Celsius, the world's first energy drink that burns calories can be bought on Amazon.com and at many other retailers that are listed on the Celsius website. The biggest national chain that carries Celsius is the Vitamin Shoppe.
I emailed Steve Haley, CEO of Celsius Holdings earlier today with some questions that I had, and some questions that other investors have had. As usual, Steve was very quick in his response and I'm posting my email and his responses below. My questions are in Bold and Mr. Haley's responses are in italics.
Mr. Haley,
I have a few questions that myself and some of the blog readers have come up with and I was hoping you could answer them to the best of your ability, within reason.
1. The Jorge Hane deal was announced months ago. What were the specifics of the deal and how can we expect Jorge Hane to benefit the company, the product, the investor and distribution? (Aside from having his name attached to the website.)
We are working with him for his first distribution deal in S. America. Hopefully it will be quite large and impactful. We are also in the beginning stages of some product additions that his network will be able to exploit. It is still early. We announced earlier than we did the Mid-East relationship because we felt it was material. It took almost a year before the Lebanon order became real. Main hold up is the governmental hurdles for each country. We also hope to utilize him more on the marketing front. I know this is not giving you too much substance to discuss but there is not too much more that I can say right now.
2. A recent article in the South Florida Business Journal stated that Celsius had a national advertising campaign, package redesign and retail roll out ahead. We’ve seen the package redesign, and it looks great. Celsius is a great product and many store managers I have spoke with believe that Celsius would fly off the shelves if people knew about the product.
- What are the plans for the national advertising campaign? Can we expect national Television ads, national Print ads or National Radio ads? Are Satellite radio ads being considered? We are in the process of creating both TV and radio ads built on some neat themes and sounds. Took a little longer than planned to wrap up some of the IP. Radio may start this week. TV will be produced soon but we may not start the media buys until after the elections. We will run in some test areas first to make sure we have it right and then roll out to areas where we have distribution.
- Can we get more specifics on the retail roll out? Are there national retailers in the works?
Many in the works. Tough part is they are planning six to nine months out. For example, we had some great meetings last week that will lead to being in two retailers’ ‘plan or grams’. They won’t take effect however until March in one case and May in the other. As I have said on multiple con calls, the results you see now are from ground work laid many months before. We are doing a lot to have a big push in January. I know investors want much more quickly (as I do) but the larger the retailer it seems the longer the planning cycle.
- Can we expect a wholesaler such as Cost-Co to stock Celsius anytime soon?
Maybe. It is a very tough thing to navigate. Local distributors will just about not take on a new brand if it is being sold in Costco at a price that their accounts (retailers) would be buying it from them. We are working on some but have to time it right and do it in the right geographies before we would do it nationally.
- Has the company approached the military exchanges about stocking the product? (Navy Exchange or Army and Air Force Exchange Service)
Not aggressively enough. I really want us to but there is only so much we can do at once. I may have a broker take it on next quarter.
- Are there deals in the works with national Gyms, such as Gold's Gym or World's Gym?
Working on almost all of them. Tough part here is for most of them, the fruit bar/food part is not associated with the gym side. Also, some of them have national exclusive agreements with Coke. We are working to get around them but in some cases, Coke is putting up a strong line in the sand.
3. I’ve encountered numerous occasions where the Celsius website advertises the product as being sold in a specific location when, in fact, it is not. A Bloom supermarket in Odenton, Maryland was the most recent location that did not stock the product while the website listed it as being sold there. A General Manager for Albertsons in Southern California told me earlier this year that they did not re-stock the product once they sold out. Is the company taking any action to ensure the product is on the shelves before putting a location on the website? When we bring on a large chain and their strategy is to use their own warehousing system (like Bloom does) we depend on what they tell us. We don’t have the manpower to go to every store on their list to verify that Celsius was placed as planned. As we grow and get more resources (employees, ambassadors, local reps, brokers, etc) we are better at it but it is still something that we do not control. Also, there are some stores in some locations that the local management overrides the corporate planogram. We try to find this by analyzing the scanning data but when a chain is new it may take months for us to be alerted to it so we can take that location off the store locator.
- Are reorders from current retailers meeting the company’s expectations?
No but they are increasing. I, of course, want them higher. Some retailers get behind the brand better than others.
4. Earlier this year, you stated that the company would be releasing a new product. The Green Tea brands are amazing, especially the Peach-Mango, and I have confidence that they will catch on. Are these Green Tea brands the new product or is there more in store?
There is more in store but we are still refining it. I had hoped we would be launching this quarter. It has taken longer to perfect and as it got delayed, we did not want to take away some focus from the teas. I actually thought the new product line would be out before the teas. I am not sure if we will be able to do it in Q4. We may hold off for a bigger launch in early 2009. Depends on the progress the next few weeks.
End of questions.
One of the reasons why I am confident in our investment in Celsius is the strength of the management team. Mr. Haley and other members of the staff have always been honest and responsive when I've corresponded with them. They're building a business slowly and efficiently and I think we are on the verge of breaking out; not necessarily in the terms of share price just yet, but in terms of consumer awareness.
A review of the responses.
1. The Jorge Hane deal has long been a concern of mine. We haven't heard anything about that deal since it was announced. Now it looks like progress is being made on that front. Hane's push into South America could rival the Lebanon deal. Mr. Haley's answer quenches my thirst for information regarding the Hane deal, only because we have not had an update of any kind.
2. Sounds good to me. Large chains and big business think quarters down the road, so we, as investors, need to practice patience. I do believe there would be a strong following in the military ranks if they could get the military exchanges deal done. The Gold's Gym I've been to is loaded with Enviga, so I could understand Coke's hesitance to let in competition, especially since Enviga is a far inferior product to Celsius.
3. Good explanation to my concern about some stores not carrying the product while the Celsius website lists them as carrying Celsius.
An honest answer about the reorders. They're not meeting company expectations, but they are increasing. The reorders have been a concern of mine and we'll have to let the numbers in the conference call speak for themselves. Once we see the advertising campaign kick in, the reorder numbers should drastically increase.
4. The teas are NOT the new product. This is intriguing. I think the Teas are going to do very well, maybe even better than the original drinks. The thought of another product on top of that is bonus.
Mr. Haley also made a statement in response to question number two that I liked; investors want results a lot more quickly than they're coming. When I invested in Celsius I had a five year plan, I knew this business was at it's beginning stages and I'll sit it through because I think this stock will be well above where it is now in a few years. Admittedly, I started getting a little worried through these last few months, but if the company acts on all the items Mr. Haley pointed out today, then I'm just as confident as ever that we have a winner. The key is the advertising campaign. The website is up and running and distribution is decent, it's time for people to know the product. Once the product awareness is in place, the product will sell itself. Also, once the product awareness is in place, the stock gains attention as well; many people like to chase fads. The key is to be in before the product and the stock takes hold, and thats where we are today. I truly believe we're in on the bottom floor.
If the company can make it through the next few quarters without major dilution or worse, then we could be in for a pleasant surprise with CSUH.OB.
The CEO sounds committed to excellence and I don't believe Mr. DeSantis, who recently climbed aboard the Celsius express, is one who accepts failure.
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