Why Coca-Cola (KO), Nestle, S.A. (NSRGY) & PepsiCo (PEP ...
Transcript of Why Coca-Cola (KO), Nestle, S.A. (NSRGY) & PepsiCo (PEP ...
Why Coca-Cola (KO), Nestle, S.A.
(NSRGY) & PepsiCo (PEP) May Be
Watching This Small, Innovative
Company Very Closely
The exciting new consumer trend that
the big beverage companies simply
cannot afford to ignore
"
"
"
"
The Challenges Facing Today's Largest Beverage Companies - Innovation &
Sustainable Growth. Where Will It Come From?
History shows that every once in a while a disruptive technology, product, or service
appears on the horizon that has the potential to create a paradigm shift in consumer
thinking and behavior. At first, most people dismiss it as a fad; thinking that it can't gain
much traction in the marketplace, and that it will never last. Oftentimes, they are correct.
In the case of the food & beverage industry, the landscape is littered with companies
that have attempted to offer innovative new products to consumers, but ultimately
failed. It goes without saying that the odds of success, in developing, manufacturing
and marketing a new beverage brand are not very favorable. But for those companies
that succeed in achieving the improbable, if not impossible, their early investors are
often significantly rewarded as word-of-mouth spreads, brand recognition increases,
sales momentum builds and investor awareness takes hold.
The only thing you have to do is find the right company, at the right time, with the right
product, the right strategic business plan, the right kind of capital structure and funding
mechanism, and the right management team to execute on the plan ---- and, most
importantly, deliver results.
But does such a company exist today?
In recent years, some of the biggest stock market winners have come from the beverage
industry. Just go back and look at the longer term charts of Monster (MNST), Cott
(COT), and Jones Soda (JSDA). Each of these companies, at some point in their history,
experienced a surge in share price. Investors, with lasting memories of the investment
power that underlies a new consumer beverage trend, continue to search for the next
big winner in this sector. Remember, Glaceau the maker of Vitamin Water, which was
purchased by Coca-Cola in 2007 for $4.2 billion dollars in cash? "
http://www.nytimes.com/2007/05/26/business/26drink-web.html?_r=0
Some have opined that Coca-Cola overpaid for ownership of Glaceau's Vitamin Water
brand, which some have called nothing more than filtered water, sweetener, and
vitamins along with some coloring. I only point this out to show that at six times
expected 2007 revenues, Coke paid a pretty penny for a brand with no real proprietary
formula, or intellectual property protection. The brand, while popular, simply quenches
thirst and provides a few vitamins. Coke and Pepsi, the beverage market leaders, are in
a unique position. Because of their size and structure, they find it much easier, cheaper,
and more desirable to purchase small companies that already have proven success in
launching an innovative new product.
As Tom Pirko, president of Bevmark, a consulting firm to the food and beverage
industry, including Coke, says, in the NY Times article above "When you look at what's
happening with Coke, they can't innovate their way out. They have to buy their way
out.” The question then becomes, at what point is a small start-up beverage company
worthy of the attention of the big boys?
Well, in the case of Coca-Cola, their VEB (Venture & Emerging Brands) Team looks for
those "brands that have achieved approximately $10 million in revenue". This $10
million bogey appears to be the critical threshold before any small beverage company
with a new, innovative, product will even begin to merit consideration by Coke's VEB
group. Another criterion that I found interesting was that in evaluating the growth of a
brand, the VEB group in Atlanta, pays particular attention to those company executives
that “understand the value of going deep before going wide by targeting specific
regions, channels, or customer segments, versus trying to be everywhere at once”.
http://www.coca-colacompany.com/stories/the-next-big-thing-howcokes-venturing-
emerging-brands-unit-stays-a-step-ahead-oftomorrows-thirsts
Judging from recent trade magazine articles, it also appears that a big priority for Coca-
Cola, as they move forward, is in the health and wellness area; providing beverages
with ingredients that are natural and good for you. Lower calorie, healthy alternatives
seem to be a logical first step to achieving this newly-formed corporate mandate.
Coke's chief procurement officer Ron Lewis has even gone so far as to say: "We can't
ignore the small, entrepreneurial brands popping up in unconventional outlets --- such
as health and beauty spas, natural food stores, gyms, yoga studios and other places
our red trucks don't visit.”
http://www.beveragedaily.com/Manufacturers/Coca-Cola-A-third-ofbeverage-
industry-growth-could-come-from-disruptive-brands-incategories-that-do-not-
exist-today
http://www.foodnavigator-usa.com/Manufacturers/Coca-Cola-onthinking-like-a-start-up-
open-innovation-and-avoiding-Kodak-moments
The future direction of Coca-Cola (KO) and PepsiCo (PEP), for that matter, seems fairly
obvious. The question becomes, where will they find the next new beverage product
worthy of their attention? I believe the answer lies in Boca Raton, Florida, at a small
company named Celsius Holdings, Inc. (CELH).
Celsius Holdings, Inc. first came to my attention in the summer of
2007 when I read an article by Herb Greenberg, currently of CNBC notoriety, who at the
time was writing a column on the Market Watch web site of the Wall Street Journal.
http://blogs.marketwatch.com/greenberg/2006/10/coke_formally_i/
http://blogs.marketwatch.com/greenberg/2006/10/more_on_cokes_c/
While I was impressed with what Coca-Cola was doing, I was more intrigued with the
fact that Coke was not the first to market with this new innovative product; a company
in Florida called Elite FX already had a calorie-burning beverage named Celsius. Elite
FX even went so far as to conduct a placebo-controlled, double blind cross-over clinical
study, to substantiate its calorie-burning marketing claims. This study validated the
efficacy of Celsius and the "thermogenesis", i.e., the raising of the body's metabolism,
which takes place shortly after drinking the product, and lasts for approximately three
hours.
Those clinical studies, which were done at the request of then CEO Steve Haley, proved
to be instrumental in giving Celsius a distinct scientific advantage over Coca-Cola (KO)
and Nestle's (NSRGY) Enviga product. Mr. Haley’s foresight and vision would provide a
critical step forward in the marketing of his company’s products. For this decision
alone, he deserves much credit and recognition.
The introduction of calorie-burning beverages creates a whole new category in the
industry; one that more than a few beverage company executives and outside
consultants feel is in its early stages of development.
If you think about it, the industry has gone from high-fructose corn syrup products,
where calorie counts typically range from around 140-160 calories, to lower calorie
beverages (light beers for example) and other light beverages, to zero-calorie
beverages. The question then becomes where do we go from here?
Why Stop at Zero Calories? – The Negative-Calorie
Category Comes of Age:
Since the initial study in 2005, Celsius has conducted six additional studies, many at the
prestigious University of Oklahoma Health Sciences Center, under Dr. Jeffrey Stout,
PhD, Director of Metabolic and Body Composition. Many of these studies have been
published by the ISSN (International Society of Sports Nutrition) in the Journal of the
International Society of Sports Nutrition, and the Journal of Strength and Conditioning
Research. Links to the various scientific studies may be found here:
http://www.celsius.com/thermogenic-scientific-studies
"
"
"
"
"
"
"
These types of studies have become increasingly important in today's age of scrutiny
by regulators and legislators. In fact, it was because Coca-Cola and Nestle's Enviga
product had no underlying proof for its calorie-burning claims, that they were ultimately
forced into a $650,000 settlement with 27 state attorneys, including Connecticut
Attorney General Richard Blumenthal, and ultimately wound up pulling their product
from the marketplace.
http://www.bevnet.com/news/2009/2-27-2009-enviga
It's important to note that there is a huge difference between conducting a study on the
efficacy of one or two ingredients in a product versus the actual product as delivered to
consumers. Some have attempted to apply the efficacy of a single ingredient (such as
caffeine) to a product consisting of many ingredients. The problem with this approach is
that it is not all-inclusive or comprehensive enough to validate a marketing claim. All of
Celsius' scientific studies were conducted on the actual Celsius product formula, as
delivered in Ready-to-Drink cans, or powders that simply dissolve when added to water.
The Enviga settlement also served to tighten up what could and could not be said with
regard to claims for calorie-burning beverages. This was also part of the approval by
the National Advertising Division (NAD) of The Better Business Bureau, as a
comprehensive review of the marketing claims made by Celsius. Here is a direct quote
from the NAD --- Specifically, "NAD found that the advertiser (Celsius) could support
claims that referenced the taste of Celsius and the product's ingredients, as well as
claims Celsius supplementation results in 'increased metabolism,' 'calorie burning,' 'fat
loss,' 'decrease in body fat,' 'greater endurance performance' and 'greater resistance to
fatigue (increased energy)’." To my knowledge, there is no other brand that has gone
through this kind of exhaustive process to validate their marketing claims.
http://www.cspnet.com/category-management-news-data/beveragesnews-
data/articles/bbb-advertising-division-confirms-celsius
To take things one step further, Celsius was even challenged in the courts regarding
their marketing claims, and the efficacy of their product's calorie-burning properties.
Their victory, pursuant to Judge Terry A. Green's ruling, was a precedent, in my
opinion, for any other potential future challenges to the brand. As Celsius
attorney Joel B. Rothman said "We shut down the plaintiff's class action
litigation by showing that the plaintiff did not have standing to pursue a case
against Celsius," Rothman said. "It's a big win in a state that's known as a haven
for class-action lawsuits.”
http://www.naturalproductsinsider.com/news/2011/10/judge-rules-infavor-of-celsius-
holdings-in-claim.aspx
http://www.arnstein.com/15DCB1/assets/files/documents/
8-11-11_RothmanLaw360_CelsiusArticle.pdf
Okay, so I think that we have established that the Celsius brand is on solid-footing
regarding both the legitimacy of its marketing claims, and the efficacy of those claims
to "burn more calories and provide lasting energy."
So now the question is how does the product resonate with consumers and how will
management go about building the brand? The first question is a relatively easy one.
You need do nothing more that click on over to Amazon.com to see what people who
use the product are saying:
http://www.amazon.com/Celsius-Raspberry-Acai-Green-12-Ounce/ product-
reviews/B007R8XGKY/ref=cm_cr_pr_top_recent?
ie=UTF8&showViewpoints=0&sortBy=bySubmissionDateDescending
Celsius products enjoy an average 4.2 out of 5.0 stars rating, with about 325 people
weighing in with their opinion of the product. Celsius made a decision in the fall of 2013
to stop taking direct orders for Celsius products on their web site, and decided to
contract out to Amazon to be their primary direct on-line retailer.
http://www.celsius.com/live-healthy/celsius-announces-a-new-way-toshop-online
I believe that this was a smart move for a
couple of reasons. First, everybody
knows and trusts Amazon as an on-line
retailer. Their prices are very competitive,
and for those that use Celsius products on a
regular basis, there are even ways to
reduce shipping costs.
Secondly, Celsius management was able to reduce their overall costs (something they
have been focusing on for a while) by eliminating the labor and materials to handle
orders and the shipment of those orders out to customers. The management team at
Celsius has even recently implemented production of Celsius products in Dusseldorf,
Germany as another way to reduce shipping costs to international distributors in the
European Union, Middle East and African regions of the world. They have future plans
to do the same for distribution already announced in China & Brazil.
http://www.marketwatch.com/story/celsiusr-commences-production-indusseldorf-
germany-2014-01-13
It's not just consumers who feel that the products are deserving of strong reviews for
taste, innovation and proven results. The beverage industry has also given Celsius
products numerous accolades. Celsius has garnered thirteen (13) international awards
in the functional beverage category, including "Best New Natural Functional Beverage",
"Best New Fitness and Sports Beverage" and "#1 Food & Beverage Trend”. That last
award, won in 2007, is especially interesting because that same year the highly-
respected international research company Datamonitor named the category of calorie-
burning beverages as the number one food and beverage trend for 2007.
http://www.gizmag.com/go/6831/
While the folks over at Datamonitor might have been a bit ahead of the curve, and
premature on their call, they certainly are not without a good deal of market research,
industry databases, relevant information and expert analysis to arrive at such a
conclusion. In my opinion, their thesis is correct; they just have miscalculated the
timing of the trend.
So who are the people behind Celsius, and can they build this venture into a successful
and profitable company? First and foremost, I believe that one of the keys to how
Celsius got this far has been the result of the personal commitment and capital of Carl
DeSantis.
http://www.celsius.com/live-healthy/calorie-burning-celsius-announcesstrategic-
partnership-with-former-rexall-sundown-chairman-carldesantis
http://www.businesswire.com/news/home/20090406005367/en
http://www.prnewswire.com/news-releases/calorie-burning-celsiusannounces-strategic-
partnership-with-former-rexall-sundownchairman-carl-desantis-64887052.html
http://www.marketwired.com/press-release/carl-desantis-increasesinvestment-to-153-
million-in-celsius-1210014.htm
http://www.marketwired.com/press-release/Celsius-ExpandsMarketing-Through-
Additional-Financing-From-Desantis-NASDAQCELH-1289070.htm
For those who may not be familiar with Mr. DeSantis, he is the founder, and former
Chairman & CEO of Rexall-Sundown, a vitamin and supplement company that was sold
in 2000 to Royal Numico for $1.8 billion
http://www.prnewswire.com/news-releases/royal-numico-to-acquirerexall-sundown-for-
us18-billion-72875007.html
Carl started Sundown, as a mail-order vitamin business out of his house, at a very
young age, working along with his wife. He eventually merged the company with Rexall,
a chain of drugstores mostly located throughout the mid-western part of the United
States, which he purchased, and the rest, as they say is history.
Carl even penned an autobiography titled "Vitamin Enriched", which provides a history
of his entrepreneurial spirit, strong work ethic and determination to succeed. These
attributes ultimately led to the pinnacle of his career; building a multi-billion dollar
business, and selling it to a large international corporation. You can find Mr. DeSantis'
book at Amazon.com. If nothing else, you'll get a sense of Carl DeSantis' resolve and
fortitude in business matters, and his strong moral character.
http://www.amazon.com/Vitamin-Enriched-Prescription-
FounderDeSantis/dp/1890819034/ref=sr_1_2? ie=UTF8&qid=1392335539&sr=8-
2&keywords=vitamin+enriched
+books
Carl has always been an entrepreneur, and his South Florida Company, CDS Ventures,
has multiple holding of various public and private companies. They first started
financing Celsius Holdings when Steve Haley was the CEO, and most recently added
another $2.2 million in funds, this past September, after seeing the progress made by
his newly-appointed management team brought in during late 2011 to replace Steve
Haley, the founding CEO (more about this later).
http://www.marketwatch.com/story/cds-ventures-of-south-florida-llcincreases-stake-in-
celsius-holdings-inc-and-extends-debt-instrumentson-results-2013-09-10
However, don't think that because Carl is wealthy he just decided to invest in Celsius on
a whim. Before making the decision to invest in this company, Carl and his group
performed extensive and thorough due diligence on the product and its claims. This
was to avoid a rather embarrassing situation that occurred with a Rexall-Sundown
product called Cellasene.
http://www.palmbeachpost.com/news/business/delray-beach-basedcompany-dives-into-
crowded-en-1/nL64z/
Celsius During Steve Haley's 7-Year Tenure as CEO. The Brand Experiences
Growing Pains. What Went Wrong & Why?:
Under former CEO Steve Haley, the company conducted its first clinical study of Celsius
in 2005, and afterwards, the company began to slowly market its products through
traditional distribution channels.
As a result of the company receiving unexpected national attention, a false-sense of
grandiosity suddenly appeared in the C-suite and the Board Room. Out of that, the
"build-it-and-they-will-come" mentality grew, and the costly decision to go national with
distribution was made.
Celsius, the calorie-burning beverage, appeared on literally hundreds of local CBS, NBC
and ABC affiliate news channels, as well as appearances on Food Network's
Unwrapped, NBC's Today Show with Matt Lauer and hit-show The Doctors.
http://www.youtube.com/watch?
v=GO5ztWClww4&playnext=1&list=PLA05173E858256AD2&feature=re sults_video
Using a distribution model which required the payment of high-cost slotting fees to
retailers in exchange for shelf space, the company quickly found that the "pay-to-play"
strategy was resulting in excessive and exorbitant marketing costs.
Without having first established the brand, with strong reorders and customer sell-
through, the company quickly found itself burning through cash at an alarming rate.
After the company raised $13 million in capital through an offering of shares in May of
2010, and secured a listing on the NASDAQ after affecting a 1:20 reverse split, the
company embarked on an aggressive marketing campaign and wound up squandering
just about all of the capital raised in the May 2010 stock offering.
http://articles.sun-sentinel.com/2010-05-07/business/fl-desantisdrink-
20100507_1_nasdaq-capital-market-rexall-sundown-carl-desantis
Looking back, it appears that not properly laying the groundwork for the brand resulted
in slower than expected sales, while marketing expenses, in the form of slotting fees,
ballooned. The company found itself in the position of losing huge amounts of money
on a quarterly basis. In addition, almost half of the company's revenues were coming
from Costco Wholesale Clubs, where margins were razor thin, and consumers
had to make a commitment to purchase Costco's only Celsius offering; a 15-pack of
Outrageous Orange or Raspberry-Acai Green Tea flavor.
Carl, in an attempt, to stop the bleeding took steps to remedy the situation by reducing
the salaries of those in the executive suite, and establishing a special board committee
to evaluate strategic alternatives. The company also implemented a new strategic
operating plan aimed at right-sizing the company. Translation: cut all but the most
essential expenses on both the marketing and operation side of the business.
http://www.sec.gov/Archives/edgar/data/
1341766/000121390010005096/f8k120210_celsius.htm
At that point in time, things looked very bleak. However, much to the surprise of many,
sales continued to show resiliency despite the cutting off of all marketing and
advertising by the company. The stock, on the other hand, languished and slowly
drifted lower, from a high of $14, and a market cap of north of $100 million, as investor
expectations were dashed. The last official 10-Q was filed on May 10, 2011. The
Company also announced its intention to deregister as a reporting company under the
Securities Exchange Act of 1934, as amended. The company said in an 8-K Filing "The
Company believes that given its downsized level of operations, it is in the best interests
of its shareholders not to incur the expenses associated with being a reporting
company. It's the company's intention to continue to issue quarterly financial
information. The Company's shares and warrants will continue to trade in the over-the-
counter market following deregistration."
Nine days later the company filed a Form 15-12B effectively withdrawing its requirement
to file reports with the Securities & Exchange Commission. In my opinion, this move
officially ushered in the end of the Steve Haley era, and paved the way for Carl to bring
in a fresh and focused management team with experience in turning around troubled
companies.
In November of 2011 it was announced that Steve Haley was stepping down as the CEO
of Celsius Holdings, Inc. and being replaced by Gerry David, a seasoned executive with
extensive experience in corporate turnarounds, start-up companies and those
companies with fast growth prospects. As part of Steve Haley's exit, Carl DeSantis
agreed to buy a substantial portion of the equity position held by Mr. Haley, thus
increasing his ownership to a majority of 52 percent of the common stock of Celsius
Holdings, Inc.
http://www.bevnet.com/news/2011/changes-roiling-functionalbeverage-category
http://www.bevnet.com/magazine/issue/2012/big-changes-at-o-n-ecelsius-and-
starbucks-buys-evolution-juice
Celsius Redux. The Rebuilding and Rebranding Process Begins Under New
Management:
Gerry David wasted no time in executing a comprehensive strategic business plan to
turn around the struggling fortunes of this once promising little beverage company. One
of Mr. David's first initiatives was to re-brand the Celsius product by changing the
marketing strategy, as well as changing the look and feel of the product.
He also scaled down the number of flavors to a more manageable, SKU-friendly, number
of five. The five flavors that remained were Sparkling Cola, Sparkling Berry, Sparkling
Orange, a non-carbonated Peach-Mango Green Tea, and a non-carbonated Raspberry-
Acai Green Tea flavor. Gone were a non-carbonated Outrageous Orange flavor, non-
carbonated Lemon Iced Tea and non-carbonated Strawberry-Kiwi. Celsius' new
management team felt that having a fresh, exciting and upscale look with enhanced
graphics and a look of continuity across the five flavors was critical to the re-branding
of the product. Focus groups conducted with beverage distributors agreed.
http://www.bevnet.com/news/2012/celsius-gets-a-makeover-andunveils-new-packaging
http://www.healthcarepackaging.com/package-design/structural/ redesigned-can-
energizes-celsius
Many consumers, who remember the old cans, say that their look resembled a
PowerPoint presentation, with too many different fonts, italics and bold type scattered
about everywhere. I've heard it described as being very noisy looking and very
unappealing to the eye; not something desirable when you are on a shelf competing for
the consumer's attention with hundreds of other beverages.
Another key component of Mr. David's new marketing strategy was to move from a
business model of selling four packs of Celsius to new consumers, to one of selling
refrigerated single cans, to allow consumers to sample the product first without having
to make a commitment to purchase volume of something they had never tried before.
As part of this strategy, the company ended its distribution relationship with Costco.
That was a bold move, considering the revenue generated from having a presence in
316 of Costco's signature outlets was hefty.
The decision to drop Costco from the ranks of Celsius' distribution partners, in early
2012, was a difficult choice, but one that ultimately strengthens the company for two
reasons. First, it removes the frightening dependence on a single source for almost
fifty-percent of annual revenues. Second, the very thin margins from the Costco
relationship were a drag; pulling down the overall, blended margins across all
distribution channels.
Looking at the revenue numbers over the past few years, it seems that the broadening
out of the distribution base has stabilized revenues, and created a more predictable
stream of income for the company.
Here is a breakdown of the financial results reported by the company over the past four
years:
However, the new strategic focus didn't end there. Mr. David decided to partner with one
of the country's most aggressive distributors, GBS Smash Brands, to expand
distribution in a new direction which included health clubs, colleges and universities
and other nontraditional distribution outlets.
http://www.bevnet.com/news/2012/celsius-enlists-gbs-smash-brandsto-pump-up-new-
growth-strategy
In addition, Mr. David beefed up the Celsius Ambassador Program, whereby free
samples of Celsius were given out, along with an incentive to buy-one-get-one-free with
the retail purchase of a single can.
Taste is one of the most important consumer criteria in any beverage, and it has been
shown that most people who try Celsius enjoy the taste and will purchase the product.
He also made the Ambassador Program profitable, something that was never done
under Mr. Haley.
Sampling is a big part of getting consumers to try and eventually buy Celsius. The
company has used a number of sampling programs, partnering with subscription box
companies such a Bulu Box and Goodies Co. (a Wal-Mart affiliate), among others.
I mentioned how under Celsius' previous management, thousands of dollars were spent
on slotting fees and marketing expenses, resulting in an unusually high-cost structure
to bring in each new customer. A new, less expensive and creative way to find and
secure new customers was necessary, and Gerry David found it in digital marketing and
social media.
http://www.bevnet.com/news/2013/celsius-growth-led-by-refineddistribution-digital-
marketing
A very important and instrumental part of developing a digital marketing and social
media strategy was to partner with a public relations firm that had all the right
characteristics necessary to launch, manage and monitor an effective PR campaign. For
this extremely important task, Celsius chose 5WPR with offices in New York and Los
Angeles, as their PR Agency of Record.
http://www.prnewswire.com/news-releases/5w-public-relations-namedpr-agency-of-
record-for-celsius-inc-143289876.html
In his most recent commentary on FY 2013 results, CEO Gerry David had this to say: "as
a result of our marketing initiatives we are attracting new daily consumers and industry-
wide brand recognition. Celsius Public Relations efforts have generated over 750
million impressions in 2013 while our digital radio campaign continues to deliver 7.8
million ads each month that are focused in our "Drill Deep" markets."
Perhaps the most important change that was made to the Celsius marketing strategy
was to eliminate the previously held notion that the company needed to take
distribution nationwide, versus concentrating on a few markets where the idea was to
"drill deep"; penetrate and concentrate on establishing a repeat customer base by
achieving product "sell-through".
The use of Pandora has been very instrumental in helping Celsius attract and retain new
customers who are encouraged to visit the company web site where they can purchase
the product and see the results that others are achieving in terms of weight-loss,
increased energy, along with more stamina and endurance when exercising.
Some of the success stories achieved by ordinary people are truly amazing. I'm sure
these personal testimonials convince many who visit the company web site to try the
product. Celsius also has its own team of sponsored athletes who compete in a number
of different sports.
http://www.celsius.com/category/weight-loss-success/
You will remember earlier in my report I quoted executives at CocaCola's VEB unit who
said that the VEB group in Atlanta, pays particular attention to those company
executives “that understand the value of going deep before going wide by targeting
specific regions, channels, or customer segments, versus trying to be everywhere at
once”.
This new multi-layered strategy, of doing just that, appears to be yielding significant
results.
http://www.bevnet.com/news/2014/multi-layered-strategy-catalyzescelsius
While there has certainly been significant progress made by the Csuite at Celsius,
some of the most powerful and influential changes may have recently taken place at
the Board Level. In April of 2013, it was announced that three new individuals had
joined the Celsius Board of Directors; Kevin Harrington, Kathleen M. Dwyer and Nick
Castaldo.
http://www.marketwatch.com/story/celsius-holdings-inc-appointsthree-new-board-
members-2013-04-15
These three individuals have very strong credentials, and each has demonstrated a
track-record of success in their respective careers.
Kevin Harrington's desire to join the Board is based on his ability to recognize growing
consumer trends, and products that meet the needs of the marketplace. He was one of
the original members of the hit television show "Shark Tank", and has successfully
helped launch over 500 new consumer products.
http://upstart.bizjournals.com/entrepreneurs/hot-shots/2013/08/07/ kevin-harrington-
shark-tank-advice.html?page=all
His presence on the Celsius Board has caused some to speculate that "with Kevin
Harrington on board, the competition will heat up, and the big boys (Coke and Pepsi)
will pay close attention”.
http://www.palmbeachlwp.com/news/work/celsius-drinks-addsharrington-to-board/
If, in the case of Coca-Cola, their VEB (Venture & Emerging Brands) Team looks for
those "brands that have achieved approximately $10 million in revenue", the boys in
Atlanta may, in fact, have begun watching this upstart little beverage company very
closely. Most recent Q4 and FY 2103 results show continued strong revenue growth
(topping $10 million for the first time in the company’s history), improving margins,
and double-digit growth in multiple channels, while international expansion plans
are gaining traction.
http://globenewswire.com/news-release/2014/02/06/608019/10067114/en/Celsius-
Holdings-Inc-Reports-Fourth-Quarter-and-Year-End-2013-Results.html
http://globenewswire.com/news-release/2014/02/25/613019/10069679/en/Celsius-R-
Partners-With-Dubai-Franchising-of-UAE-International-Investments-for-Exclusive-
Distribution-in-Middle-East.html
Investors might find the shares of Celsius Holdings, Inc. particularly compelling, given
its potential growth prospects and most recent quarterly results. As of the date of this
report, the company is selling for roughly 0.7x annual revenue, well below the industry
average of 1.5x - 2.0x, and substantially below the 6x number that Coca-Cola paid for
Glaceau in 2007.
Shares of Celsius Holdings, Inc. are very thinly traded as a result of having only
20,179,032 shares outstanding as of 12/31/2013.
Approximately, 52%, or 10,493,096 of the outstanding shares are held by majority
stakeholder, Carl DeSantis, through his corporate entity CDS Ventures of South Florida,
LLC, leaving only approximately 9,685,935 for purchase in the public float.
CDS Ventures of South Florida, LLC also owns debt instruments totaling approximately
$7.6 million, some of which are convertible into shares of Celsius Holdings, Inc.
common stock. Potential investors are strongly encouraged to review the company
filings for details regarding the terms and conditions of these instruments, along with
conversion privileges as they relate to these various debt obligations.
IMPORTANT DISCLAIMERS
The principals of Altitrade Partners are long shares of Celsius Holdings, Inc. (CELH). This report
expresses only those opinions of individuals who are affiliated with Altitrade Partners. Altitrade
Partners has not received any form of compensation from Celsius Holdings, Inc., or any other third-
party in exchange for writing this report. No promotional fees, of any kind, have been paid to Altitrade
Partners. We are an independent provider of small-cap and microcap research. For more information
about Altitrade Partners, including our disclaimer, please visit www.altitradepartners.com
Altitrade Partners has no business arrangement with any company discussed in this research report.
Please see the additional disclaimer below for more complete details.
Altitrade Partners, herein referred to as (AP), is not an investment advisory service, and is not a
registered investment advisor or broker/dealer. Investors should base any buy and sell decisions on their
own due diligence and preferably with the advice of their own financial, tax and investment advisors.
The views and opinions expressed in this report are purely those of Altitrade Partners. No views or
opinions should be misconstrued as advice as to whether or not to buy or sell any securities. Altitrade
Partners does not offer advice or investment services, and is not compensated to provide opinions, write
research reports, or to comment on news of any publicly traded or privately-held companies. AP has no
liability in any personal investment decisions made by readers based any AP report, or reports written
by any of its affiliates.
Statements posted, and opinions expressed are made as of the date of the report, and are subject to
change without notice. While we may provide future updates to our reports, from time to time, we are
under no obligation to do so. It is up to each individual reader to stay abreast of any future
developments which may positively or negatively impact the future of any company we report on. All
information is believed to be accurate and reliable, but there can be no assurance of same. We suggest
that you do your own research and due diligence, and not rely on the information posted on this, or any,
Internet web site.
Do not rely on information contained within this report as the basis for any buy or sell decisions. The
opinions expressed here are provided as informational only and should not be construed as investment
advice. Each investor is responsible for making his or her own investment decisions, with the assistance
of a licensed financial advisor, investment advisor or tax professional to determine whether or not an
investment is suitable based on their personal financial goals, circumstances and risk-profile. Readers
must understand and acknowledge that there is a very high degree of risk involved in trading securities
and any investment decision should not be based solely on what is read in a research report, viewed on
a web site, or seen on an Internet page.
The employees and/or affiliates of Altitrade Partners may hold positions in the equity securities of
companies or industries discussed here; including, but not limited to common stock, preferred stock,
convertible debt, as well as listed put and call options. Any such positions are disclosed to readers, so
that they may be aware of any potential conflicts of interest as a result of the author's position (long or
short) in a security which they are writing about. Understand that such disclosure is made at the time
that the opinion is posted, and is subject to change. Such changes may include increasing or decreasing
the number of shares held, increasing or decreasing the number of options which may be exercised into
common stock, along with hedging strategies designed around taking an offsetting position in the same
security, or convertible securities, to manage risk.
Altitrade Partners does not issue buy or sell recommendations. We only discusses relevant public
information on specific companies, sectors or subjects. We make every attempt to verify and
authenticate the information presented, by providing readers with hyperlinks to articles we have
researched from sources such as trade magazines, various news services, industry journals, company
web sites, press releases, SEC Filings, etc.
All information is believed to be accurate and reliable, but there can be no assurance of same.
Accordingly, you should not rely solely on this information in making any investment decision. Rather,
you should use the information only as the beginning of a due diligence process, which, we believe,
every investor should engage in before deciding on an appropriate course of action. You are
encouraged to perform your own additional independent research in order to allow you to form your
own opinion regarding any investment. You should always check with your licensed financial advisor
and tax professional to determine the suitability of any investment you are considering.
The information and services contained within this report may include or incorporate by reference
"forward looking statements" including certain information with respect to business results, plans and
strategies of publicly-traded companies. For this purpose, any statements on the site or incorporated by
reference that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting or forgoing the words "should", "could", "may" "believe", "anticipate", "plan",
"expect", "project" and similar expressions are intended to identify forward-looking statements. Such
statements are subject to risks, uncertainties, and assumptions about each company, economic and
market factors in industries in which the companies do business, among other factors. These statements
are in no way guarantees of future performances and actual events, and results may differ materially
from those expressed or forecasted by the companies due to many factors.
The information contained herein contains forward-looking information within the meaning of
Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934
including statements regarding expected continual growth of the company and the value of its securities.
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 it
is hereby noted that statements contained herein that look forward in time which include everything
other than historical information, involve risk and uncertainties that may affect the company's actual
results of operation. Factors that could cause actual results to differ include the size and growth of the
market for the company's products, the company's ability to fund its capital requirements in the near
term and in the long term, pricing pressures, unforeseen and/or unexpected circumstances in
happenings, pricing pressures, etc. Investing in securities is speculative and carries risk.