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For many observers, PepsiCo's short-lived partnership with Bang Energy a few years back was an object lesson in how not to implement a partner-brand strategy. Incentives sometimes seemed misaligned, given heftier margins PEP obtained from its own Rockstar and Mtn Dew energy entries than from partner brand Bang, and the impatience and prickliness of Bang owner Jack Owoc made it unlikely partners would be able to sit down to methodically iron out discrepancies, which sometimes saw Bang-branded coolers filled only with Rockstar and Mtn Dew to founder's outrage. So Owoc proceeded to publicly "fire" Pepsi, Trump-style, without having contractual latitude to do so and things unraveled from there. Pepsi's current Celsius partnership represents its do-over in category. Out the gate it clearly was much more successful than Pepsi/Bang and there have been tweaks along the way. The course corrections, capped by recently revamped deal that made Celsius Pepsi's category captain in energy and sent over to it Pepsi's struggling Rockstar brand (BBI, Aug 29), seem to demonstrate how an approach of continuous improvement can serve to remedy imbalances. At Piper Sandler conference last week, Celsius chief of staff Toby David walked Wall Streeters thru partners' revamped deal, in illuminating discussion hosted by Piper analyst Michael Lavery. Toby's a 13-yr Celsius vet who's also a board member at BeatBox. (His dad Gerry David was predecessor to John Fieldly as Celsius CEO.)Before we go there, we want to address one area that wasn't touched by that discussion or, as far as we know, co's other public statements: whether, with reconfigured alliance, Celsius has won role as PEP's exclusive energy partner, as Monster is in alliance with Coca-Cola that Celsius CEO John Fieldly has cited as a role model. The answer, per our recent query to IR chief Paul Wiseman, is no. "Celsius Holdings doesn't have energy exclusivity within PBNA, but the captaincy confers certain, new protections to Celsius that protect our interests in this regard," Paul told us, referring to PepsiCo Beverages North America. It's not surprising that PepsiCo would be hesitant to cede any exclusivity in energy any more after similar commitment to Rockstar forced it to undertake $4 bil acquisition of already-declining brand in order to void that contract and clear the way for Bang deal.As noted, paramount to revamped Pepsi deal is so-called captaincy, serving as partner's energy lead. That captaincy "is really critical for us" because it insures the "full mental focus of their team," as David explained. Tho initial phase of alliance over past 3 years has been "a great relationship," that didn't disguise reality that "at the same time we are an allied brand and Rockstar was an owned brand within their portfolio," Toby elaborated. "We wanted to get full share of mind within the Pepsi system." As captain, David said, "we get a lot of prioritization, in Pepsi-controlled Plan-O-Grams, we lead in the space," determining how much Celsius, Alani Nu and Rockstar get in each placement. As Fieldly likes to say, "we want to put the fast cars on the track" rather than have preferences dictated by whether it's an owned or allied brand (with the margin implications that also carries).Under new deal, "when it comes to Pepsi Plan-O-Gram, we control that, we control call points at Walmart, 7-Eleven," David indicated. In c-store channel in particular, which had been untapped channel for Celsius and now represents big upside for Alani Nu, Pepsi services over 100K indie stores across US, controlling specific footprint and offering proportional discounts, program called Medals. That's now controlled by Celsius in energy space.As captain, it's Celsius' job to make the calls based on brands' strengths in particular regions and channels. On the coasts, where Celsius is stronger, it likely will command greater space allocation while central states will skew higher for Alani presence. Tho long declining, Rockstar retains very strong presence in Pac NW and can count on greater shelf space there. And while Celsius until now had made much of the fact that the category's growth has been occurring on zero-sugar side, "full-sugar, at the end of the day, is still half of the category." Rockstar provides useful tool to get share there. On promotional calendar, CELH will "toggle" to make sure one of its brands is on promo at all times of year. "Monster does a great job of that," Toby said of rival in its role managing extensive portfolio of brands, many sent over from Coca-Cola just as Pepsi has sent Rockstar over to Celsius. "We'll make sure that we're not competing against one another now that we have a portfolio approach," he explained.Under its new owner Celsius, can Rockstar get back on a growth track? "They've had their declines over the years," as David readily allowed. Still, he pointed out that many current Celsius execs were senior-level Rockstar execs years ago during its indie growth years. So they might bring useful insights to turn things around. Still, "step 1 is to get them back to where they're not losing share, flatten things out, then see where we go." Broad array of sublines and sku's will be consolidated to top performers. Of course, there's a Coke/Monster comparison here too, as Monster works to revitalize a Bang Energy brand it acquired out of bankruptcy after Bang's Pepsi alliance collapsed and Monster prevailed in pair of key legal rulings.Wall Street has also harbored some questions about the fast-growing Alani Nu brand that cuts over to Pepsi system on Dec 1, with some wondering whether it's too close an overlap to Celsius itself and whether it will thrive in convenience channel. In discussing brand, David offered a tip of the hat to "fragmented" Anheuser-Busch beer network that had gotten brand this far. "Fabulous network, can't speak highly enough," he said. Still, Pepsi is "tier 1" option, in David's phrase. In C&G Alani currently boasts about 65% ACV (in both tracked and indie channels), similar to Celsius brand's presence before it did its Pepsi deal, and similar # of sku's to Celsius at that part of growth cycle. Can Alani perform within convenience despite its heavily female demo? So far, Alani's scanned performance within C&G "is really strong" and hopefully it can maintain progress. In larger-format stores, meaning grocery and big-box, Celsius will be bringing its strength with Pepsi in maintaining high IOD (inventory on display) and NOD (number of displays), "a great opportunity for Alani" starting in early 2026. As with Celsius, foodservice channel is a Pepsi strength that could prove big unlock for Alani brand. Thanks to Pepsi, that channel now is 11-12% of Celsius' total sales.

STRATEGY: How Celsius Has Strengthened PepsiCo Partnership via Energy Captain Role; Now Commands Schematics but Still Not Exclusive Energy Partner

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