2022 Was a Sparkling Year for Carbonated Beverage Stocks - The Motley Fool

It was a painful year for most investors. Unless your portfolio was loaded with energy stocks or the right healthcare companies, your returns probably declined in 2022. But under the radar, the leading distributors of carbonated beverages were popping last year.

Celsius Holdings (CELH -5.19%) -- up 40%
Coca-Cola (KO -1.56%) -- up 11%
PepsiCo (PEP -1.10%) -- up 8%
Monster (MNST -0.36%)-- up 6%
National Beverage Corp. (FIZZ -0.02%) -- up 3%

Companies making fizzy beverages didn't go flat last year, bucking the trend of many consumer-facing companies that sputtered. Repeating the feat in 2023 won't be easy, but we're getting ahead of ourselves. Most stocks experienced double-digit percentage declines in 2022, so it was refreshing to see an unlikely niche pay off for investors.

Image source: Getty Images.

There's no popping this bubble

Celsius Holdings led the way for the carbonated beverage companies, and it's easy to see why. Its functional energy drinks, which claim to burn calories by boosting metabolism through thermogenesis, are flying off the shelves. Celsius was initially a hit with fitness junkies trying to maximize the effectiveness of their workouts, and now we're seeing the masses take to the growing product line. Currently, 174,000 retail outlets stock Celsius cans across the country, a 54% increase over the past year.

The business itself is growing even faster. North American sales soared 112% in its latest quarter. And this isn't a fluke in which Celsius is benefiting from gyms and the economy opening up again, providing easy comparisons to prior results. Sales more than doubled last year, and that was after soaring 74% through 2020's consumer slowdown.

It wasn't just the product's skyrocketing sales that helped deliver monster gains for investors. The company's success attracted the attention of PepsiCo, which made a $550 million investment in Celsius over the summer. The world's second-largest soft drink brand received an 8.5% stake in Celsius, a seat on the board, and distribution rights in the U.S. as well as becoming Celsius' preferred partner overseas, where the smaller company has yet to get rolling.

Celsius wasn't the only energy drink maker moving higher last year, either. Shares of the larger Monster Beverage also rose 6% in 2022. Net sales for Monster have risen 20% through the first nine months of last year on a foreign-currency-adjusted basis.

The two carbonated beverage brands that investors typically think of -- Coca-Cola and PepsiCo -- saw their stocks surge 11% and 8%, respectively, last year. LaCroix owner National Beverage rounds out the list of rising makers of carbonated beverages. LaCroix ushered in the era of sparkling water enhanced with fruit flavors. There's a glut of competitors on shelves these days, but National Beverage has still been finding ways to post single-digit growth over the past few quarters.

However, not every maker of fizzy drinks was a pop star last year. Keurig Dr Pepper (KDP -0.79%) didn't move higher in 2022. However, the company behind the Keurig K-Cup coffee platform, as well as carbonated beverages including 7UP, Sunkist, and the namesake Dr Pepper, saw its stock dip a mere 1% on a dividend-adjusted basis. In short, even Keurig Dr Pepper trounced the market.

Were beverage stocks a flight to safety for investors over the past year? It's not as if the industry was able to sidestep challenges. We've seen aluminum can and carbonation shortages emerge, and inflationary pressures are testing how much consumers are willing to pay for carbonated refreshment. They aced the "pop" quiz in 2022, but the real test comes now.

Rick Munarriz has positions in Celsius. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool recommends National Beverage and recommends the following options: long January 2024 $47.50 calls on Coca-Cola. The Motley Fool has a disclosure policy.

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