Celsius Holdings, Inc. (CELH) Earnings Call Transcript & Summary

Good morning, everybody. Thanks for attending day 2 of HALO Conference. I'm Kaumil Gajrawala, health, wellness, healthy living, beverages, household, personal care and really anything else that Chris was asking me to do. With me this morning is John Fieldly, CEO of Celsius, Celsius Energy, Celsius Beverage.

It's all about living fit.

It's all about living fit. And I'm sure you've seen we've got plenty of fitness things going on outside.

It looks great here.

Feel free to try the products.

Let's kick off with the selling proposition on how energy drinks and how energy drinks are evolving as a category, and then we'll get into some more details.

Yes. No, absolutely. I mean Celsius, as you see in the video we just showed, it's all about living fit, living healthy, taking life to the next level. One thing we're about is Celsius Live Fit, it's had essential energy for life. And when you look at where the category is going, I mean, we're here at health and wellness consumer conference. It's a megatrend. It's in our DNA. Coming out of the pandemic, we need to live healthier, live better, live longer. And that's what it's all about. And with Celsius and our DNA, we are born in fitness, health and wellness and really align for where the trends are going for today and tomorrow. And we're seeing that. If you talk about the energy category, you're seeing in the energy category. I mean you look at beyond meats and the meat category and you look at all categories, we all want more. And we want our foods and our beverages do more than just provide that hydration or something on those lines.

The proposition of Celsius has been similar for a long time. Then you evolved it to Live Fit. What was the moment that -- or what happened that really changed the trajectory of the product?

Originally, our founders actually -- what's interesting about Celsius, it was -- Celsius, it was not born from people in the beverage industry that created a functional beverage. The product was formed from really dietary supplement formulators that created a beverage. So the beverage is created to perform, has over 7 essential vitamins. It's backed by 6 clinical studies. It actually is clinically proven to be a thermogenic, burn calories and body fat, actually 140 calories per can. So originally, the proposition was to go after the diet industry and in the dietary supplement space. And the product at the time, you had tablets and capsules as fat burners, and there wasn't really a beverage that was on the market. So that's where Celsius was born. And it was born right around the same time when Vega came out. Remember -- I don't know if many of you remember Vega back in the day, but Nestle and Coke partnered on Vega, and it was a negative calorie soda launched around the same time as Celsius. And unfortunately, it didn't have the right science behind the product. Because keep in mind, Celsius was created by people in the nutraceutical space. And they understand the importance of science coming from dietary supplements, which is really critical when you're making structural functional claims. So unfortunately, Coke and Nestle got shut down by the FTC. Celsius has been reviewed by the FTC, actually the National Advertising Division as well. We've gone through class action lawsuits in California and prevailed. So our product is -- their claims that the product makes are extremely strong there. So originally, it was launched as this diet product going after the diet category, which is a massive category. I've been with the company now for over 10 years. I started in 2012. It is a turnaround story. We're probably one of the only consumer products, maybe the only company actually at this conference that's been delisted practically out of every retailer in the country and delisted off NASDAQ. So we're back on now. And on Friday, we're ringing the bell for our 5th year anniversary on NASDAQ, so pretty excited about that. But we probably back in -- when we first started, we took the original thesis and went after the diet crowd. We did couch to 5K program, a lot of different advertising programs. And what's fascinating with the product, there's so many people that the product has changed their lives. Really it's gotten people to live healthy, live better. We used to have it before and after piece on our website. It's amazing. The product has touched so many people. But we saw -- we have something more than a diet product. We have an amazing energy drink. When you consume product -- when you consume Celsius, you feel better. There's no crash, no jitters. We do have a sampling booth outside. So please grab, go say hello to Lisa upfront and get a product, try some of our new flavors. I see so many of you already hit that up on coming in here. But the product is great. You don't get the crash like many other energy drinks. And the way it's built with ginger, the taurine in the product, you don't get the jitters and no crash. So that's when we made the pivotal change. It was really 7-Eleven back in 2000 and -- right around 2015, we really started to position the transition of the company to go after the energy category, which is a much larger TAM as well. And that's been successful. 7-Eleven believed in us as a healthy better-for-you energy drink, and it's really one of the first believers to put us in that energy category. And then we've used that story from that point, which we're still in today, nationwide with full shelves and just launched our first exclusive flavor with them in January. And so that -- really, 2015 was a pivotal point.

I think I had 3 of those before noon yesterday. But from hearing what you just said, it's an excuse to have the short ribs I had last night, I suppose. Let's talk about TAM. You mentioned TAM. How do you think about TAM? Because the view of energy drinks is blurring as a category. It's coming out of sports drinks. It's coming into hydration. It's moving a bit more broader than just share versus Red Bull or Monster. So how are you thinking about the TAM and category size?

Yes. What's interesting, I mean, if you look at the TAM, I talked to our sales team members all the time about this, how big can we be? Where do we see the category?

What's their answer?

Well, what their answer is, brands create these subcategories and categories to keep the relevance. So if you look at like, talk about the energy category, we'd like to say traditional energy, better for you, new age, performance energy. The reason why that's really segmented is because the largest brands in that category are really forcing the other brands to move into other sections. So as an example, your new age, you need to go bottom right, in the gutter. Oh, your performance, you go gutter, upper right. So it's really trying to protect their shelf space. But what's fascinating, if you look at the beverage category as a whole, when you look at the top 5 beverages in the category, 2 of them are energy drinks, 2 of the highest SKU in the whole category. So one could argue, we're going after the beverage category, not the energy category, as it was reported today. And what's also fascinating is, we're seeing anecdotal -- we're at the NRA show this week. so we have a great move of getting a lot of excitement from the food service industry.

National Restaurant Association.

National Restaurant Association. It's a massive show.

More than one NRA.

Yes. That's right. That's true. National Restaurant. Absolutely. But we've seen a lot of opportunities. So what you're seeing historically, we're hearing some anecdotal information from the convenience store and a lot of delis as well that when consumers are purchasing Celsius, they're purchasing another food item. They're purchasing a salad. They're purchasing a snack. We're also seeing it sold during lunchtime with meals. And historically, when you look I'd like a Red Bull, a Monster and even a Bang, they're really just -- the sale is just one. They're coming in and buying a Red Bull, a Monster, a Bang. It's almost like an appetite suppressant versus -- we've heard this from a lot of our store owners that Celsius is actually helping me increase the ring at the register because consumers are buying it with other items. So that makes us talk about not just the energy category, the bigger opportunity we potentially have here with Celsius going after the beverage category.

That's interesting. So the story very recently has been about distribution, which I do want to get to. But what you just mentioned is about expanding occasions. And it sounds a little bit as a -- like almost an evolution of the brand. So can you maybe talk about that more? Let's drill into that a bit on how Celsius is expanding energy drink occasions.

Yes. I mean originally, when you go back to history, right, I mean, we were pre-workout originally. And a lot of our science is based on consuming Celsius 15 minutes before a workout or a fitness activity. So that was our main usage occasion. And then as we evolve into energy, we played into those dayparts in the energy category going after the after lunch crowd. Because after lunch, a lot of folks get coffee or an energy drink and going after that daypart. And what we're seeing is, we have a massive opportunity going after now the crowd -- the lunch crowd. So we're looking at the food service industry, those type of opportunities. And as the brand really get broader distribution, we're learning more where Celsius can play within the categories and within the different channels and parts of consumption. So it is quite interesting, probably...

Is food service part of your business at all?

It's very small right now, very small. It's not a big part of the business at all. That would all be incremental for us. And just -- like I said, we're learning more about this brand each and every day, and that's anecdotally information that's coming in and coming in pretty loud. And we're hearing that from our distributors. We have 280 distributors across the country. And they're getting us into these new channels where we haven't been able to do -- didn't have the access before.

Let's roll into distribution. So you signed the deal with ABI, you going into DSD.

Not ABI, but independent.

Independent ABI distributors.

Wholesaler distributors. Yes.

Who make decisions entirely on their own.

Correct.

So that was a moment in time for the company that really where it sort of inflected. You're still in the process of this DSD switchovers. Can you talk about how far along you are? And what's the -- what's remaining in terms of making that change?

Yes. I think when you look at our distribution, we're in 288 distributors, independent distributors across the country. So a lot of great distributors across the country and from John Lenore, Lakeshore, Big Geyser in New York. And we're probably about 70%, 75% of our distribution now, has been turned over to DSD. We have kind of public -- we have some retailers that have not turned over, but we're working on that. There's tremendous value in switching over to DSD. We have a high-velocity product. So when you see -- we need to be cold. When we notice when Celsius has the same shelf space or presence as the 2 largest players in the energy category, we will perform at the same level, if not better than them. So the only way you can get there is with a DSD partner, getting that white glove service. You have to be cold. You have to get additional placements. And when you're building a brand, you need to own the floor. You have to own the floor. So we have a big -- a lot of our team members, we have over 78 distribution management team members across the country. We're building displays, helping out our distributors. Really, we're in an educational process right now, teaching our distributors what Celsius can do for them, and it's all about making money. So they want -- whatever brand they can make the most money with, that's where they're going to kind of put more efforts. So we're really -- it's all about education right now. So it's optimization. We have the distributors. But how do we optimize them? How do we educate them on the amount of money that they can make with Celsius? So that's really what we're doing right now as this whole education process on -- and not all distributors are created equal, and it takes time on the education.

Typically, when you have these distribution expansions, velocity goes the other way. It's very natural. You start to get into Walmart, you start to get it, whatever the accounts are. Can you talk about what's happening to our velocity as you switch over?

Yes. I mean we've talked about this a lot -- and a lot of the analysts as well and investors. It seems to be, as we're expanding, our velocities are increasing, which is -- there's 2 reasons for that. Number one, our distribution has been increasing. We're up to 140 retailers in the country. But simultaneously on the distribution expansion, we've also been able to transition to -- our accounts over from a direct wholesale to retail to the DSD. So that white glove service, you're getting better placements. We're getting higher rotation. We're getting higher velocity naturally. But the other area of opportunity for us is we're backdooring the energy category, and that has to do with a lot of the history around the company. Unfortunately, we were not able to participate in the energy category because of this fitness, better for you mantra or our DNA. We were seen as a vitamin shop specialty, didn't belong in that space. Bang has really opened that door in the eyes of many retailers. And health and wellness trends today, they see they need to carry brands like Celsius with the success we're getting in these other channels. So Celsius has -- we've grown the channel in grocery, mass, drug. Club has been a massive opportunity for us in Q1. We launched there in Q2 of last year is when we first started testing in Costco, and that's been a great success. But we're backdooring the energy category. So all the doors and a lot of the doors we're bringing on are all in convenience, and that's a higher velocity channel for energy drinks. So the new doors we're bringing on have a higher velocity. And our existing distribution is flipping over to DSD and getting better placements. So we're getting higher velocity there as well. So that's how we're able to buck the hurdle on what you've seen from other companies there.

Yes. Yes. Can you talk maybe a little bit about your share by channels? I know you've discussed it in the past.

Yes. And the shares -- I talked about some of them on the public information side. What's really exciting for us is we've done a phenomenal on Amazon. So Amazon has been a big success for the company for many, many, many years. We are the #2 energy drink brand on Amazon.

Behind Monster?

And #1 is Monster with a lot of the SKUs. And we're about, I think, it's 6% on share ahead of Red Bull. So massive amounts of volume, #2 brand. And if you consider that, all brands are treated equal on Amazon, right? So everyone has the same opportunity. So that's a great data point that we look at, seeing that as #2 on Amazon. The other great share in the total category, we're at over a 4 share now in the energy category, according to Nielsen, the latest data that came out in April, so -- which is a great success. The company just hurdled that and hurdled Rockstar as I mentioned. So those are kind of anecdotal. We've done extremely well at Costco. We haven't stated the share number or have not provided it either. But we're told we're doing extremely well there as a brand. And sales now represents over 20% of our shares if you look at the first quarter of this year. So that's really been our second quarter in Costco there.

So the big questions we get from investors is the sustainability of your top line. You're obviously growing very quickly. But you've had major Costco rollout. You've had ABI distribution expansion. Can you talk about sustainability? How should we think about what revenue growth should look like over time?

Yes. I mean if you look at -- we're somewhere between the #2 brand and a 4 share brand as we stand today. So we're somewhere -- that's the 2 data points I have. Is this sustainable? We've been growing Nielsen scan over 200%. Just a theory of numbers kind of is against us, I guess, on those type of growth rates. But we'll see where we continue to grow. We've surprised. Every quarter, we've exceeded expectations. It's a tough business as we get larger. Instead of -- we were always hunting. Now we're being hunted by all these brands as well. So there's a lot of competition. We're aggregating the 2 of the -- some of the largest players. So it is a street war as we all know. It's highly aggressive. Fans love us. Our products are great. We're well-positioned. Our retailers, we're told, are great to work with as an organization. And we've got a lot of great team members on the team. So we'll see where we go. We don't provide forward-looking information. But we'll see as we continue to grow and scale, keep an eye on the scan data. We're excited where we're headed. I think the company has never been better positioned. And we're in a good place.

How do you think about balancing growth versus profitability? You're at a point now where you're probably close to where beverage business would start to really scale and you start to see profitability. While your top line might be there, including at Amazon and such, your profitability doesn't look like what Monster's profitability looks like, just -- and we don't know how much money Red Bull makes, but I'm guessing a fortune.

Yes.

How are you thinking about balancing the share gains, the growth, the top line with how much you invest?

Well, we've done a balanced approach. We've always said we're going to drive profitable growth. Historically, we've always said 10% to 15% EBITDA during these growth phases of our growth cycle. We're still in our growth cycle. We're over investing in a lot of our areas in regards to marketing and sales team members and in finance and all of our departments. We're making sure we're investing to support the growth that's ahead. And we're growing. We just grew 134% in Q1. So we're not optimized by any means. I think there's a lot of opportunities ahead to continue to optimize. When that growth -- that time, we'll be able to get to Monster's EBITDA numbers. We're going to try once we reach scale. But we don't want to pull back right now because we're seeing massive opportunities to get that share gain up. And being methodical, coming back out of COVID, we are investing in a lot of events. So we have our Celsius central vibe tour we're investing in. We're putting a lot of cans in hands, really activating that Gen Z consumer that the product is extremely aligned with, and it's working. So those are somewhat higher-cost initiative marketing initiatives that we're going after. But we feel it's really key for the brand-building phases of the brand. And when you look at our awareness, it's fairly low at this point. So we're going to make these strategic bets. We do feel it's going to deliver spades in the future as we move forward. But it's -- we put I think about the 15% EBITDA or 11% EBITDA in Q1, put $130 million -- $133 million up in revenue. And I think we have a good cash management. We put $10 million on cash on the balance sheet, operating cash flow, so approximately.

Anything structural about your business that would suggest that the margin shouldn't get there over time?

We're an asset-light model. So right now, we got -- we talk about the orbits. We've talked about 6 orbits. Eventually, we'll go to 13 orbits. That's when you gain really efficiencies. So it's keeping your warehouse, your co-packers, your suppliers, your distribution centers extremely close in these orbits, and that's when you gain those real efficiencies. So we're working on those as we'll scale. We'll get more of those. Our margins are suppressed right now because we're made a strategic decision when we're going through this can pandemic, when we're -- can shortages across the nation. We've imported a lot of cans from overseas that we need to cycle through. We anticipate to be cycled through those by the end of Q2. And then we'll get back to somewhat roughly around the mid-45% range in gross profits as we continue to move forward here based on our channel mix that we're watching.

Is that new news today? I felt like you were going to take longer to get through the cans coming over, about 2Q?

No. Yes. No, not Q2 -- Q3, sorry.

Q3.

You're correct. Yes, Q3, Q3.

Okay, not new news.

Yes. not new news. Sorry about that.

That's too bad. We got other things for the webcast service, will also add some news. All right. Well, let's talk a little bit about -- a little bit more on supply. How do you feel about supply now? Do you have what you need? And it makes sense meeting with the restaurant association doing all these other things if the demand is there, but do you need to get some cans.

Yes. I mean on supply chain, we -- it's scary out there right now when you hear about supply chains. Containers are getting difficult to get, importing of raw materials. There's a grid lock over in Asia. Just listening to an article, reading an article yesterday about you have the shoreman over in California, they're going to renegotiate the contracts on June 9 or June 6, so there could be shutdowns in the ports. So there's -- in a time that's going to be technically difficult on supply chain coming back online. So there's a lot of concerns and risks out there. The good news is, we made a strategic decision to build our inventories up back in, really, October and November. So we're sitting on a good amount of inventory, excess of 3 months. If you go back and look at our historical run rate, we're sitting on almost 6 months of inventory. But on a go-forward basis, we feel we're a little bit shorter than that. We have built up a lot of raw materials. So we are sitting on a lot of imported cans we're going to cycle through. We do have flavors. We have all of our raw materials. We feel we're in a really, really good position. And because we have those extra inventory levels, that's going to allow us additional time to maneuver around some of the supply chain constraints that we feel or anticipate will be coming through, which will put us in a better position than many of the competition and the new entries in the category. So -- and with regards to supply chain, we're in a really good spot.

It's a good space. Let's talk about pricing. Monster was very explicit. I think Kimberly-Clark maybe is the only other company that was very explicit on time and price, the time and magnitude of price increase. Can you talk about how you're thinking about pricing?

Yes, we're really specific on time, not the percent or the price point. But we've been testing price elasticity strategies and promotional strategies for the last 2 years. I think you can see that in the scan data. If you look at the 52 weeks, we're up. I think the last pool that we saw, it was about 18% on price if you look back 52 weeks. So there's some variances in there, timing of promotions, if you look at the shorter time lines, 4 weeks to 6 weeks and 12 weeks. But in general, we've been really price elasticity testing in all of our channels. And we made a cognizant decision to take price April 1. So we're rolling out a 3-phase approach there on taking price -- frontline pricing. And obviously...

At list price.

At list price. But that allows you, you can also discount from that and get some strategies as we roll it out. So we won't see the full effect until Q4, but we're slowly rolling it out in a 3-phased approach and...

What do you 3 phase?

The first phase would be you kind of either Tier 1, Tier 2 or Tier 3. Or what we're doing is we're also rolling out to our distributors first. We have a lot of new accounts coming onboard, so you don't want to take price on some of the new accounts and partners that come onboard. So those will likely come onboard in Q4 there. So we won't see their true realized benefit until Q4 of the price increase that we took.

Does Monster's announcement change your opinion or strategy on how much you're taking?

Not at all.

And how about Red Bull? I guess...

As for Red Bull, yes, I don't know.

We don't know.

We don't about that.

I get the sense it's $0.10 on the small ones and $0.20 on the big ones, which is about 7.6% price increase. Does that change how you're thinking about anything?

Not at all.

How about the recent news from Walmart and Target, which really had sent a shock through all of CPG, the magnitude of their profit miss. Their revenues were there. Their profits weren't. So anyone selling into these big accounts need to sort of rethink pricing. Has that changed your thinking in any way?

Yes. I mean listen, the costs are going up all around the category of the channel. I mean we're not taking price. I mean for more -- it would be forced of all the costs that are going up. So I think it's just -- this is the environment and the world we live in today. And we're being forced to do it. We wouldn't do it. But unfortunately, this is where we're at in the macro and microenvironment we're in. And as Walmart and Target are going through some challenges, labor as well, and we're all affected by it. It's not just targeting Walmart. This is globally, really all categories. So -- and a lot of companies have taken a lot higher price as well, and seeing a lot of higher expenses. If you look at some of the prices of our raw materials, have increased over 100% on some of the price increases there.

Do you have an opinion about the consumer and how the consumer is evolving?

With regards to the consumer evolving, I think I had some investors ask about in regards to consumers and we're heading into a potential recession and how will that be affected. In regards to our positioning, where the product is, I think we're in a really good position. Number one, we're in a really loyal category. The energy category has really loyal consumers. And Celsius has had a loyal consumer from the beginning of time. Our consumers are extremely loyal with the product. And if you look at even Starbucks, you see the line every morning. People wait 1.5 hours for up a coffee at Starbucks. It's -- that's part of your daily routine. It's part of your daily lifestyle. For an individual to give that up, it has to be really bad. So it's not going to be your first 5 things that you're going to give up when you're looking at heading in and getting -- they've got to make some choices. There's a lot of other areas that an individual would cut before they start getting into their Starbucks or their daily routine, their Celsius. I mean it's a little bit lower on the priority list. So we think we're in a good position, being cognizant of that. But the category, we're in a good category. We have an extremely loyal consumer. And we feel like we're going to be lower on the priority list in the event that the consumer has to start making choices.

Is it harder to sell in or bring in new customers if the consumer is in a little bit of a more difficult position?

We're going to have to see how it evolves here. In regards to the proposition of what Celsius provides to the consumer, and given the pricing point, when we look at our price point, we're below Red Bull, above -- slightly above Monster. We are a premium offering in the category. Consumers are making shifts. What's interesting is new consumers to the category, when you look at our overall kind of overall sales in the category, about 19% of our sales are new to category. The 19% of our sales are new to categories, so new consumers entering. So we're incremental to the category. And I think when you look at it, the last data pool, the category grew about $100 million. And Celsius' growth contributed by 37% growth of the category. So we're bringing new consumers in. So in essence, that could be beneficial and a tailwind for us. And then as consumers are looking for alternatives, better-for-you alternatives, I think it's about 24% of our sales according to an Evercore report in regards to brand shifts. So bulk of our sales are coming from existing consumers, talking about consuming more Celsius with those expanded usage occasions, 19% new to category, I'd say 24% branch shift. So I think we're in good shape. We'll see how it evolves and how it plays out, but well positioned.

Anyways, that suggests while you compete, obviously, with Red Bull and Monster not as directly, can you talk about the demographics of your products versus energy?

Yes. Historically, if you go back, historically, our demographics has been slightly an older demographic and kind of targeted energy drink consumer, which is an 18 to 24 male. We were 24 to 44. And then historically, it goes back to our fitness attributes of health and wellness and being a pre-workout. But as we've gone broader over the years and getting broader distribution, and health and wellness trends have continued to increase, we've seen a massive opportunity, a massive growth in the 18 to 24 male/female of the category entering. And if you go to colleges and universities, we're seeing that Celsius is that premium energy drink on campus. So it's no longer you're seeing Red Bull as that premium offering. You're seeing Celsius there and -- which is great to see. So when you look at -- where we're seeing is it's quite diverse. That's the other kind of interesting attribute of the product as we continue to get broader distribution. We're seeing 18 to 24 resonating really well with that Gen Z, that new consumer entering the category, which gives us long-lasting growth given the loyalty within the category. But then we're also seeing consumers, older demographics as well consuming the products in their 60s and 70s. If you go to Costco, it's quite interesting watching some of the consumers running through with cases of Celsius and watching checkout coolers. So it's diverse. And that's one thing that we're all about. We're about inclusion. We look at Celsius, we're inviting. We're aspirational. We have an aspiration to live fit, live healthy and provide that essential energy either inside the gym, after being pick up or just live life to its fullest. And it's resonating with a much broader consumer base. And it could be some of the attributes of the green tea, the green tea would attribute in the 7 essential vitamins.

You mentioned earlier, premium to Monster, cheaper than Red Bull, is that generally where you prefer your pricing to be?

Generally, that's where our pricing, we like our pricing to align to. Certain channels are different, and we have some legacy pricing that we're trying to optimize. We continue to optimize and get some brand consistency within the channels, but that's generally where we want to be.

You talked maybe a little bit -- you mentioned you had a pretty loyal consumer base. Can you talk maybe a little bit about your repeat rates? And in particular, with all these new -- all these new distribution, how does that evolve?

We still have a lot to learn because a lot of the new distribution has just been on in last -- you look at the last 12 months, you've gained over -- more than doubled our distribution. So we're still learning about that. What we are hearing is we do have a really high continuity rate. And that the Evercore report, 52% of our sales were coming from increased consumption. Amazon, we're told we have one of the higher continuity rates on Amazon. So that's great to hear. It's a little bit hard to get the data on the IRI, the recurring purchases there, but we know we have an extremely high loyal consumer. And the recurring rates are continuing to grow, and that's what you're seeing your growth rate on the revenue. If we're constantly chasing a new consumer to purchase, we would not have the growth rates we have right now. So we are building a loyal consumer base.

Okay. Great. 75% turnover to DSD as you mentioned earlier, what's the appropriate rate? Is it 85? What's the -- it's not probably --not 100 or something.

We would like to have 100. I mean we'd be fully optimized with 100. We do have some retailers that require -- they want a direct store distribution model. But we want to get that number as high as we can just due to those service levels. The product sells. I was walking through on my way here, and you see some empty shells. So the CVS was blown up. I asked the store clerk if there's any product in the back I can pull up. And he said, "No, it's gone. We're waiting for our next delivery." So we need more than a full shelf. We need 2 full shelves at that point. And he gets service every week, he said. So that was great. And he said the order was coming in, but there's a lot of opportunity. You've got to have DSD if you have a high-velocity brand. It just doesn't work any other way.

But you are hybrid. You direct to Costco, direct to -- are you...

Direct to Costco. Direct to Amazon. There are certain retailers in the country. We currently go to direct because we don't have the footprint covered like Wawa, QuikTrip [Indiscernible] and Casey's is direct as well. We have some other retailers there.

How do you manage that relationship with your distributors when nothing terrifies an ABI distributor more than a -- no, no, I guess, unions and Amazon, so those 2 things?

Yes.

And so how do you manage that relationship going direct?

Yes. Well, it is a topic of discussion for sure. But really, Amazon is helping the retail sales. So it's actually incremental. It's not taking sales away. So what we're seeing is it's working hand in hand. They're getting more awareness with Amazon. They're purchasing at the local store. It's all about convenience. Consumers want the product when they want it, how they want it, and that's what it's all about. And by working together, we can deliver that. And we can grow their market share in the category even that much quicker. So it's a balancing act.

[indiscernible]

It's a balancing act, but it really helps grow share and awareness within the territory.

How about within the ABI houses, they're picking up more and more soft drinks. They're also picking up more and more energy drinks. How do you compete inside of the house?

That is a challenge. I mean some of these houses have like 9 or 10 energy drinks. And it's the -- what is the new shiny penny of the week potentially. But at the end of the day, it's who's turning at the faster rate, which brand are they making the most money on. And who is really providing the support for that. So we are building the infrastructure to support our DSD. You talked about that education process, that oversight, really collaborating with them. And then Celsius is overperforming in the category, so we're getting the overperformance of focus. In order to win, you have to get focused with the DSD partners. And there's competition. There's a lot there. And there's competition every day. In the category, there's competition. There's competition with our distributors. There's competition at retail. That's what the game is all about.

When you think about getting to a 4 share where you are now or really going from 1 to 2, 2 to 4. But it's somewhere around that 4, 5 share where the bets become bigger. It's very different gaining the incremental share point and you're right on that serve zone. Often 8 is that magic number that's hard to break through. You're not there yet. How are you thinking about the business differently? How should we be thinking about the business differently in terms of how you need to invest for the incremental share point from where you are now?

Yes. And I think that's going back optimizing the EBITDA and your operating leverage. I mean if you look at that, I mean, we are overinvesting. We need to continue to grab share. The opportunity, there's a window of opportunity. We see the window in the next 12 to 24 months is a massive opportunity for Celsius to continue to grab share. We got really the support of our DSD partners. The marketing team has got great plans scheduled for the back half of this year and into '23. If you look at here at the conference, we have 2 new great flavors. We've got our strawberry and lemonade, which is a phenomenal summer flavor. Several of you have our Arctic Vibe. We see massive opportunities with this Vibe line. So our Celsius Vibe line we have 3 great flavors now. We've got more flavors coming on the innovation side. And that's really going after that traditional energy drink consumer that we're seeing. We have -- we're more fun, a little bit more inviting with the product, and it's really resonating. Actually, if you look at the SKU count, 2 of Vibe flavors are within our top 5 and they've just launched in the last, call it 18 months. So lots of opportunities in the Celsius Vibe line. And yes, something to watch. We'll see where we go. 8%, I don't know. I think Amazon says #2 in the category. But we'll see where we wind up.

You've hired a lot in the recent, I'd say, maybe 6 months, maybe 9 months. Are you appropriately and fully staffed now? Or are you still in flight?

Yes. I mean we're going to continue to bring on great talent. We've hired just -- in this quarter alone, we've hired over 25 additional employees. I think we have 4 that started with us this week. Last week, we had 8 that started. So we're bringing on great talent every day. We've expanded. We have Tony Guilfoyle, heads up our sales in the U.S. He's phenomenal building -- further building on our key accounts team, distributor management team. We have Paul Storey, who heads up our operations team. He came over from Monster and built Rockstar. On the supply chain, we have Jarrod who is here with us today as our CFO. He's phenomenal, came over from Primo Water and Cott Beverage and got just a great talent coming to the team. Just hired an analyst from Red Bull that joined us. He's been analyzing us for 2 years. So he wanted to join the winning team. So he joined us about a week ago. So learning a lot of data points on how they're looking at us and how we can leverage that.

As an analyst, he must be good.

Yes. We're getting -- I mean, we're bringing a good talent every day. That's what it's about, right? And it's exciting.

What is -- Paul Storey, head of supply, what has he discovered as he's come in?

Well, he's been -- he really -- Paul has been phenomenal. And we made a strategic decision. We had capital on the balance sheet. Back in October, we had about $80 million, and we were in a good cash position. And we made a strategic decision. Through Paul's connections, we were able to buy cans on spot rates from some of the largest can manufacturers. And that's what allowed us to increase our inventories and put us in a really good position to really make it through this supply chain disruption that every company had. As you saw many beverages over the last 24 months, a lot of them are wrapped. And if our cans were wrapped, you would not want to look at our P&L. So that's a really, really tough position. We were buying some wrap cans up until that point to kind of continue the demand. But it is -- with his success, I mean, he really put the company up to continue to grab share and get us to the 4 share on the supply chain. He's opened up great relationships with suppliers, additional manufacturers, suppliers. So helped us build out the orbit strategy as well quickly within 6 months. And a great asset, a great addition to the team. And he's brought on some strategic talent as well.

Great. Well, CVS isn't the only place you ran out. You ran out here yesterday, too.

That's what I hear. Lisa said, it's a hit.

Yes, you've got an equity sales force that was probably doing some high velocity trading after [indiscernible]

Excellent.

Thank you very much. Thank you, appreciate it.