Issue #23

Zero Sugar, Triple Growth: The Beverage Revolution Is On

The beverage industry is undergoing a health-conscious revolution — and two companies are leading the charge from very different corners of the market.

Zevia PBC (NYSE: ZVIA): A mission-driven beverage innovator redefining soda with zero-calorie, naturally sweetened drinks. After achieving its first-ever positive Adjusted EBITDA and expanding shelf space in major retailers, Zevia is emerging as a lean, asset-light disruptor in the “better-for-you” beverage segment.

Celsius Holdings Inc. (NASDAQ: CELH): The unstoppable growth story in functional energy. With explosive revenue growth, strategic acquisitions like Alani Nu, and an expanded partnership with PepsiCo, Celsius is rapidly transforming from a niche wellness brand into a global powerhouse challenging Monster and Red Bull.

Both companies offer distinct exposure to the fast-growing shift toward healthier, functional beverages — one an early-stage turnaround story, the other a high-momentum leader riding record growth.

Zevia PBC (NYSE:ZVIA)

Zevia PBC is a Public Benefit Corporation (PBC) focused on addressing health challenges from excessive sugar consumption. It produces a broad portfolio of zero-calorie, zero-sugar, naturally sweetened beverages using stevia, aiming to disrupt the soft drink, energy drink, and mixer categories.

Business Model and Revenue Streams 📦

Zevia operates as a branded consumer packaged goods (CPG) company with an asset-light model, primarily focusing on brand building, innovation, and distribution.

• Core Revenue Streams: Revenue is derived entirely from the sale of its beverage portfolio, segmented by product type:
• Carbonated Soft Drinks (CSD): The largest segment, featuring a variety of flavors and positioned as a healthier alternative to traditional soda.
• Energy Drinks: A high-growth category for the company, capturing the demand for clean, zero-sugar energy.
• Mixers and Other Beverages: Including products like sparkling water and other functional drinks.
• Operating Strategy (Asset-Light): The company leverages a network of third-party contract manufacturers and distributors, allowing it to minimize capital investment and focus resources on marketing, product innovation, and expanding distribution points.
• Key Drivers: Growth is fueled by the secular consumer shift away from sugar, and the company's ability to gain Total Distribution Points (TDPs) in major retailers like Walmart.

Impact of Current Macroeconomic Policies

As an emerging CPG brand, Zevia is highly sensitive to macroeconomic conditions, facing both opportunities and constraints:

• Input Cost Inflation: Inflation in commodity, packaging (aluminum cans), transportation, and labor costs directly pressures Zevia's cost of goods sold (COGS). Management has cited the impact of tariffs and general inflation as headwinds to gross margin, requiring careful productivity initiatives to offset.
• Consumer Spending: While high inflation can pressure consumers to trade down on price, Zevia's position in the "better-for-you" (BFY) category helps. However, it operates in the non-alcoholic beverage space, where promotional activity is common, sometimes forcing Zevia to increase promotions, which can temper revenue realization.
• Focus on Cost Control: Macro pressures have intensified the company's focus on achieving Adjusted EBITDA break-even, emphasizing disciplined investment and operational efficiency.

Recent Performance and Corporate Developments 📈

Zevia has demonstrated strong operational execution in a difficult environment, highlighted by a milestone achievement in its most recent quarter.

Q2 2025 Financial Highlights: 💰

• Total Revenue: Net sales were $44.5 million, a increase year-over-year, and exceeded analyst forecasts. Volume growth was a strong .
• Adjusted EBITDA Break-even: Zevia achieved a positive Adjusted EBITDA of $0.2 million, marking a significant $4.6 million improvement year-over-year and representing the first profitable quarter (on an Adjusted EBITDA basis) since going public.
• Gross Margin: Gross profit margin saw a substantial improvement, reaching , up percentage points year-over-year, driven by improved unit costs and the realization of cost-saving initiatives.
• Distribution Gains: The company surpassed its historical peak distribution levels, driven by expanded shelf presence and strong performance in top accounts, notably Walmart.

Strategic Initiatives and Mergers: 🤝

• Brand Reinvigoration: The company recently shifted marketing resources and introduced a new, more dynamic packaging design to amplify brand clarity and drive consumer trial.
• Product Innovation: New flavor launches with an enhanced taste profile are generating excitement and posting strong retail velocities, supporting the overall growth narrative.

Path to Profitability and Fair Value 🎯

Zevia's path to sustained profitability relies entirely on scaling its business to achieve necessary economies of scale, leveraging its gross margin improvements, and controlling marketing and overhead spend.

• Leveraging Gross Margin: The recent substantial improvement in Gross Margin is the single most important factor. By optimizing the supply chain (cost mitigation, productivity, and unit cost reductions), the company is creating the financial breathing room needed to eventually achieve net income profitability.
• Scalability: The asset-light, outsourced model means that increased volume (from distribution gains) should translate more efficiently into higher gross profit, covering operating expenses faster. The company is targeting positive Adjusted EBITDA for the full year in the coming periods.
• Strong Balance Sheet: Zevia maintains a strong financial foundation with no debt and a healthy cash position (around $26.3 million), providing the necessary liquidity to fund ongoing growth investments.

Analyst Estimates and Ratings

• Consensus Rating: The consensus rating from 6 analysts is typically a "Hold" or "Moderate Buy".
• Consensus Price Target: The average 12-month price target is $4.58, with a high of $8.00 (issued by Stephens & Co. on July 25, 2023) and a low of $1.00 (issued by Wells Fargo on May 9, 2024).
• Recent Analyst Action (Last 30 Days): The three most-recent analyst ratings—from Telsey Advisory Group, Morgan Stanley, and BMO Capital (released between August 7 and August 14, 2025)—reflect significant optimism. The average price target from just these three recent ratings is $4.90, suggesting an implied upside of over from the current price.

Investor-Focused Takeaway: Is ZVIA Right for Your Portfolio?

Zevia offers a compelling bet on the long-term trend of sugar reduction in beverages. The impressive Q2 performance, which saw Zevia achieve Adjusted EBITDA break-even, signals that the company's operational turnaround is gaining momentum.

• Recommendation: ZVIA is viewed as a Speculative Buy for investors comfortable with a higher-risk, high-reward profile. The combination of strong volume growth, massive gross margin expansion, and a debt-free balance sheet supports a positive long-term outlook. The recent analyst upgrades and significantly high price targets from the most current ratings suggest the market may be slowly recognizing the potential of this disruptive brand.

What to Watch in the Near Term: 📈

• Sustained Margin: Can the company maintain gross margin above the high range despite inflationary pressures?
• Distribution Velocity: Monitor sales velocity at key retail partners to ensure distribution gains translate into sustained consumer pull.

Full-Year Profitability: Track progress toward achieving sustained positive Adjusted EBITDA, a crucial step toward GAAP profitability.

Celsius Holdings Inc (NASDAQ:CELH)

Celsius Holdings, Inc. is a global leader in the rapidly growing functional energy drink market. It is known for its health-focused beverages that appeal to fitness enthusiasts and health-conscious consumers by offering products that boost energy, support metabolism, and contain zero sugar and essential vitamins.

Business Model and Revenue Streams 📦

Celsius operates a hybrid manufacturing and distribution model, combining an asset-light co-packing strategy with a powerful, strategic distribution partnership.

• Core Revenue Streams (Branded Products): Revenue is generated through the sale of its expanding portfolio of functional beverages:
  • CELSIUS® Originals/Essentials: The flagship energy drink line, formulated with MetaPlus® blends designed to boost metabolism and burn body fat through thermogenesis.
  • Alani Nu®: A key acquired brand that targets the female health and wellness consumer segment, providing crucial diversification.
  • Rockstar Energy: Recently acquired from PepsiCo as part of a strategic deal, bolstering its presence in the mainstream energy category.
• Distribution Strategy (The PepsiCo Advantage): Celsius outsources manufacturing to third-party co-packers and leverages a massive long-term distribution partnership with PepsiCo. This partnership grants Celsius access to PepsiCo's vast, efficient U.S. and international distribution network (Direct Store Delivery - DSD), allowing Celsius to focus capital on branding and innovation while rapidly scaling market penetration.

Impact of Current Macroeconomic Policies

Celsius's high growth trajectory provides insulation against some macro factors, but cost pressures remain a key focus:

• Inflation and Raw Material Costs: The company faces headwinds from rising costs in packaging (aluminum), raw materials, and shipping. Management has acknowledged that aluminum cost inflation and tariffs are expected to weigh on gross margins in the second half of the year.
• Discretionary Spending: Despite its premium positioning, demand for Celsius remains highly resilient due to strong consumer trends favoring "better-for-you" and functional beverages. Its rapid market share gain (currently around 11% of the U.S. energy drink market) suggests that the product is becoming a staple, rather than a discretionary luxury.
• International Expansion: Global economic recovery and market trends (especially in Europe and APAC) are supportive of the company’s ambitious international expansion plans, which are being executed with PepsiCo’s logistical support.

Recent Performance and Corporate Developments 📈

Celsius has continued to report explosive growth, reinforcing its position as a major disruptor in the beverage sector.

• Q2 2025 Financial Highlights: 💰
  • Total Revenue: Revenue surged to $739.3 million, marking a staggering year-over-year increase of 84% (or 41% for the first half of 2025), significantly beating analyst expectations.
  • Alani Nu Contribution: The newly acquired Alani Nu brand contributed $301.2 million to Q2 revenue, demonstrating the immediate synergistic impact of the acquisition.
  • Net Income & EPS: The company reported strong net income and an EPS of $0.33, which surprised estimates by over 56% (consensus was $0.21).
  • Distribution: Products are now sold in over 240,000 tracked U.S. retail outlets, reaching approximately 43% of U.S. households, showing the power of the PepsiCo distribution model.
• Strategic Initiatives and Mergers: 🤝
  • Major M&A (Alani Nu): In February 2025, Celsius announced the transformative acquisition of Alani Nutrition LLC (Alani Nu) for $1.8 billion in cash and stock, immediately adding a major, female-focused health and wellness brand to its portfolio.
  • Strengthened PepsiCo Partnership: In August 2025, Celsius and PepsiCo announced a significant strengthening of their strategic partnership. This deal involves:
    • Integrating the newly acquired Alani Nu brand into PepsiCo’s U.S. and Canada distribution system.
    • PepsiCo investing $585 million in convertible preferred stock, increasing its ownership to approximately 11%.
    • Celsius acquiring the Rockstar Energy brand from PepsiCo in the U.S.
  • Management Restructuring: The company recently appointed a new Chief Marketing Officer and announced other marketing leadership changes aimed at turning its brands into global "mega brands."

Profitability and Fair Value 🎯

Celsius is highly profitable and is focused on extending its growth runway and maximizing operational efficiency across its expanded portfolio.

• Profitability: Having achieved consistent profitability, the focus is now on margin defense and expansion. The company is targeting $50 million in cost-savings from the Alani Nu integration and leveraging the massive scale of the PepsiCo network to achieve volume and manufacturing efficiencies that counteract inflationary pressures.
• Fair Value: Traditional valuation metrics, like the forward P/E ratio (currently high, around 44x), do not fully capture the explosive growth rate. A discounted cash flow (DCF) model suggests the stock is trading near its fair value (with a slight undervaluation) when factoring in its accelerated revenue and earnings growth.

Analyst Estimates and Ratings

• Consensus Rating: The consensus rating from analysts is a decisive "Strong Buy" or "Buy". Out of 19 analysts, approximately 84% recommend a Buy or Strong Buy, and there are virtually no Sell ratings.
• Recent Analyst Action (Last 30 Days): Analyst sentiment has been overwhelmingly positive. Recent actions include a "Buy" rating initiated by Goldman Sachs with a $72 price target in September 2025, and a Morgan Stanley upgrade to "Overweight" in late September 2025.
• Price Target: The average 12-month price target is approximately $67.19 (with a range from $40.00 to over $70.00), suggesting double-digit upside from current levels.

Investor-Focused Takeaway: Is CELH Right for Your Portfolio?

Celsius is an exceptional high-growth play in the consumer staples sector, actively disrupting the market leaders (Monster and Red Bull) by aligning with the health and wellness trend.

• Recommendation: CELH is a Strong Buy for investors seeking dynamic growth. The new, multi-brand platform (Celsius, Alani Nu, Rockstar), the strengthened, highly strategic distribution relationship with PepsiCo, and the company's continuous track record of beating estimates provide a unique and powerful growth narrative. While the valuation is high, it is justified by the company’s market share expansion and its clear path to becoming a global beverage powerhouse.

What to Watch in the Near Term: 📈

• Integration Synergies: Monitor the realization of the announced $50 million in cost savings from the Alani Nu integration.
• International Expansion: Track the progress and volume growth in new international markets supported by PepsiCo's global reach.

Margin Pressure: Watch for the impact of aluminum costs and tariffs in the second half of the year and management's success in mitigating these headwinds.

A Final Word on Your Investment Decision

Zevia (ZVIA) and Celsius Holdings (CELH) reflect two powerful but distinct paths in the fast-evolving beverage industry. One is a lean, mission-driven disruptor gaining ground through zero-sugar innovation and disciplined cost control; the other is a hyper-growth juggernaut scaling globally through strategic acquisitions and a deep partnership with PepsiCo. Both companies offer exposure to the booming health and wellness trend—but with differing risk profiles and return trajectories.

Zevia (ZVIA) – Zero-Calorie Turnaround With Distribution Momentum
✔ First-ever positive Adjusted EBITDA achieved in Q2 2025
✔ Expanding distribution in Walmart and top-tier retailers
✔ Strong gross margin improvement and zero debt on the balance sheet
➤ Best for: Risk-tolerant investors seeking early-stage exposure to the long-term shift away from sugar and into “better-for-you” beverages

Celsius Holdings (CELH) – Functional Energy Giant in the Making
✔ 84% YoY revenue growth and consistent earnings beats
✔ Massive brand expansion with Alani Nu and Rockstar Energy
✔ Deepened strategic partnership with PepsiCo amplifies global scale
➤ Best for: Growth-oriented investors looking for a dominant player in functional energy drinks with a proven track record and large-cap ambitions

Investor Insight:

🥤 Want early exposure to a breakout brand in the zero-calorie movement? → Zevia (ZVIA)
​ ⚡ Prefer a high-growth market leader disrupting global energy drinks? → Celsius Holdings (CELH)

Each company taps into the seismic shift toward healthier beverages—but from opposite ends of the growth curve. Zevia is just turning the corner on profitability with lean execution, while Celsius is rapidly scaling a multi-brand platform on the shoulders of PepsiCo’s global machine.

We’ll be back with our next report soon, bringing you fresh insights on the market and new opportunities to watch. In the meantime, we’d love to hear from you—let us know how you found this report, what niche sectors you’d like us to cover next, and don’t forget to share your top stock holdings with us. Your feedback helps us deliver reports that matter most to your investing journey.

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Happy Trading
​— Team Premium Stock Alerts