Evercore sees sugar-free energy drinks gaining share By Investing.com

Sugar-free energy drinks gained about 410 bps of market share and grew sales 23.1% year over year, while the overall category rose 13.7% in the latest four weeks. Costco’s Kirkland Signature Energy Drinks are pressuring Celsius by targeting its price point and flavor profile, contributing to a 46% six-month share decline to $34.73 and an approximate 7% drop after the launch. Analysts remain constructive on Celsius overall, with Deutsche Bank, TD Cowen, Morgan Stanley, and Jefferies still maintaining bullish ratings despite the competitive pressure.

Analysis

The important takeaway is not just share loss in energy drinks, but the retail-price architecture shift now underway. A low-price private label at Costco can pressure premium brands fastest in channels where trial is driven by value shoppers, and that typically forces incumbents to defend with promo spend rather than list-price cuts. That implies margin compression can show up before share loss does in the scanner data, making near-term earnings revisions more sensitive than sell-side models that focus only on volume.

Celsius is the cleanest loser because its valuation still embeds a normalized growth multiple, while the business now faces a two-front fight: private label at the low end and broader category deceleration at the high end. The second-order effect is that competitors with broader distribution and stronger trade budgets can take share without needing to win brand loyalty outright; Monster is less exposed operationally, but its growth algorithm is also more likely to be forced into heavier merchandising, which can cap upside. Costco is the structural winner here because it can use energy drinks as a traffic driver, not a profit pool, which makes the pricing pressure durable rather than promotional.

The contrarian point is that this may be more of a mix/margin event than a true category demand break. If the category still grows mid-teens, then the bear case on Celsius depends on private label proving that it can scale beyond a niche warehouse channel; if it cannot, the current drawdown could overshoot fundamentals over the next 1-2 quarters. The key variable to watch is whether lower-priced SKUs shift the basket or merely expand the category by recruiting more price-sensitive buyers.

Key Decisions for Investors

• Short CELH on rallies for a 4-8 week trade: favorable risk/reward if private label pressure forces another round of estimate cuts; use a tight stop above the most recent post-launch rebound high.
• Pair trade long COST / short CELH into the next monthly channel-check read: COST monetizes traffic and vendor leverage, while CELH is exposed to both share and margin compression.
• Buy MNST puts or run a put spread 1-2 months out: downside is more limited than CELH, but heavier trade support could still compress near-term EPS if management chooses to defend shelf space.
• Wait for the next earnings cycle before adding to DB/MS based on analyst calls: the upgrade cycle is likely reacting to valuation, but the better entry is after management commentary confirms whether category promotion intensity is rising or temporary.
• Avoid chasing CELH dip-buying until there is evidence Kirkland velocities are not sustaining: the trade works only if private label remains a warehouse-only nuisance rather than a repeatable pricing template.