Earnings Call Transcript
Celsius Holdings, Inc. (CELH)
Earnings Call Transcript - CELH Q2 2021
Operator, Operator
Greetings and welcome to Celsius Holdings Inc. Second Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cameron Donahue, Investor Relations for Celsius Holdings. Thank you. You may begin.
Cameron Donahue, Investor Relations
Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings' second quarter 2021 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer; and Edwin Negron, Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions and instructions will be given at that time. The company filed its Form 10-Q with the SEC and initiated a press release today. All materials are available on the company's website celsiusholdingsinc.com under the Investor Relations section. As a reminder, before I turn the call over to John, an audio replay will be available later today. Please also be aware, this call may contain forward-looking statements which are based on forecasts, expectations and other information available to management as of August 12, 2021. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent as required by law, Celsius Holdings undertakes no obligation and disclaims any duty to update any of these forward-looking statements. We encourage you to review in full our safe harbor statements contained in today's press release and our quarterly filings with the SEC for additional information. With that, I'd like to turn the call over to President and Chief Executive Officer, John Fieldly for his prepared comments. John?
John Fieldly, CEO
Thank you, Cameron, and good morning, everyone and thank you for joining us today. Our record second quarter results are representative of the momentum that the CELSIUS brand is achieving across the board, with increased sales growth, SKU expansion, distribution gains, increased brand recognition and increased organic social support just some of the drivers supporting what we feel has been a significant step-up for the company. We believe this also provides leverage to drive further acceleration in market share gains. Total sales for the quarter totaled $65.1 million, up 117% from $30 million in the year ago quarter. Our domestic revenue increased 157% to $53.7 million, up from $20.8 million in the year ago quarter, with both of these percentage growth rates, the highest in our history. Two of the channels hardest hit by COVID are the fitness channel and the vending channel each had triple-digit growth, which contributed approximately $4.9 million of incremental revenue when compared to the prior quarter. International sales growth grew 25% to $11.5 million, primarily from a 23% growth in Nordic sales of $10.8 million. Even with the record second quarter and first six months of 2021, we are still dealing with the impacts of COVID-19, including in our International markets, increased costs in raw materials and transportation. Our fitness channel and vending channels saw tremendous growth on both a year-over-year period and sequential basis with positive trends continuing into the third quarter. Although the comparable basis from the second quarter of 2022 was the low mark for both of these channels, the great growth rate and total sales for each continued to improve. Our operations in the EU, Middle East, Asia-Pacific, and Australia remain adversely affected by COVID-19 with varying restrictions and lockdowns in these markets. Overall, we have been seeing sequential improvements over the last several quarters with capacity restrictions as well as reopenings in the hardest hit channels, but there still remains a lot of uncertainty, as there is potential for reclosings due to new variants and cases increasing in our regions of operations, which could force extended closures in some states and countries. The health and safety of our employees and partners remains our top priority and precautionary measures have been implemented which we have developed and adopted in line with guidance from public health authorities. The aluminum can shortage driven by COVID and impacting the entire industry remains in place, but for Celsius we believe we are well positioned from our proactive sourcing of international cans and new relationships with top can manufacturers in the US, which have initiated major expansion projects and we continue to anticipate the completion of this expansion in the back half of 2021 through 2022. We implemented our contingency plans around production, which included imported can production starting in March of 2021. We anticipate 50% of our can supply for 2021 to be derived from imported and wrapped cans, which should decrease late in 2021 and through 2022. We expect a significant majority of cans will be sourced domestically in 2022, improving our margins, and at this point, we believe Q1 of 2021 was the low point for margins with the back half of 2021 showing sequential improvements towards our fiscal year 2020 levels. In addition, the team is expanding warehouse distribution sites to a six-regional orbit model to drive efficiencies, implementing plans to further secure raw materials with minimum floor stock programs, blanket purchase orders and second and third alternatives of suppliers. The teams continue to quickly adapt to the new COVID environment and are focused on driving efficiencies and operational performance and believe with our significantly expanded scale, we have the opportunity to leverage this to reduce input costs as we move forward. We have also further integrated and leveraged synergistic benefits from our global operations, focusing on marketing operations, financial integrations, and implementing our strategy to build a globally dominant iconic brand. The company improved our fill rates through the second quarter from the 80% level in Q1, driven by shipping delays and can shortages, gas shortages in the East Coast and the Texas freeze which impacted our co-packers and warehouses for several weeks. We ended the second quarter in June at approximately a 90% fill rate and expect to see this improve further in the back half as we continue to reach normalized levels of inventory. Turning to some additional financial highlights for the second quarter. Our domestic sales revenue topped $53.7 million, driven by accelerating triple-digit growth in traditional channels of trade, expansion of world-class retailers and further activation and growth from our distribution partners. Our Direct Store Delivery network delivered growth of 333% in our distributor revenues when compared to the prior year. Our fitness channel, as discussed, saw sales increase over 300% from the prior year in addition to our vending growth, which saw over a 250% growth rate, contributing that $4.9 million of incremental revenue compared to the prior year. As of July 1, we have over 18,500 vending micro market placements and we expect that growth to continue throughout the year as we drive additional new national distribution agreements with Performance, Food Group, contracts and several regional agreements. In addition, all major chains in our gym fitness channel expanded SKUs where we further expanded our new offering, our new flavors, Tropical Vibe and Strawberry Guava, which is now the number one selling flavor in the fitness channel. The mass club channel continues to accelerate. We are now fully rolled out nationally in all 561 Costco locations. Additionally in Target, we have converted approximately 95% to DSD and are also in process of launching four-packs. In our convenience channel side in North America, which represents the largest market in the energy drink category with over $10 billion in annual sales, the latest SPINS data shows an 86% year-over-year increase for the Celsius product portfolio in the convenience channel compared to a 9.1% overall growth in the energy category, while Celsius is only holding a 17.1% ACV, which truly shows the opportunity we have lying ahead as we continue to further expand. Through this year we have added over 19,000 convenience stores in the last 12 months with additional accounts expected as fall resets take place. This is per SPINS shelf-stable energy functional beverage convenience, for the 52 weeks ending July 11, 2021. Industry-backed third-party data continues to show accelerated growth metrics. We are confident that Celsius will continue to drive sales even higher as we continue to increase our ACV across channels through additional launches with nationwide retail chains and transforming our existing distribution to our DSD service model network. Consumer demand for Celsius accelerated through Q2 of 2021 with most recent reported Nielsen scan data as of July 3, 2021 showing sales of Celsius were up 193% year-over-year for the two weeks ending and 195% for the 12 weeks ending with a 1.6 share of the total energy drink category over the last four weeks. On Amazon, CELSIUS is the third largest energy drink with a 13.12% share of the energy drink category just 1.32% share behind Red Bull at a 14.44% share and 18.13% behind Monster at a 31.25% share for the last 52 weeks ending July 10, 2021. For the four weeks ending July 3, 2021, category sales including shots surged 104.5% with bank sales up 216.1%, CELSIUS sales were up 133.1%, Red Bull sales were up 109.4% and Monster sales were up 59.9%. According to Stackline's latest year-to-date LEADERBOARD Ranking of most popular search brands in the U.S., Grocery Department, CELSIUS is the number one fastest growing brand while positioned at 18 overall for the reporting period ending July 3, 2021. We continue to see acceleration and are now beginning to also see the additional lift from the conversion of our accounts to our national DSD network. This delivered growth of 333% in our distribution revenues when compared to the prior year second quarter. We secured additional distribution agreements with partners in the independent Anheuser-Busch network, independent PepsiCo, Keurig Dr. Pepper and MillerCoors network further expanding availability to new regions as Celsius builds out its national distribution network, which now includes over 190 regional direct store delivery DSD partner distribution centers now covering approximately 90% of major metropolitan markets and 85% of total U.S. counties. We also filled one of the major gaps in our DSD network in the Mid-Atlantic region, adding three new distributors in that area, which were signed up in the second quarter. Transitioning to DSD continues with our retail partners with 45% of retail stores now serviced by DSD. Key accounts converted, with over 75% transitioned to DSD, include Target, Walmart, RaceTrac, Kroger, Circle K, Speedway, Murphy's USA, with CVS and 7-11 also in the process with more being transitioned in the second half of 2021 and through 2022. Our rollout of Celsius branded coolers in the second quarter totaled approximately 300 and now we have over 500 placed in the market through the first six months of 2021. We have also implemented additional comprehensive tracking tools to leverage our growth and accelerate the metrics through the retail partners. We expect additional cooler placements in the back half of this year at similar or increased numbers as we continue to see strong velocity rates and increased store sales. Today in the United States, our total door count now exceeds 100,000 locations, which is a major milestone and grew by over 20,000 doors since the beginning of 2021, with additional expansion planned throughout the rest of this year as retailers reset. On our co-packing front, we continue to expand our partners and scale at existing locations, improving our line time priority. Our total U.S. co-packer footprint now totals nine active locations, which will help fuel our growth and limit our out-of-stocks and support the national massive growth opportunity that lies ahead. During the second quarter, we increased our inventory levels up to $63 million, up 27% from $36 million at the end of the first quarter to support our growth and increased warehouse distribution centers and to better service our customers and meet demand as well as increasing our inventory of raw materials. In Europe, Nordic sales increased 23% versus the prior year, helped by the growth of our CELSIUS portfolio and the launch of two new flavors of Tropical flavors. Additionally, our Global Celsius EMEA packaging launched in Finland, where initial results have been extremely positive and has been further rolled out to a top main retailer expanding to 832 locations. The FAST portfolio experienced out of stocks during the quarter due to co-packer delays associated with COVID, which has started to normalize in the back half of the quarter. Celsius sales made up for the reduction in the FAST portfolio to drive positive growth in that territory. We also have initially soft-launched the FAST portfolio in the U.S. through Amazon. We continue to evaluate the timing of additional European expansion markets. We are confirmed to launch in the first Amazon EU market of the UK and Germany in the back half of 2021 and expect to launch additional EU countries through 2022, including Sweden, Spain, Italy, France, and several others. In China, we maintain a licensing royalty model in the market, where our distributor covers approximately 76 cities and over 60,000 locations of distribution. Our other international markets have been impacted, both the in-country service and by our co-packers supporting these countries due to COVID impacts. We anticipate that these geographies once fully opened will provide additional long-term growth opportunities. As with Europe and the United States, we see significant opportunities to capitalize on a global scale, reflecting the changes in consumer preferences for better-for-you offerings in this enormous Asian market. Now moving to marketing. On the marketing front, we continue to activate, targeting consumers as they live, work, and play, building meaningful and emotional connections through robust integrated marketing programs. Specifically during the quarter, despite COVID restrictions, we sponsored targeted programs both in-person and virtual. We further expanded and integrated our experiential sampling Live Fit Tour in Florida, Texas, and California and other markets as well. Additionally, we further expanded our brand ambassadors and influencer programs, reaching more consumers in a meaningful way. On June 9, 2021, the company completed an offering that generated net proceeds to the company of approximately $67.8 million, which we intend to use primarily for growth capital, including building inventory to support our sales growth, leveraging and optimizing our warehousing, targeting investments in targeted marketing programs, and expanding the Celsius branded Cooler program. We have reached another inflection point in our operations and growth, one that positions Celsius for exponential sales and market share growth. With this, we have been proactive in building the Celsius team to maximize the opportunity as well as with key partners such as Ernst & Young as our corporate auditors beginning in the third quarter of 2021. Our national DSD network is in place with our retail partners accelerating distribution, which we have only just begun to recognize the incremental growth associated with these transactions. Our team is ready and our infrastructure is in place to support the sales growth we expect on an expedited scale.
Edwin Negron-Carballo, CFO
Thank you, John. First, I wanted to cover the June 9 public offering led by UBS and Jefferies. The company issued and sold 1,133,953 shares of common stock, approximately 1.7% dilution, and the selling stockholders sold 6,257,455 shares in the aggregate of common stock in the offering at a price of $62.50. The offering generated net proceeds for the company of $67.8 million with net proceeds for selling stockholders of $375 million. The company did not receive any proceeds from the sale of shares by the selling stockholders. The company intends to use the proceeds for general corporate purposes, such as working capital financing, expanding our Celsius branded cooler program, and expanding our warehouses and distribution model to reduce miles on cans and better service our distributors. Now turning to the second quarter results. Our second quarter revenue for the three months ended June 30, 2021 was approximately $65.1 million, a robust increase of $35.1 million, translating into a significant growth of 117% from $30 million for the three months ended June 30, 2020. Approximately 94% of this growth was a result of increased revenues in North America where 2021 second quarter revenues were $53.6 million, a considerable increase of $32.8 million or an impressive 157% increase from the 2020 quarter. The balance of the increase was largely attributable to a 23% growth in European revenues, to $10.8 million in the 2021 quarter from $8.8 million in the prior year quarter. Asian revenues, primarily consisting of royalty revenues from our China licensee for the three months ended June 30, 2021, were $619,000, an increase of 89.9% from $326,000 for the prior year quarter. This increase was provided for in our licensing agreement. Other international markets generated $62,000 in revenue during the three months ended June 30, 2021, a decrease of $45,000 from $107,000 for the prior year quarter, mainly related to an operational restructuring in the Middle East. The total increase in revenue was mainly related to increases in sales volume as opposed to increases in product pricing. The primary factors behind the increase in North American sales volume were related to continued strong triple-digit growth in traditional distribution channels, combined with an increase in optimization of our presence in world-class retailers. Additionally, the continued expansion of our DSD network resulted in significant growth in distributor revenues compared to the prior year quarter. We also achieved triple-digit growth in our fitness and vending channels in the 2021 quarter, contributing considerable incremental revenue compared to the prior year quarter during which many fitness facilities were closed due to the pandemic. Furthermore, we estimate that the strengthening of the Euro accounted for approximately 2.3% of the increase in European revenue in the 2021 quarter from the prior year quarter. Gross profit for Q2 increased by approximately $15.2 million or 117% to $28.2 million, from $13 million for the three months ended June 30, 2020. Gross profit margins reflected a nominal increase to 43.4% for the three months ended June 30, 2021, from 43.3% for the 2020 quarter. Excluding freight, as some of our competitors do not include this as cost of goods sold, our adjusted gross profit for the second quarter would translate to 51.8% compared to 50.5% in the second quarter of 2020. The increase in gross profit dollars is mainly related to increases in volume, while the nominal increase in gross profit margins is mainly related to lower processing and repackaging costs. We estimate that the increase of approximately $15.2 million in gross profit dollars from the 2020 quarter to the 2021 quarter reflected $14.4 million related to volume increases as well as favorable cost impacts of approximately $25,000 and favorable currency impacts of $796,000. Sales and marketing expenses for the three months ended June 30, 2021, were $15.5 million, an increase of $7.6 million or 96.2% from $7.9 million for the three months ended June 30, 2020. This increase was mainly attributable to additional marketing investment activities, resulting in an increase of $4.2 million compared to the prior year quarter. Additionally, employee costs increased by $900,000 from the year ago quarter as we continue to invest in this area to have the proper infrastructure to support our growth. We're also incurring travel and business expenses as we are able to resume in-person marketing events and selling activities. Similarly, we experienced increases in other sales expenses, amounting to $795,000, mainly related to trade marketing activities to support our ongoing DSD network expansion. Lastly, storage and distribution expenses, as well as broker costs, accounted for the remainder of the increase in this area of $1.7 million from the 2020 quarter. As a percentage of revenue, sales and marketing expenses amounted to 23.9% in Q2 of 2021 compared to 26.2% in Q2 of 2020. General and administrative expenses for the three months ended June 30, 2021, were $9.1 million, an increase of $5.2 million or 133% from $3.9 million for the three months ended June 30, 2020. This increase was primarily attributable to stock option expense, which amounted to $4 million for the three months ended June 30, 2021, an increase of $2.8 million, accounting for 51.9% of the total increase in this area compared to the prior year quarter. Management deems it very important to motivate employees by providing them ownership in the business to promote over-performance. Additionally, employee costs for the three months ended June 30, 2021 reflect an increase of $670,000 or 61%, as investments in this area are also required to properly support our higher business volume and the commercial and operational areas. Travel and other similar expenses are now being incurred. Administrative expenses amounted to $2.7 million, an increase of $1.4 million or 107.7% compared to the prior year quarter. This variance is mainly related to an increase in bad debt reserves of $650,000 to properly cover any potential realization exposures. We also experienced increases in audit costs, legal expenses, insurance costs, and office rent, accounting for the majority of the remaining fluctuation of $750,000. Depreciation and amortization increased by approximately $124,000 compared to the prior year quarter. Lastly, all other administrative expenses, mainly composed of research, development, and quality control testing, increased by $200,000 compared to the second quarter of 2020. Total net other income for the three months ended June 30, 2021, amounted to $361,500, an increase of $51,500 compared to total other income of $310,000 for the three months ended June 30, 2020. The total other net income of $361,500 comprises foreign currency exchange gains of $178,000, miscellaneous other non-operational income of $108,000, and interest income of $77,000 related to the note receivable from our China licensee, partially offset by miscellaneous interest expense of $1,400 pertaining to financial leases. The note receivable requires repayment by our licensee over a five-year period. The note receivable is due from the licensee in accordance with his terms, even if the independent license arrangement is terminated. As a result of the above, the net income for the three months ended June 30, 2021, was $3.9 million or $0.05 per share based on a weighted average of 73.2 million shares outstanding, and dilutive earnings of $0.05 per share based on a fully diluted weighted average of 77.2 million shares outstanding. In comparison, for the three months ended June 30, 2020, the company had net income of approximately $1.6 million or $0.02 per share based on a weighted average of 69.4 million shares and dilutive earnings per share of $0.02 based on a fully diluted weighted average of 71.5 million shares outstanding. Focusing now on liquidity and capital resources, as of June 30, 2021 and December 31, 2020, we had cash of $83.8 million and $43.2 million respectively and working capital of $151 million and $66.2 million respectively with no long-term debt. Cash flows used by operating activities totaled $30.3 million for the six months ended June 30, 2021, representing a $26.1 million increase from net cash used in operating activities of $4.3 million for the six months ended June 30, 2020. The use of cash was mainly related to an increase in our inventory levels to properly service demand for our products. Our net inventory increased by $45.4 million from Q4 2020 to $63.8 million in Q2 of 2021. Excluding this significant increase in inventory, cash flow from operations would have totaled $15.1 million. I also wanted to cover a few additional metrics we believe provide a good perspective of our operational performance using Q2 business volume as a basis. Our DSOs or daily sales outstanding were approximately 45 days. Our inventory days on hand were approximately 155 days and our payable days were approximately 31 days. Given our growth, these are very good working capital metrics. Lastly, adjusted EBITDA for the second quarter was $7.9 million or 12.2% of revenues. We believe this information on adjusted EBITDA and other non-GAAP financial measures enhances the overall understanding and visibility of our true business performance. To that effect, a reconciliation of our GAAP results to non-GAAP figures has been included in our earnings press release. This concludes our prepared remarks. Operator, you may now open the call for questions. Thank you.
Operator, Operator
Thank you. Ladies and gentlemen, we will now start the question-and-answer session. Our first question comes from Kaumil Gajrawala with Credit Suisse. Please go ahead with your question.
Kaumil Gajrawala, Analyst
Thank you, operator. Hey everybody. A couple of questions. I guess, first you – there is meant to be quite a significant amount of I guess catch up shelf resets this fall, after some delays and those sorts of things. Obviously you've gained quite a bit of distribution. You have some momentum. Should we be expecting that to accelerate into those resets or do you think you've maybe captured a reasonable amount of what you would have captured at a reset anyways? We should just expect things to kind of continue along its current path?
John Fieldly, CEO
Thank you, Kaumil. This is John. When we look at resets, we added about 20,000 stores through the first six months of the year, reaching 100,000 doors is a major milestone for the company. What we're seeing, Coke Energy is getting listed out there right now and our team has been extremely aggressive in potentially getting some of that space for us in the back half of this year as retailers are doing some mid-year cut-ins. So we do see some of the resets are a little bit unique given COVID restrictions in 2020. There is different timing on resets. So we are seeing shelf sets gaining additional distribution. We expect to gain additional distribution in Q3, also the activation of the DSD network, really going after small format independents is a huge opportunity for us as we continue to activate this DSD network. So we anticipate stores to continue to grow. We'll see at the same rate, but early indications are we will continue to grow doors throughout the year and then as we anticipate larger resets happening in 2022.
Kaumil Gajrawala, Analyst
Got it. And then if I could ask about Europe. You mentioned that you are planning on launching an Amazon Europe in a series of markets. Can you maybe just add a little bit more detail on maybe the market size, what your expectations are for contribution in those launches, that sort of thing?
John Fieldly, CEO
Yes, we've been talking about it for some time. We're obviously doing extremely well on Amazon in North America and working with the European partners and divisions over there. We're looking for really in Q3 to launch in the UK and Germany and other markets. Early indications suggest that the overall size of the energy drink market on Amazon is not as large as the U.S. We do anticipate incremental revenue, but most importantly it gives us additional exposure as we expand into these markets. So think of it as air cover, so to speak, as we enter the UK and Germany and the opportunity we look for with partners in retail as well as distributors. So lots of opportunity as we look to further expand throughout Europe, but in regards to significant dollars to top line, we'll see how it prevails, but we anticipate it to be incremental.
Kaumil Gajrawala, Analyst
Okay, great. And maybe a final question on margins. It sounds like you have quite a bit of confidence in getting your gross margins back up to where they were. But I guess, was just under 47% last year. Is that what you are indicating when you're saying we will sequentially get better to get back to that 46.6%, or was that maybe longer range? Is that kind of a year – because the figure for what you intend to exit the year, what do you think you'll get the full year to?
John Fieldly, CEO
Yes, we feel in the back half of 2021 we're going to see sequential growth anticipated in the margins, as we've seen in Q1 and in Q2. There's a lot of variables out there, freight costs as well and extremely volatile as well as we will be cycling through some imported cans and raw materials. So that will put some pressure on our margins in Q2 and potentially into Q4. We do anticipate more U.S. can manufacturing to be utilized toward the back half of 2021 and into 2022. And Edwin, I don't know if you want to add any additional color on that?
Edwin Negron-Carballo, CFO
Yes, thank you, John. Yes, I agree, there's a lot of variables and the other one that I always like to emphasize is the parity between the U.S. dollar and the euro. The dollar is strengthening. So I think that's also going to come into play as well. Again, it's difficult to kind of predict where we're going to land, but I always want to make sure that that's also taken into consideration.
John Fieldly, CEO
Yes. No. Good point. But we do anticipate the Q2 results at around 43% gross profit to anticipate being the floor as we continue to move forward.
Kaumil Gajrawala, Analyst
Okay, got it. Thank you everybody.
John Fieldly, CEO
Thank you.
Operator, Operator
Our next question comes from the line of Sean King with UBS. Please proceed with your question.
Sean King, Analyst
Hey, good morning guys. Thanks for the question. How are you thinking about pricing in the energy drink category? And I guess just maybe your ability to take pricing given some of the consumer loyalty metrics that you've seen?
John Fieldly, CEO
Yes, I mean consumer loyalty has been extremely high for us. That's more of a competitive advantage we have is our loyal fan base and with regards to pricing, we do think there's opportunities on pricing as we continue to grow in scale. When we look at pricing right now, we're really watching what the other players in the category are doing and also what Monster is doing, really watching our promotional allocations, allowances and plans as we go forward to mitigate the overall frontline price increase.
Sean King, Analyst
Great. If I could squeeze one more in. I just was curious to understand the mechanics of the shift to DSD, and if that does have a drag on margins going forward?
John Fieldly, CEO
Yes, no, it's a great question. I mean there is somewhat of a transition. We are getting top line dollars, and we're giving up margin to move to our DSD network, but there's a lot of synergistic benefits that you receive from transitioning. So what we're seeing is, it's really potentially margin neutral. And also where we see opportunities is as we grow further scale to really leverage some of those efficiencies on a larger scale operations as we continue to grow to further increase our margin. So at this point, as we make the transition it has been fairly neutral.
Edwin Negron-Carballo, CFO
Yes, the way I would look at it as well is from my perspective is, kind of short-term versus long-term or mid-term, initially, there may be an impact to contraction, but as John mentioned, then with the synergies and the other benefits, we'll definitely be able to make that up.
Sean King, Analyst
Great. I'll pass it on. Thanks a lot.
John Fieldly, CEO
Thank you.
Edwin Negron-Carballo, CFO
Thank you, Sean.
Operator, Operator
Our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead with your question.
Jeffrey Cohen, Analyst
Hi, John and Edwin. How are you?
John Fieldly, CEO
Good morning, Jeff.
Edwin Negron-Carballo, CFO
Good morning, Jeff. Excellent.
Jeffrey Cohen, Analyst
Hey, just a bit of a follow-up on a couple of Kaumil's questions. As far as the big five plus in Western Europe, you're going to launch out on EU Amazon. Are there any plans for other channels to happen in the short to mid-term as far as the gym channels or retail?
John Fieldly, CEO
Yes, that is a massive opportunity. We are under discussions. We're looking at that with a variety of potential partners. So more on that in the coming quarters. But at this point, our first step is to expand with Amazon and then we're looking for other partners in those markets where we are under discussions.
Jeffrey Cohen, Analyst
Great. And then second for us, could you talk about the coolers and what we should expect for the back half and talk a little bit about some of the channels of velocity that you're getting to there and how that may roll out in some of the data in stores as far as what they're finding as far as the effect on the stores. Thank you.
John Fieldly, CEO
Yes, no, it's a great question. In regards to sitting here in 2019 and 2018, we really had a lot of out of stocks at retail just due to the velocity of the products. So moving to DSD is one step in enhancing our availability, maintaining that in-stock position and then taking it to the next step further is getting coolers placed strategically in locations where we really can drive a velocity and really service our customers. Historically, over 12 months ago the majority of our sales were all take home. So with the cold availability that allows us to take part of the larger energy drink category, which is impulse purchase. When we see coolers placed in strategic locations where consumers are, we're seeing great returns on the investments in the coolers. We have indicated we have about 500 currently placed as of June 30. We have many more, we anticipate placing in the back half of this year and into 2022. We're working on cooler programs with some larger retailers for 2022 as well. So really in a good place as we continue to service our customers better, where they live, work, and play.
Jeffrey Cohen, Analyst
Got it. And then lastly, first can you talk about the throughput rates previously 80% and 90% reported out this quarter. So we are just kind of steady state? And what are the push and pulls there involved? Thank you.
Edwin Negron-Carballo, CFO
Thank you, Jeff. Yes, fill rates in Q1 were roughly around 80%. We have increased those to the back half of the second quarter, mainly in June, getting to a 90% fill rate there. So we anticipate that to continue to sequentially increase over the next several months. Currently, in Q2 we're averaging right around that 94%, 93% fill rate, which should increase as we further increase our inventories. Moving to this six orbit model of warehousing will also allow us to drive some efficiencies. The key is to get the inventory levels at a right level and then we'll be able to continue to improve fill rates.
Jeffrey Cohen, Analyst
Thanks again. Congrats on the strong retail.
Edwin Negron-Carballo, CFO
Thank you, Jeff.
John Fieldly, CEO
Thank you.
Operator, Operator
Our next question comes from the line of Jeff Van Sinderen with B. Riley. Please proceed with your question.
Jeff Van Sinderen, Analyst
And thanks for taking my questions. Just any update you can give us on where we are on CVS and 7-11's progress on flipping to maxed out DSD?
John Fieldly, CEO
Yes, great question, Jeff. In regards to 7-11, we continue to make progress each and every day. The whole West Coast division has been turned over. We're working on the Southeast Division and several other regions. So we seem to have full support of 7-11 really closing the gaps now that we have about 85% of every county covered in the U.S., giving us further grip. Our DSD team really made great strides in the second quarter, securing the final pieces of some of these counties needing coverage to flip over the zones. So we’re really excited on 7-11, and that transition will continue. Regarding CVS, we are making progress on that each and every day. More zones or more DCs are being converted. We still have a lot of work ahead to continue to move forward, mainly with the Anheuser-Busch network. There are some challenges regarding alcohol service – alcohol distributor servicing, some nuances there we’re working through. But all in all, everyone is in favor of flipping over to DSD. And then CVS, if you look at it, we have full shelves across the country. So lots of opportunity to drive volume to better service our customers.
Jeff Van Sinderen, Analyst
Okay, great. And then any are you anticipating any impact on the fitness and vending channel with the resurgence of COVID or do you think we're beyond that?
John Fieldly, CEO
Yes, it's a great question. I mean, we saw great growth in the second quarter in our fitness and vending, but between both of them were up $4.9 million. We haven't seen it slow down yet. That is definitely a concern we're having. We're taking additional precautions and safety measures throughout the whole company. Time will tell. At this point, we're seeing especially in Florida, Texas, and many markets, we're witnessing the gyms are coming back. So people are very cautious, but it seems to be a growing opportunity for Celsius. So time will tell. I don't have a great answer on that, but we're closely monitoring that.
Jeff Van Sinderen, Analyst
Okay. And then if I could just squeeze in one more. If you could touch on the launch of the four-packs?
John Fieldly, CEO
Yes, the launch of the four-packs, Jeff, you've been with us for some time as well. When you look at where we've been, the company transitioned to a single strategy to drive trial and awareness, and now due to our velocity, there are opportunities for further pack size. I think everyone has been talking about multi-packs. We've strategically introduced expanded multi-pack offerings and the four-packs going into Target is a great win for the company. It just shows you the velocity. We started off with three singles, three flavors, four flavors, five flavors expanded stores, now we're taking that partnership to the next level with four-packs and soon to be a multi-pack we're working on as well as we look at 2022. So lots of opportunities there, but definitely take home, larger take home is going to increase our overall velocity as well versus people buying one or two cans, they can pick up multiple packs. It’s worked really well for us at Publix, for example, where we have singles and four-packs. So expect more four-packs and multi-packs coming in the back half of 2021 and then into 2022.
Jeff Van Sinderen, Analyst
Thanks, and best of luck.
John Fieldly, CEO
Thank you, Jeff.
Edwin Negron-Carballo, CFO
Thank you.
Operator, Operator
This concludes our question-and-answer session. I'd like to hand the call back to management for closing remarks.
John Fieldly, CEO
Thank you. On behalf of the company, we'd like to thank everyone for joining us today and their continued interest. Our results demonstrate our products are gaining considerable momentum. We are capitalizing on today's global health and wellness trends and the transformation taking place in today's energy drink category. Our active lifestyle position is a global position with mass appeal. We're building upon our core and leveraging opportunities and deploying best practices. We have an award-winning portfolio, strategy, and team in a large, rapidly growing market that consumers want. We believe we'll be able to continue to navigate through the challenges ahead of us as a result of COVID-19, and we are well positioned to thrive in the transformation taking place in the category today. Additionally, I'd like to thank all of our investors for their continued support and confidence in our team. Next week we'll be hosting our Annual Shareholder Meeting on August 19 at 2:00 PM in Boca Raton. Notices have been sent out to all shareholders with a record date as of June 30, 2021. Additional information is available on our corporate website. Also, upcoming conferences we will be attending include the Wells Fargo Fourth Annual Consumer Conference on September 23rd to 24th and the Jefferies West Coast Consumer Conference on November 16th and 17th. I look forward to seeing many of you there. Thank you everyone for your interest in Celsius. Be safe, stay healthy, and have a great day.
Operator, Operator
Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.