UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
Commission File No. 001-34611
CELSIUS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or Other Jurisdiction of
Incorporation or Organization)
20-2745790
(I.R.S. Employer
Identification No.)
2424 N Federal Highway, Suite 208, Boca Raton, Florida 33431
(Address of Principal Executive Offices)
(561) 276-2239
(Registrant?s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Exchange Act:
Common Stock, $0.001 par value
(Title of Class)
Name of each exchange on which registered: The Nasdaq Capital Market (Trading Symbol CELH)
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ? Yes X No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. X Yes ? No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. X Yes ? No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). X Yes ? No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See definitions of ?large accelerated filer,? ?accelerated filer,? ?smaller reporting company? and ?emerging growth company? in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer
Non-accelerated filer
?
X
Accelerated Filer
Smaller reporting company
Emerging growth company
?
X
?
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ?
Indicate by check mark whether the registrant has filed a report on and attestation to its management?s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ?
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ? Yes X No
The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $301,864,237 as of June 30, 2020 for the Company?s common stock on
such date on the Nasdaq Capital Market. For purposes of the foregoing computation, all executive officers, directors, and 10% beneficial owners of the Registrant are deemed to be
affiliates.
Indicate the number of shares outstanding of each of the registrant?s classes of common stock, as of the latest practicable date. There were 72,585,354 shares of common stock
outstanding as of March 10, 2021.
DOCUMENTS INCORPORATED BY REFERENCE: No documents are incorporated by reference into this Report except those Exhibits so incorporated as set forth in the Exhibit
index.
TABLE OF CONTENTS
Page
1
Part I
Item 1.
Item 1A.
Item1B.
Item 2.
Business
Risk Factors
Unresolved Staff Comments
Properties
1
8
15
15
Item 3.
Item 4.
Legal Proceedings
Mine Safety Disclosures
15
15
16
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Market For Registrant?s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data.
Management?s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
22
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
16
16
17
19
19
19
20
21
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Principal Accountant Fees and Services
22
27
30
32
33
Financial Statements and Exhibits
33
Part IV
Item 15.
Signatures
35
i
When used in this Annual Report on Form 10-K (this ?Report?), unless otherwise indicated, the terms ?the Company,? ?Celsius,? ?we,? ?us? and ?our? refers to Celsius Holdings,
Inc. and its subsidiaries.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains or refers to certain statements that are not historical facts and are ?forward-looking? statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the ?Securities Act?), and Section 21E of the Securities Exchange Act of 1934, as amended (the ?Exchange Act?). Such forward looking statements may be
identified by words such as that. ?anticipate,? ?assume,? ?believe,? ?estimate,? ?expect,? ?will,? ?intend,? ?may,? ?plan,? ?project,? ?should,? ?could,? ?seek,? ?designed,?
?potential,? ?forecast,? ?target,? ?objective,? ?goal,? or the negatives of such terms or other similar expressions.
These statements are subject to various risks and uncertainties, many of which are outside our control, including, among others, strength of the economy, potential effects of the
COVID-19 pandemic, changes in the overall level of consumer spending, the performance of the Company?s products within the prevailing retail environment, implementation of
our strategy, trade restrictions, availability of suitable store locations at appropriate terms, the availability of raw materials, compliance with regulations, certifications and best
practices with respect to the development, manufacture, sales and marketing of the Company?s products, management changes, maintaining appropriate levels of inventory,
changes in tax regulations, e-commerce relationships, disruptions of manufacturing, warehouse or distribution facilities or information systems, political environment and other
specific factors described in ?Item 1A. Risk Factors,? ?Item 7. Management?s Discussion and Analysis of Financial Condition and Results of Operations ? and elsewhere in this
Report.
We believe that all forward-looking statements are based on reasonable assumptions when made; however, we caution that it is impossible to predict actual results or outcomes or
the effects of risks, uncertainties or other factors on anticipated results or outcomes with certainty and that, accordingly, one should not place undue reliance on these statements.
Forward-looking statements speak only as of the date when made and we undertake no obligation to update these statements in light of subsequent events or developments.
Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.
ii
PART I
Item 1. Business
Overview
We are engaged in the development, marketing, sale and distribution of functional calorie-burning fitness and lifestyle beverages under the Celsius? brand name. According to
multiple clinical studies we funded, a single serving of Celsius? burns 100 to 140 calories by increasing a consumer?s resting metabolism an average of 12% and providing
sustained energy for up to a nine-hour period. Our exercise focused studies show Celsius delivers additional benefits when consumed prior to exercise. The studies show benefits
such as increase in fat burn, increase in lean muscle mass and increased endurance.
We seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus? formulation, while fostering the goal of
healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinks and sodas. Celsius? has no artificial
preservatives, aspartame or high fructose corn syrup and is very low in sodium. Celsius? uses good-for-you ingredients and supplements such as green tea (EGCG), ginger,
calcium, chromium, B vitamins and vitamin C. The main Celsius line of products are sweetened with sucralose, a sugar-derived sweetener that is found in Splenda?, which makes
our beverages low-calorie and suitable for consumers whose sugar intake is restricted.
We currently offer five beverage lines, CELSIUS? Originals, CELSIUS HEAT?, CELSIUS? BCAA+ENERGY, CELSIUS? On-the-Go and CELSIUS? Sweetened with Stevia.
Celsius has undertaken significant marketing efforts aimed at building brand awareness, including a wide variety of marketing vehicles such as television, radio, digital, social
media, sponsorships, and magazine advertising. We also undertake various promotions at the retail level such as coupons and other discounts in addition to in-store sampling.
During the first quarter of 2021, Celsius launched a branded cooler program, with a first phase target of locating up to 1,000 coolers in various retail outlets.
We distribute our In the United States and elsewhere in North America, Celsius ? is sold across many retail segments. They include supermarkets, convenience stores, drug stores,
nutritional stores, and mass merchants. We also sell to health clubs, spas, gyms, the military and e-commerce websites.
We distribute our products domestically through a hybrid of direct-store delivery (DSD) distributors and as well as sales direct to retailers (DTR). We are continuing to emphasize
DSD distribution as we believe it has been a key element in opening additional domestic markets and retail segments and increasing sales.
Our products are distributed in various foreign regions, primarily Europe and Asia, through regional and country-specific distribution partners. In October 2019, we acquired Func
Food, our Nordic distribution partner, who markets both our products as well as other products under its own brands. Celsius intends to use Func Food as a platform to expand
product distribution elsewhere in Europe.
The Company does not directly manufacture its beverages and powder packets, but instead outsource the manufacturing process to established third-party co-packers. We do,
however, provide our co-packers with flavors, ingredient blends, cans and other raw materials for our beverages purchased by us from various suppliers.
1
Recent Developments
On October 30, 2020, the Company fully repaid the outstanding bonds payable, which were reinstated as part of the acquisition of Func Food on October 25, 2019, in accordance
with the original terms of the bonds. The total amount repaid was approximately $9.9 million, which included principal of $9.6 million and accrued interest of $0.3 million.
Potential Effects of the COVID-19 Pandemic on the Company?s Business
Our business and results of operations may be adversely affected by changes in the global macro-economic environment which may also reflect the negative impacts caused by
pandemic and public health crises related to the COVID-19 pandemic. These macro-economic aspects may also impact inflation, currency exchange rates, interest rates, availability
of capital markets, consumer demand, distribution and raw material costs.
Volatility in the financial markets and deterioration of global economic conditions could impact our business and operations in several ways, including the following:
?
Purchasing power of consumers may be reduced thereby affecting demand for our products;
?
Restrictions related to social distancing and other activities may limit the opportunity for our clients and consumers to purchase our products;
?
If a significant number of our employees are unable to work, including illness or travel restrictions in connection with COVID-19, our operations may be negatively
impacted;
?
A shutdown of multiple co-packer facilities in connection with COVID-19 may affect our product availability;
?
Decreased demand for our products due to significant unemployment as a result of COVID-19 and macro-economic environment;
?
Limitations regarding our raw materials and other input components could substantially impact the availability of our products; and
?
If needed, it may become more costly or difficult to obtain debt or equity financing to fund operations or investment opportunities, or to refinance our debt, in each case,
on terms and within a time period acceptable to us.
Our ability to commercialize our products is critical to our success. Damage or disruption to our supply chain, including third-party manufacturing or transportation and
distribution capabilities, due to the COVID-19 pandemic and related aspects or other reasons beyond our control or the control of our suppliers and business partners, could impair
our operations.
We are closely monitoring the COVID-19 pandemic and its potential impact on our supply chain, distribution and our consolidated results of operations. While the beverage
industry has experienced some shortages of cans as a result of the COVID-19 pandemic, Celsius has been able to secure adequate supply and has not experienced significant
adverse effects on its business, operations and financial condition from such shortage or otherwise from the COVID-19 pandemic. Nonetheless, we are unable to accurately predict
the impact that COVID-19 will have due to the uncertainties which include the ultimate geographic spread of the virus, the intensity of the virus, the duration of the outbreak,
and/or actions that may be taken by governmental agencies.
Corporate History
We were incorporated in Nevada on April 26, 2005 under the name ?Vector Ventures, Inc.? and originally engaged in mineral exploration. Such business was unsuccessful. On
January 26, 2007, we acquired the Celsius ? beverage business of Elite FX, Inc., a Florida corporation engaged in the development of ?functional? beverages since 2004 in a reverse
merger, and subsequently changed our name to Celsius Holdings, Inc.
2
Our Products
Celsius ? calorie-burning beverages were first introduced to the marketplace in 2005.
According to multiple clinical studies we funded, a single serving (12 ounce can) of Celsius ? burns 100 to 140 calories by increasing a consumer?s metabolism an average of 12%
for up to a three-hour period. In addition, these studies have indicated that drinking a single serving of Celsius ? prior to exercising may improve cardiovascular health and fitness
and enhance the loss of fat and gain of muscle from exercise.
We seek to combine nutritional science with mainstream beverages by using our proprietary thermogenic (calorie-burning) MetaPlus ? formulation, while fostering the goal of
healthier everyday refreshment by being as natural as possible without the artificial preservatives often found in many energy drinks or sodas. Celsius ? has no chemical
preservatives, aspartame or high fructose corn syrup and is very low in sodium. Celsius ? uses good-for-you ingredients and supplements such as green tea (EGCG), ginger,
calcium, chromium, B vitamins and vitamin C. Celsius is sweetened with sucralose, a sugar-derived sweetener that is found in Splenda?, which makes our beverages low-calorie
and suitable for consumers whose sugar intake is restricted. Each 12 ounce can of Celsius ? contains 200 milligrams of caffeine which is comparable to one 12-ounce cup of coffee
from the leading coffeehouse.
We currently five beverage lines:
?
CELSIUS? Originals, our initial product line. is currently offered in nine flavors: orange, wild berry, cola, grape, kiwi-guava and watermelon (which are carbonated), and
non-carbonated green tea raspberry/acai, green tea/peach mango and green tea/grapefruit melon.
?
CELSIUS HEAT?, introduced in 2018 is a trainer?s grade beverage. CELSIUS HEAT? is also a dietary supplement, that uses the same proprietary thermogenic
MetaPlus? formula as CELSIUS?, Originals, which is proven to accelerate metabolism, boost energy and accelerate calorie and fat burn when combined with exercise.
CELSIUS HEAT?, which is packed with 2,000mg of L-citrulline and 300mg of caffeine, comes in eight carbonated flavors: Apple Jack?d, Orangesicle, Inferno Punch,
Cherry Lime, Blueberry Pomegranate, Strawberry Dragonfruit, Tangerine Grapefruit and Jackfruit.
?
CELSIUS? BCCA+ENERGY, introduced in 2019, is an innovative branched-chain amino acids (BCAA) functional beverage that fuels muscle recovery. The CELSIUS?
BCCA+ENERGY product line was initially launched in the fitness channel.
?
CELSIUS? On-the-Go is is a powdered form of the active ingredients in our beverages in individual On-The-Go packets as well as multiple serving canisters.
?
CELSIUS? Sweetened with Stevia is a natural line extension introduced in 2018, targeting the natural products channel. CELSIUS? Sweetened with Stevia is available in
six refreshing flavors: three sparkling – grapefruit, cucumber lime, orange pomegranate and three non-carbonated – pineapple coconut, watermelon berry and strawberries
& cream. This product line boasts a clean ingredient panel featuring 100% natural caffeine-from-green-coffee bean extract and Stevia an all-natural sweetener.
Celsius? ready-to drink products are packaged in a distinctive 12 ounce sleek can that uses vivid colors in abstract patterns to create a strong on-shelf impact. The cans are sold
as singles or in four-packs. We have recently redesigned our packaging to provide a cleaner, crisper and more modern look. In addition to being sugar free, our original ready-to drink products line is non-GMO, kosher and vegan certified and soy and gluten free.
As a result of completion of the acquisition of Func Food in October 2019, we acquired the beverages, protein bars, supplements and superfoods marketed and distributed in
Finland, Sweden, and Norway. These products are distributed under the FAST, FitFarm and CocoVi brands and which are owned by Func Food. FAST products is a market leader
in Finland and has begun distribution into the Swedish market. FitFarm and CocoVi are well-established brands of superfoods and other supplements in the Nordic countries.
3
Clinical Studies
It is our belief that clinical studies substantiating product claims will become more important as more and more beverages are marketed with health claims. Celsius ? was one of the
first functional beverages to be launched along with a clinical study. Celsius ? is also one of very few functional beverages that has clinical research on the actual product itself.
Some beverage companies that do mention studies backing their claims are referencing independent studies conducted on one or more of the ingredients in the product. We
believe that it is important and will become more important to have studies on the actual product.
We have funded seven U.S. based clinical studies for Celsius ?. Each was conducted by a research organization and each studied the total Celsius ? formula. The first study was
conducted by the Ohio Research Group of Exercise Science & Sports Nutrition. The remaining studies were conducted by the Applied Biochemistry & Molecular Physiology
Laboratory of the University of Oklahoma. We funded all of the studies and provided Celsius? beverage for the studies. However, none of our directors, executive officers or
principal shareholders is in any way affiliated with either of the two research organizations which conducted the studies.
The first study was conducted in 2005 by the Ohio Research Group of Exercise Science & Sports Nutrition www.ohioresearchgroup.com. The Ohio Research Group of Exercise
Science & Sports Nutrition is a multidisciplinary clinical research team dedicated to exploring the relationship between exercise, nutrition, dietary supplements and health. This
placebo-controlled, double-blind cross-over study compared the effects of Celsius ? and the placebo on metabolic rate. Twenty-two participants were randomly assigned to ingest
a 12 ounce serving of Celsius ? and on a separate day a serving of twelve ounces of Diet Coke?. All subjects completed both trials using a randomized, counterbalanced design.
Randomized means that subjects were selected for each group randomly to ensure that the different treatments were statistically equivalent. Counterbalancing means that
individuals in one group drank the placebo on the first day and drank Celsius ? on the second day. The other group did the opposite. Counterbalancing is a design method that is
used to control ?order effects.? In other words, this was done to make sure that the order that subjects were served does not impact the results and analysis.
Metabolic rate (via indirect calorimetry, measurements taken from breaths into and out of calorimeter) and substrate oxidation (via respiratory exchange ratios) were measured at
baseline (pre-ingestion) and for ten minutes at the end of each hour for three hours post-ingestion. The results showed an average increase of metabolism of twelve percent over
the three-hour period, compared to a statistically insignificant change for the control group. Metabolic rate, or metabolism, is the rate at which the body expends energy. This is
also referred to as the ?caloric burn rate.? Indirect calorimetry calculates heat that living organisms produce from their production of carbon dioxide. It is called ?indirect? because
the caloric burn rate is calculated from a measurement of oxygen uptake. Direct calorimetry would involve the subject being placed inside the calorimeter for the measurement to
determine the heat being produced. Respiratory Exchange Ratio is the ratio oxygen taken in a breath compared to the carbon dioxide breathed out in one breath or exchange.
Measuring this ratio can be used for estimating which substrate (fuel such as carbohydrate or fat) is being metabolized or ?oxidized? to supply the body with energy.
The second study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007. This blinded, placebo-controlled study was
conducted on a total of 60 men and women of normal weight. An equal number of participants were separated into two groups to compare one serving (a single 12 ounce can) of
Celsius ? to a placebo of the same amount. According to the study, those subjects consuming Celsius ? burned significantly more calories versus those consuming the placebo,
over a three-hour period. The study confirmed that over the three-hour period, subjects consuming a single serving of Celsius ? burned 65% more calories than those consuming
the placebo beverage and burned an average of more than 100 to 140 calories compared to the placebo. These results were statistically significant.
The third study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2007, extended our second study with the same group
of 60 individuals and protocol for 28 days and showed the same statistical significance of increased calorie burn (minimal attenuation). While the University of Oklahoma study did
extend for 28 days, more testing would be needed for long term analysis of the Celsius ? calorie-burning effects. Also, although these studies were on relatively small numbers of
subjects, they have statistically significant results. Additional studies on a larger number and wider range of body compositions can be considered to further the analysis.
Our fourth study, conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009, combined Celsius ? use with exercise. This tenweek placebo-controlled, randomized and blinded study was conducted on a total of 37 subjects. Participants were randomly assigned into one of two groups: Group 1 consumed
one serving of Celsius ? per day, and Group 2 consumed one serving of an identically flavored and labeled placebo beverage. Both groups participated in ten weeks of combined
aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. The results showed that consuming a single
serving of Celsius ? prior to exercising may enhance the positive adaptations of exercise on body composition, cardio-respiratory fitness and endurance performance. According to
the preliminary findings, subjects consuming a single serving of Celsius ? lost significantly more fat mass and gained significantly more muscle mass than those subjects
consuming the placebo ? a 93.75% greater loss in fat and 50% greater gain in muscle mass, respectively. The study also confirmed that subjects consuming Celsius? significantly
improved measures of cardio-respiratory fitness and the ability to delay the onset of fatigue when exercising to exhaustion.
4
Our fifth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized
and blinded study was conducted on a total of 27 previously sedentary overweight and obese female subjects. Participants were randomly assigned into groups that consumed
identically tasting treatment beverages with exercise or without exercise. All participants consumed one drink, either placebo or Celsius ?, per day for 10 weeks. The exercise groups
participated in ten weeks of combined aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. No
changes were made to their diet. The results showed that consuming a single serving of Celsius ? prior to exercising may improve cardiovascular health and fitness and enhance
the positive adaptations of exercise on body composition. According to the preliminary findings, subjects consuming a single serving of Celsius ? lost significantly more fat mass
and gained significantly more muscle mass when compared to exercise alone ? a 46% greater loss in fat, 27% greater gain in muscle mass, respectively. The study also confirmed
that subjects consuming Celsius ? significantly improved measures of cardio-respiratory fitness ? 35% greater endurance performance with significant improvements to lipid
profiles ? total cholesterol decreases of 5 to 13% and bad LDL cholesterol 12 to 18%. Exercise alone had no effect on blood lipid levels.
Our sixth study was conducted by the Applied Biochemistry & Molecular Physiology Laboratory of University of Oklahoma in 2009. This ten-week placebo-controlled, randomized
and blinded study was conducted on a total of 37 previously sedentary male subjects. Participants were randomly assigned into groups that consumed identically tasting treatment
beverages with exercise or without exercise. All participants consumed one drink, either placebo or Celsius ?, per day for 10 weeks. The exercise groups participated in ten weeks of
combined aerobic and weight training, following the American College of Sports Medicine guidelines of training for previously sedentary adults. No changes were made to their
diet. The results showed that consuming a single serving of Celsius ? prior to exercising may improve cardiovascular health and fitness and enhance the positive adaptations of
exercise on body composition. Significantly greater decreases in fat mass and percentage body fat and increases in VO2 were observed in the subjects that consumed Celsius ?
before exercise versus those that consumed the placebo before exercise. Mood was not affected. Clinical markers for hepatic, renal, cardiovascular and immune function, as
determined by pre-and post-blood work revealed no adverse effects.
Our seventh study was conducted by Miami Research Institute in 2010 and demonstrated the efficacy and safety of the powders and the shots. This study allows the Company to
make the same structure/function claims as the ready to drink beverages.
Manufacture and Supply of Our Products
Our beverages are produced by established third party beverage co-packers. A co-packer is a manufacturing plant that provides the service of filling bottles or cans for the brand
owner. We believe one benefit of using co-packers is that we do not have to invest in the production facility and can focus our resources on brand development, sales and
marketing. It also allows us produce in multiple locations strategically placed throughout the country. We purchase most of the ingredients and all packaging materials. The copack facility assembles our products and charges us a fee by the case. The shelf life of Celsius ? products is specified as 15 to 18 months.
Substantially all of the raw materials used in the preparation, bottling and packaging of our products are purchased by us or by our co-packers in accordance with our
specifications. Generally, we obtain the ingredients used in our products from domestic suppliers and some ingredients have several reliable suppliers. The ingredients in Celsius ?
include green tea (EGCG), ginger (from the root), caffeine, B vitamins, vitamin C, taurine, guarana, chromium, calcium, glucuronolactone, sucralose, natural flavors and natural
colorings. Celsius ? is labeled with a supplements facts panel. We have no major supply contracts with any of our suppliers. We single-source all our ingredients for purchasing
efficiency; however, we have identified a second source for our critical ingredients and there are many suppliers of flavors, colorings and sucralose. In case of a supply restriction
or interruption from any of the flavor and coloring suppliers, we would have to test and qualify other suppliers that may disrupt our production schedules.
Packaging materials, except for our distinctive sleek aluminum cans, are easily available from multiple sources in the United States; however, due to efficiencies we utilize single
source vendor relationships. While the beverage industry has experienced some shortages of cans as a result of the COVID-19 pandemic, Celsius has been able to secure adequate
supply and has not experienced significant adverse effects from such shortages.
We believe that our co-packing arrangement and supply sources are adequate for our present needs.
Func Food similarly has its FAST and other products manufactured by independent third parties in the Nordic countries.
Distribution
Domestic
In the United States and elsewhere in North America, Celsius? is sold across many retail segments. They include supermarkets, convenience stores, drug stores, nutritional stores,
and mass merchants. We also sell to health clubs, spas, gyms, the military, and e-commerce websites.
5
We distribute our products domestically through a hybrid of direct-store delivery (DSD) distributors and as well as sales direct to retailers (DTR).
We are continuing to emphasize the expansion of our DSD distribution network as we believe it has been a key element in opening additional domestic markets and retail segments
and increasing sales.
We also sell our products online through our own and other e-commerce platforms such as Amazon. As a result of the shift to online purchasing by consumers, including
additional growth arising from the effects of the COVID-19 pandemic as a result of the shutdown of various retail outlets, particularly gyms and health clubs in the fitness channel,
e-commerce sales have accounted for a growing percentage of our domestic revenue. We expect this trend to continue at least through most of 2021.
International
We distribute our products in various foreign regions through regional and country-specific distribution partners. In October 2019, we acquired Func Food, our Nordic distribution
partner, who markets both our products as well as other products under its own brands. Celsius intends to use Func Food as a platform to expand product distribution elsewhere in
Europe.
We market our products in the Asian market, which is one of the most dynamic and fastest-growing, through a partnership with A.S. Watson industries in Hong Kong and a
license agreement with our partner in China, Qifeng Food Technology (Beijing) Co., Ltd. (?Qifeng?). While we initially began both local production and preliminary distribution of
the Celsius? brand in