Celsius is growing its business to be a more powerful player in the beverage space starting with the launch of a hydration offering, a move that expands the energy drink giant’s reach with consumers while further pitting it against CPG giants such as Coca-Cola and Unilever.
The debut of Celsius Hydration this week provides a deeper look into the Florida company’s long-term strategy as it aims to grow the 21-year-old brand with roots in physical fitness into a broader lifestyle offering.
Executives see Celsius eventually connecting with consumers throughout more parts of their day, from quenching thirst and providing energy to later on potentially helping with mental clarity and providing probiotics.
“This is a big opportunity to continue to grow our Celsius lifestyle brand and our portfolio,” Kyle Watson, chief marketing officer at Celsius, said in an interview. “[Hydration] felt like a really strategic move for us that wouldn’t ... allow us to lose focus on the energy category.”
The company chose to enter hydration because it provided the best opportunity to increase consumption of Celsius among existing users and to attract new individuals to the brand.
Watson said while many of Celsius’ energy drinkers enjoyed the beverage and its flavors, several said they wanted an option that didn’t include caffeine. They often would turn to another product to fill the void.
Celsius Hydration — which does not contain caffeine but is loaded with B vitamins and electrolytes — keeps existing users within the company’s portfolio while providing people, who may have avoided the brand because of the stimulant, a reason to try its products.
There also was a natural synergy between energy drinks and hydration. Roughly half of energy drink consumers were looking for hydration options to replenish electrolytes, Watson said. In many cases, people would purchase both during the same shopping trip.
The Celsius Hydration line features five flavors: Fruit Punch, Blue Razz, Strawberry Watermelon, Arctic Cherry and Lemon Lime. Each packet has 15 calories and is sugar-free.
Celsius Hydration is currently available in powder through portable sticks conducive for on-the-go use
Beverage makers thirst for hydration offerings
The hydration segment is growing rapidly, with beverage companies of all sizes introducing portable enhancer options to allow their products to bring more benefits to consumers beyond just quenching thirst. The global market for water enhancers is projected to nearly double to $5.7 billion by 2033, according to Straits Research.
Unilever bought electrolyte-infused beverage mix maker Liquid I.V. five years ago before the trend really took off, and it has rapidly grown the brand since the acquisition.
PepsiCo last September debuted Gatorade Hydration Booster, an electrolyte drink powder for all-day hydration, while sports drink BodyArmor, which is owned by Coca-Cola, entered the category in 2022 with BodyArmor Flash I.V. before bringing it to a powder format a year later. And Waterdrop, an Australian company, is selling electrolyte-infused hydration cubes with zero sugar that can dissolve in reusable water containers.
“There’s a ton of players, and it’s a lot of amazing competitors in the category and very established brands,” Watson said. “I think for us, we’re not setting out to own hydration [like we are with energy.] We’re really looking to drive incremental consumption, incremental consumers into our brand, and we want to play in the category and see where it takes us.”
A big part of Celsius’ future growth hinges on getting people to drink its products across more occasions.
The company is exploring other categories where Celsius could play, including helping consumers with mental focus or providing prebiotics or probiotics through better-for-you sodas. It’s considering bringing Celsius into other beverage categories that coincide with existing consumer trends and that mirror what users of the brand are looking for.
“We’ve looked at all those and we’re evaluating the areas where it would really make sense for us to play,” Watson said. “There are several opportunities that we have in our sights as to where we are looking to go.”
The company, which was founded in 2004, has matured as consumer interest in better-for-you and functional offerings — a trend that intensified during the pandemic — has accelerated. Celsius fits squarely into these categories with an energy drink that lacks sugar and calories but comes loaded with ingredients it claims provide workout and energy benefits without the crash. Revenue now tops more than $1.3 billion annually.
But Celsius recently has faced a slowdown in growth as consumers cut back on spending and competition in its core energy drink business from Alani Nu, Red Bull and others intensifies.
Robert Moskow, an analyst with TD Cowen, said in a research note last week that while Celsius has gained shelf space, product velocity has declined in the double-digits. He noted that Celsius’ market share has slipped to 9.1% compared to a peak of 10.9% in May 2024.
“We see the energy drink category getting more crowded with challenger brands adopting a similar ‘better-for-you’ positioning as Celsius,” Moskow told investors.
