By registering you agree to our privacy policy, terms & conditions and to receive occasional emails from Ad Age. You may unsubscribe at any time.

Are you a print subscriber? Activate your account.

By Ad Age and Creativity Staff - 6 hours 41 min ago

By Brian Bonilla - 10 hours 13 min ago

By Adrianne Pasquarelli - 14 hours 52 min ago

By E.J. Schultz - 1 day 14 hours ago

By Garett Sloane - 2 days 4 hours ago

By Ann-Christine Diaz - 2 days ago

By Brian Bonilla - 1 day 4 hours ago

By Maia Vines - 1 day 13 hours ago

By E.J. Schultz - 2 days 7 hours ago

By Brian Bonilla - 1 day 7 hours ago

Celsius—which has become the nation’s hottest energy drink by winning fans at health clubs and grocery stores and on Amazon—is looking to college students for its next growth spurt. Gaining new distribution on college campuses was a major reason it struck a deal last week with PepsiCo, Celsius CEO John Fieldly said in an interview Wednesday.

According to Fieldly, PepsiCo has exclusive distribution deals with campuses that cover 61% of the nation’s college student population. “That is a huge opportunity for us,” he said. “A lot of college campuses are either Coke or Pepsi campuses, and if you are not on those two systems you can't get any availability there ... You could go through the bookstores—that is what we were trying to do—but that is very difficult. But now with the Pepsi system, we’ll be able to be in the cafeterias and the coolers and the vending machines.” The pact, announced Aug. 1, gives PepsiCo an estimated 8% stake in Celsius for $550 million while making the drinks and snacks giant the preferred distribution partner globally for Celsius. As of the first quarter, Celsius ranked as the nation's fifth largest energy drink with 3% market share, behind Monster, Red Bull, Bang, and PepsiCo-owned Rockstar, according to Beverage Digest.

Prior to the PepsiCo deal, Celsius had already begun seeking inroads on campuses via a marketing program called Celsius University that involves getting college students to help the brand market the drinks at their local schools. The inaugural “class” of 22 graduated last week from the program, which involved Celsius flying the students to its corporate headquarters in Boca Raton, Florida, for training. They will be paid an undisclosed sum for tasks aimed at “integrating us into college life,” including setting up sampling programs and getting Celsius noticed at on-campus events, Fieldly said. “They have clear KPIs that are being delivered,” he added.

Celsius plans to expand the program “just because of the access now with the Pepsi deal,” Fieldly said. It is targeting its next class to include 200 students.

Celsius has made gains in the energy drink sector by plugging its health credentials, which include claims that the drinks are clinically proven to accelerate metabolism and burn calories and fat. It uses a gender-neutral marketing approach that sets Celsius apart from the ego-driven, extreme-sports-laden marketing approaches taken by other brands. 

That strategy could serve Celsius well as it seeks on-campus growth. The brand is “more likely to appeal to a broader set of college students, including women,” said Duane Stanford, editor and publisher of Beverage Digest. “College kids are forever trying to figure out how to get pops of energy—because they are either studying all night, or partying all night, or both,” he said. “There is a built-in market for energy drinks.”

It is also banking on PepsiCo to help it gain distribution in foodservice channels, including sports stadiums, fast-casual restaurants and even corporate cafeterias—which are all places in which PepsiCo has a strong foothold. The ambitions are fueled in part by what Celsius sees as changing energy drink consumption habits. While consumers in the past used the drinks as an appetite suppressant or for a midday beverage break, more drinkers are now having them with lunch or other meals, “and that opens up really a new avenue for energy,” Fieldly said.

The brand is also counting on PepsiCo to help power sales at convenience outlets, which account for 70% of energy drink sales, according to Fieldly. “We are only at 50,000 locations today in convenience, and there are hundreds of thousands of locations out there,” he said.

Fieldly pointed in particular to PepsiCo’s ability to penetrate independently operated convenience stores. Celsius' second-quarter revenue more than doubled to $154 million from $65.1 million a year earlier, due in part to increased distribution in convenience stores. 

While Celsius will maintain its own marketing department, Fieldly said there are opportunities for collaboration, including leveraging PepsiCo’s sponsorship deals with sports teams. Celsius handles a lot of its marketing in-house, but he did not rule out using some PepsiCo agencies, including for media buying and planning. (Omnicom Group has PepsiCo’s media account.)

As it seeks growth inside PepsiCo’s distribution system, Celsius will have to compete for attention with the company’s wholly-owned energy drink brands, which include Rockstar and its newer Mtn Dew Energy drink. PepsiCo also partners with Starbucks on the coffee chain’s Baya energy drink, which debuted earlier this year.

“Whenever you are in a situation where you have an owned brand versus a distributed brand, there is always going to be that tension,” Stanford said. “The more Rockstar they sell, the more money they make, versus Celsius. But Celsius is the growing brand.”

Before the PepsiCo deal, Celsius’s distribution network was dominated by beer distributors, mostly from the Anheuser-Busch InBev and Molson Coors networks. Fieldly pointed out that those distributors also handled a variety of competing energy drinks.

“Some distributors have like nine other energy drink brands, now we are moving to a PepsiCo system that really has three or four brands,” he said.

One of Celsius’ competitors, Monster, just announced it was moving into the alcohol sector with the launch of The Beast Unleashed, a flavored malt beverage at 6% alcohol-by-volume that will use beer distributors. It continues the trend of blurring lines in the drinks business as traditional makers of non-alcoholic beverages get into alcohol and alcohol makers experiment with non-alcohol products. (PepsiCo rival Coca-Cola has had an investment and distribution deal with Monster since 2015.)

“I’ll never say never, but today we are not really thinking about that,” Fieldly said. “We are all about living fit and living healthy.”

E.J. Schultz is the News Editor for Ad Age, overseeing breaking news and daily coverage. He also contributes reporting on the beverage, automotive and sports marketing industries. He is a former reporter for McClatchy newspapers, including the Fresno Bee, where he covered business and state government and politics.