Forget Celsius stocks: this stock has made many more millionaires

Celsius Holdings (CELCH 1.06%) is probably best described as a fashion stock, even though it is classified as a consumer staples company. PepsiCo (PEP 0.46%) is a consumer staples stock that could be considered a boring industry giant. But if you compare the performance of these two stocks, PepsiCo looks like the better choice for investors. And that’s before factoring in its incredible long-term earnings.

What does Celsius do?

Celsius makes energy drinks. Energy drinks are an attractive segment of the beverage sector, and the company’s products have been largely well received. But step back and look at the wider drinks sector, which is much bigger than just energy drinks. Essentially, Celsius is a one-trick pony.

To be fair, that trick is pretty good now. The company claims that its products accounted for 47% of all energy drink category growth in the second quarter of 2024. It also held the no. 3 for market share in that period. While all of this is notable, it doesn’t take into account the inherent limitations of selling into a single niche of a much wider market.

When the company’s performance declines or investors simply move on to the next big investment idea, it’s likely that the stock will drop quickly. Case in point: stocks are down more than 50% from 52-week highs. It is worth noting that the peak was in May, which means that there was a very steep decline in a very short period of time.

CELH data by YCharts.

There is nothing inherently wrong with Celsius, per se. But if you think this is the stock that will make you a quick million, you might be disappointed. A much better choice would be to get rich “slowly” with a larger, more diversified company like PepsiCo.

Is PepsiCo beating Celsius?

The first thing to consider when comparing PepsiCo to Celsius is the stock earnings that each company has produced. Since Celsius’ IPO in early 2007, the stock is now up about 90%. This includes the steep decline in the share price in recent months. During the same period, PepsiCo shares rose 170%. Although PepsiCo’s stock has also fallen in recent months, the decline has not been nearly as dramatic.

PEP data by YCharts.

But what happens when you look further? Since mid-1972, PepsiCo’s stock has risen over 10,000%! That said, PepsiCo pays a dividend, unlike Celsius. The yield is currently around 3% and is backed by over five decades of annual dividend increases (making PepsiCo an elite high dividend king).

PepsiCo is clearly not a flash-in-the-pan company — it has proven its ability to adapt and grow with the world around it. To really understand the return for investors here, you need to look at total return, which involves reinvesting dividends. PepsiCo’s total return since mid-1972 is an incredible 25,000%!!!

PEP data by YCharts.

While this is a historic achievement, it is important to understand the benefits of being an industry leader in the consumer staples sector. PepsiCo has a stable of iconic brands, a global distribution system and strong marketing packages. It’s hard to compete with PepsiCo, especially for small start-ups. And here’s the kicker: When a smaller company makes vital inroads, PepsiCo is big enough to pursue that company as an acquisition target. This allows PepsiCo to adjust its business over time so that it remains relevant to consumers. That’s probably one of the biggest reasons why diversified PepsiCo will likely end up being a better long-term investment than Celsius.

Slow and steady wins this race

It’s entirely possible that Celsius will regain favor with investors and the stock will rise again, perhaps returning to, and even above, their 52-week highs. That would lead to some pretty attractive gains in the short term. However, in the long run, companies need to execute and grow over time, and Celsius is still a relatively small one-trick pony.

PepsiCo, on the other hand, has deftly managed to become an industry leader in the beverage niche and the broader consumer staples sector. With its leading position in the industry, it has the means to continue to grow, albeit slowly, and to buy smaller competitors like Celsius that have attractive brands.

Trying to get rich quick by picking up hot stocks opens you up to steep declines like the ones Celsius experienced. It’s much less risky to build a million dollar portfolio if you fill it with dominant industry leaders like PepsiCo.