Celsius Stumbles as Costco Flexes Its Branding Power With a New Energy Drink
Key Points
Costco is launching a new line of Kirkland Signature brand energy drinks.
Celsius shareholders are worried about the increased competition from this popular private label brand.
Branding is a key advantage for Costco.
Costco Wholesale (NASDAQ: COST) released a new line of energy drinks, which wasn't welcome news for Celsius Holdings (NASDAQ: CELH) shareholders. The shareholder concern is warranted, as it's becoming difficult for energy-drink companies to stand out in an increasingly crowded space.
The news may make it seem like this is a story mostly about Celsius. But if you step back to digest what's happening, there's a bigger investing takeaway to consider.
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The reasons for the concern
Here's a quick overview of what happened. Through its private-label brand, Kirkland Signature, Costco launched a new line of energy drinks. Both companies now offer drinks using the same-size cans and the same amount of caffeine. On top of that, the Kirkland Signature energy drinks are available in orange, tropical, and peach flavors, which are reportedly the most popular flavors offered by Celsius.
That creates two kinds of worry for Celsius shareholders.
The first worry is over broad competition at a lower price. Celsius has built its brand on "better-for-you" ingredients, but shelf space in that segment of the energy-drink market is becoming increasingly crowded. Costco's energy drinks are priced significantly cheaper. Costco.com sells a 24-pack of Celsius for $37.99, while it offers a 24-pack of Kirkland Signature energy drinks for $19.99.
The second issue is that Costco can also more directly impact revenue for Celsius, as Costco accounts for about 11% of its sales.
It's easy to understand why a Celsius shareholder would have concerns. But keep in mind that this is still an early-stage development, so I wouldn't make a knee-jerk decision based solely on the recent news.
For me, this story is more about Costco than it is about Celsius: It offers another proof point as to why Costco is one of the best consumer stocks an investor can consider owning.
The consumer staples company has massive loyalty
For Costco, a new energy drink is just another product launch. But the fact that it could spark such worry for Celsius highlights the broad customer devotion to Kirkland Signature products and speaks to Costco's massive branding power.
Visiting a Costco is often described as a "treasure hunt," and some people are so enthralled with the retailer that they share their shopping trips on social media.
That customer loyalty shows up in financial results as well. Costco reported in its fiscal second quarter (which ended Feb. 15) that membership renewals in the U.S. and Canada were roughly 92%, while worldwide renewals were nearly 90%.
Costco is also expanding globally to reach even more customers. It ended its fiscal 2025 (on Aug. 31, 2025) with 914 warehouses and plans to expand to 942 by the end of its fiscal 2026.
With a forward price-to-earnings (P/E) ratio of 49, the stock doesn't look cheap, so value investors may want to wait until that ratio drops before considering Costco as an investment. Still, its warehouse expansion can add a new army of customers, and the loyalty it already has from current members offers a reliable revenue stream. Those factors make Costco one of the best investments to consider in the consumer staples category.
Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius Holdings and Costco Wholesale. The Motley Fool has a disclosure policy.