🥤 Pepsi chugs Celsius

Looks like a seltzer... hits like a double espresso. Pepsi announced a $550M stake in trendy energy-drink maker Celsius Holdings as part of a distribution deal. Celsius stock popped 11% after the Pepsi-vestment. Its stake equals about 7% of Celsius, which is now worth over $7B. The soda giant will help Celsius expand in retailers like gas stations and convenience stores, where the bulk of energy drinks are sold.

• Functionally fit: Celsius markets its sugar-free energy drinks as "healthy." Think: supplemental ingredients like ginger and green tea with no artificial preservatives. It says its drinks are "clinically proven to accelerate your metabolism."
• Gen Z-pleasing: Celsius has targeted young, on-the-go consumers with its sleek cans and flavors like "Sparkling Arctic Vibe" and "Peach Mango Green Tea."

Pre-Zoom energy… Though founded in 2005, Celsius has seen explosive growth this year as young Americans seek energy boosts for Zoom marathons, gym sessions, classes, and returning social events. In the first quarter, Celsius' US sales more than tripled to $123M. It’s not just Celsius: energy drinks have become one of the fastest-growing non-boozy bev categories. Blame long and irregular hybrid work hours, labor shortages, and (increasingly frequent) social obligations.

THE TAKEAWAY

“Functional bevs” are the new sugar… As sodas continue declining, big bev companies have shifted investment to functional beverages — think: vitamin-packed energy drinks and enhanced waters with a “purpose” (besides just hydration or intoxication). Last year, Coke splurged $5.6B for health-focused Gatorade rival BodyArmor. In 2020, Pepsi bought Rockstar Energy for nearly $4B and launched sleep-enhancement drink Driftwell. The global functional-bev market is expected to be worth nearly $200B by 2026.

Oh Romeo, Romeo… where art thy batteries, Romeo? Yesterday, e-truck maker Nikola agreed to buy battery biz Romeo Power for $144M. Romeo was worth $1.3B when it went public via a SPAC in 2020. But then it ran up $250M+ in losses, and recently warned investors it might soon run out of cash.

• Extra juice: Nikola, Romeo’s biggest customer, has agreed to give Romeo $35M in “interim funding” to keep making batteries as the deal closes.
• Bringing home the batts: Since Nikola needs so many batteries, it expects to save $350M over four years through its purchase.
• Not just Nikola: Other EV makers like GM, Ford, Tesla, and Toyota are spending billions on battery factories with partners like LG and Panasonic.

A remarkable recharge… Not long ago, Nikola nearly ran out of juice itself. In 2020, Nikola’s ex-CEO resigned over fraud allegations (remember the infamous truck rolling down a hill commercial?). In the aftermath, Nikola’s billion-dollar GM partnership crumbled, and its shares have collapsed 90% from their 2020 peak. But last quarter Nikola shocked Wall Street by delivering its first trucks — and its first revenue. Now:

• Nikola expects to ship at least 300 trucks by year’s end. Batteries are among the priciest and hardest-to-find EV components, so consistent access is key to scaling.

THE TAKEAWAY

Batteries are the future of the electric economy… Take it from Elon: EV batteries are the “new oil.” But like oil, they’re expensive — and scarce. That’s why Nikola splurged on its own battery biz, despite having only about $400M in cash on hand in March. It’s also why auto giants and EV suppliers have invested $30B in the US battery biz over the past two years, and why President Biden this year unveiled a $3B plan to boost battery-making.

What else we’re Snackin’

• Lux: Cosmetics staple Estée Lauder is reportedly looking to buy fashion house Tom Ford for $3B, which would be its biggest acquisition ever. The deal would expand Estée’s biz into designer apparel.
• Viral: Watch out, Spotify: TikTok parent ByteDance filed a patent for a streaming app dubbed “TikTok Music.” After hearing a song on TikTok, 67% of users are likely to search for it on a streamer.
• Decline: A federal judge refused to dismiss a case alleging that Visa helped Pornhub parent MindGeek profit from images of child sexual abuse. The case could make payment companies liable for all transactions they process.
• Stack: The SEC charged 11 people in connection with a crypto Ponzi scheme. The pyramid-style blockchain networking biz (called "Forsage") reportedly raised $300M+ from retail investors worldwide.
• Race: Shares of Chinese EV makers Nio, XPeng, and Li Auto surged after each company's July deliveries jumped over 20%. China’s catching up in the global EV race, even as supply-chain setbacks hit the industry.

Snack Fact of the Day

Tuesday

• Earnings expected from: Avis, AMD, PayPal, BP, Ferrari, Electronic Arts, Molson Coors, Caesars Entertainment, and Uber

Authors of this Snacks own: shares of Nikola, GM, Tesla, Ford, Google, Apple, PayPal, Molson Coors Beverage Co, Spotify, and Uber

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