issues going into the Pepsi DSD integration.
But I think it's overblown.
For all of our clients, we set up a Competitive Intelligence Hub. We blend hindsight, insight, and foresight to track what's happening inside their business and across the competitive landscape.
Celsius is on that list. And what they've done in the last year is eye-opening, not just for them, but also to the entire energy category.
HINDSIGHT – This has happened before.
Q3 2024: Celsius went through an inventory optimization with their largest distributors.
Inventory as % of sales spiked. Inventory turnover dropped.
But COGS stayed stable. They executed the transition gracefully and investors didn’t blink.
INSIGHT – So what's different this time?
The balance sheet tells a similar story, that inventory is elevated as % of sales. But this time, inventory turnover is actually increasing. That inventory velocity growth is a good sign for now.
The bigger difference is timing and the macroeconomic headwinds.
On timing: It’s like changing gears while riding your bike – you want to do it while in motion. Making this change while experiencing organic growth is going to lessen the impacts and allow them to allocate supply more easily.
On the economy: In 2025, logistics costs are up, so what matters most now is three things:
1) Minimizing returns from the old network (probably through markdowns)
2) Optimizing freight lanes with one-day hauls (a must for heavy products)
3) Managing dual-distribution network costs while exiting gracefully (anyone who has changed a co-packer, flipped an account from distributor to direct, or moved to a re-distributor like DOT Foods can attest to this, and Celsius is doing this on a grand scale)
FORESIGHT – The part that nobody is talking about this quarter: PepsiCo's DSD network.
You can’t build a moat without attracting a few alligators. Monster + Coca-Cola showed us how impactful DSD is for this cutthroat category. With Celsius, there will be short-term pain and Wall Street will freak out: working capital is tied up, margins are compressed during a cutover, dual distribution costs raise SG&A. We’ll have to wait and see on this.
But the long-term benefits: 250k+ DSD doors that would make Mike Wazowski jealous, better shelf velocity as a result of almost daily hand-touched merchandising, and their first every supply chain moat (more critical now than ever). These are enduring advantages, and it takes effort to built that moat.
Bonus thought on what’s to come:
The February Alani Nu acquisition over-valued Celsius stock, but it’s still a great angle
1) It is focused on women in a historically male-dominated subcategory. Positioned as helping consumers complete their last rep or their next handstand, but the reality is people use it to get through the workday.
2) That said – the LTOs like Pumpkin Cream are brilliant, especially during a cold workday.
3) With the power of a DSD networking behind it, the merchandising alone gives this brand serious potential.
Perception is not reality Celsius was over-valued post-Alani Nu, but with a newly right-sized share price, I'm watching closely to see what they accomplish in 2026.
BTW, none of this is investment advice.