Celsius Holdings (CELH): A High-Conviction Play on Energy Drink Market Consolidation and Margin Expansion in 2026

The energy drink market, long fragmented and competitive, is undergoing a quiet but significant consolidation. Celsius Holdings (CELH) has positioned itself at the center of this shift, leveraging strategic acquisitions and partnerships to expand its portfolio and distribution capabilities. While short-term integration challenges have clouded its financial performance in 2025, the company's disciplined execution and clear path to margin normalization by 2026 make it a compelling high-conviction investment.

Strategic Acquisitions and Partnerships: Building a Diversified Portfolio

Celsius Holdings has aggressively expanded its market footprint through two landmark transactions in 2025. In February, it acquired Alani Nutrition for $1.8 billion, adding the Alani Nu brand of functional beverages and wellness products to its portfolio according to reports. This move was followed by a transformative partnership with PepsiCo in August, under which Celsius acquired the Rockstar Energy brand in the U.S. and Canada, while PepsiCo invested $585 million in convertible preferred stock as per official statements. Crucially, Alani Nu's integration into PepsiCo's distribution network-a transition set to begin in December 2025- positions Celsius to leverage one of the most efficient logistics systems in the beverage industry.

These acquisitions reflect a dual strategy: combining Celsius's core energy drink expertise with Alani Nu's health-conscious appeal and Rockstar's established energy drink presence. The partnership with PepsiCo, in particular, offers a scalable infrastructure to accelerate growth while reducing the cost of market penetration.

Financial Performance: Margin Gains Amid Integration Turbulence

Celsius's Q3 2025 results underscored both the promise and the perils of rapid expansion. The company reported a 51.3% gross margin, a 530-basis-point increase year-over-year, driven by lower promotional spending, favorable product mix, and economies of scale. However, integration costs from Alani Nu and Rockstar-such as tariffs, freight, and returns- temporarily pressured margins. Management acknowledged that Q4 2025 would be "noisy" due to ongoing integration activities, including the transition of Alani Nu to PepsiCo's distribution system.

Despite these headwinds, Celsius has maintained tight control over general and administrative expenses, which now account for just 6% of sales (excluding acquisition costs), down from 9% as reported in earnings. This operational discipline, coupled with a 173% revenue surge in Q3 2025, highlights the company's ability to balance growth with efficiency.

Integration Execution: Operational Efficiencies and Cost Synergies

The key to Celsius's long-term success lies in its ability to execute its integration strategies. For Alani Nu, the transition to PepsiCo's distribution network-funded entirely by PepsiCo- has been a critical step. While the $247 million in transition costs have created short-term drag, the long-term benefits are clear: broader retail availability, reduced logistics costs, and accelerated growth. Management expects these efficiencies to materialize by Q1 2026 as forecast.

For Rockstar Energy, the focus is on sourcing and production integration. The brand, which saw a 9% decline in retail sales year-over-year for the 13 weeks ending September 28, is being repositioned to align with Celsius's cost-optimization playbook. Margin improvements are projected for H1 2026, mirroring the trajectory of Alani Nu.

Margin Normalization: A Clear Path to 2026

Celsius's management has been unequivocal: margin normalization is within reach. The company anticipates that co-packing and sourcing efficiencies will drive gross margin expansion in early 2026. While Q4 2025 sales and marketing expenses are expected to rise to 23%-25% of sales as management stated, these costs are temporary, tied to brand transitions and promotional campaigns. By Q1 2026, these pressures are forecast to normalize.

Investors should also consider the broader context. The energy drink market is projected to grow at a compound annual rate of 5.2% through 2030, and Celsius's expanded portfolio-spanning functional beverages, classic energy drinks, and premium wellness products-positions it to capture a larger share of this growth.

Conclusion: A High-Conviction Play on Execution

Celsius Holdings' journey in 2025 has been marked by turbulence, but its strategic acquisitions and disciplined integration efforts have laid a solid foundation for 2026. The company's ability to navigate short-term challenges while maintaining operational efficiency and margin discipline underscores its management's capability. For investors willing to look beyond near-term volatility, CELH represents a high-conviction opportunity to capitalize on energy drink market consolidation and margin expansion.