Hot Picks: Clean-label and zero-sugar drinks are driving new consumer demand

Retailers are doubling down on targeted promotions and value-driven pack sizes as consumers stretch budgets yet continue to reward convenience, clean-label ingredients and affordable indulgence. Better-for-you drinks and functional hydration remain standout performers in centre-store categories.

BNN Bloomberg spoke with Jim Salera, research analyst in institutional equities and research at Stephens, who pointed to opportunities across zero-sugar energy drinks, coconut water and clean-label sodas as shifting consumer habits and retailer priorities reshape demand across the packaged beverage landscape.

Key Takeaways

• Retailers are prioritizing digital offers and basket-based rewards that drive velocity rather than broad price reductions.
• Shoppers are trading within categories, leaning on club formats, value packs and trusted private-label brands to stretch budgets.
• Better-for-you beverages continue to gain traction as consumers look for taste, convenience and functional benefits at accessible price points.
• Functional hydration brands are expanding household penetration, supported by improved shelf placement and easing freight and tariff pressures.
• Clean-label and zero-sugar beverages are benefiting from durable demand and broader distribution, supporting stronger margins heading into 2026.

Read the full transcript below:

ANDREW: Hot Picks today is packaged food and beverage stocks. Our guest has zero-sugar energy drink maker Celsius as his top selection. Let’s get more from Jim Salera, research analyst in institutional equities and research at Stephens. Thanks very much, Jim, for joining us as ever. Tell us about Celsius. What’s the attraction here?

JIM: Hi, Andrew. Yeah, thanks for having us on again. Yes, Celsius is positioned in a very unique space in the U.S. right now because what we’ve seen is a big consumer migration towards this focus on cleaner-label, better ingredients, zero- or low-sugar products. And we’ve also seen a migration to energy drink as kind of a preferred caffeine delivery source, especially for younger consumers.

Earlier this year, Celsius acquired a brand called Alani Nu. It’s more of a female-centric brand paired with its core Celsius brand, and then recently also picked up the Rockstar Energy brand. So they have a pretty targeted portfolio that really expands the aperture of consumers that will come into the energy category. And we’ve been seeing them really drive incremental visits and incremental trips to the energy category because of the zero-sugar, kind of health-forward brand positioning.

ANDREW: Tell us about your next one, Vita Coco. The core of their business is coconut water, and that’s striking a chord with consumers.

JIM: Yeah, so again, kind of pulling on that same thread around health and wellness. Vita Coco, organic product, pretty much as natural as you can get. Crack the coconut open, water comes out, and that’s the product that you’re consuming. Earlier in the year there were some concerns around tariff impacts and what that might do to the business. But as we’ve seen recently, the Trump administration has put in exemptions for a lot of food products, coconut water being among those, and so that’s dramatically improved the margin profile for the business moving forward.

And we’ve also seen major retailers like Walmart increasing their shelf placement for better-for-you beverages, including coconut water and Vita Coco in specific. And so when you have large retailers increasing the shelf visibility, that drives more eyeballs and gets more consumers to try the product and, you know, add it into their kind of routine shopping behaviour.

ANDREW: Apparently there has been a lot of hype about coconut water, but it’s not bad for you, but it’s not especially good for you. I don’t know if it’s particularly nutritious either.

JIM: I think it depends on what you’re substituting. So what’s the use occasion, right? So, you know, if you think about coconut water as kind of a natural hydration beverage versus, you know, a sugary sports drink or something like that, it does reduce the amount of sugar. And particularly you’re substituting natural sugars versus artificial sugars. So like all things, it’s a comparison of what you’re replacing versus what you were consuming before.

ANDREW: So you say — I think you touched on this — you reckon the valuation is rich, but you think it’s justified in this case with Vita Coco, yeah?

JIM: So I think right now, in consumer, given a lot of the dynamic around kind of lower-income consumer pressure in the U.S., there’s not a ton of growth opportunity. And so what we’ve found is all of the brands we touched on — Celsius earlier, Vita Coco another one — if they’re in this momentum basket and they’re seeing more engagement with consumers, potentially replacing legacy brands that the consumer was previously buying, that allows them to command a much more premium multiple relative to the rest of the group. So it’s a small selection, but we think that, you know, if you’re in that momentum basket, it allows you to command a premium versus kind of the broader group.

ANDREW: I notice, if I go into a corner store or convenience store, there’s a fridge and it’s just full of beverages from the giants Coca-Cola and Pepsi. I think they supply the fridge in some cases. So is it hard for these smaller brands to get into an outlet like that?

JIM: Yeah, so that’s a great point. And yeah, Coca-Cola and Pepsi, as well as KDP, Keurig Dr Pepper, have big direct-store distribution networks where they have employees, you know, going to these convenience stores and other outlets and filling these refrigerators. Celsius actually has a distribution agreement with Pepsi, and so that allows them to kind of piggyback off that much larger network. And so you’ll often see Celsius in those branded Pepsi coolers alongside, you know, other Pepsi products. And so it provides a kind of insulation for a brand like Celsius and does create a challenge for some of the smaller energy brands to really get that same kind of on-shelf presence if you’re not riding with one of the big distributors.

ANDREW: And then finally, Zevia, which uses that sweetener stevia — or stevia, I forget how to pronounce it. Tell us again: this feeds into the thesis that consumers want stuff they see as healthier.

JIM: Yeah, so again, kind of a common theme across all these guys. Zevia is zero-sugar soda really priced at a much more affordable price point versus what we’ve seen from some of these other kind of functional, better-for-you sodas. It’s much more comparable with kind of a traditional diet soda in terms of price point.

They actually just signed a deal to expand into Walmart Canada. So if you have any viewers that are shoppers at Walmart, they should see this appearing on shelf in the not-too-distant future. But again, we’ve seen a lot of retailers, Walmart in particular, take a leadership role in expanding the shelf presence for these zero-sugar beverages. In our view, that’s kind of an indication of things to come. You know, if you have the world’s largest retailer adding more allocation for these zero-sugar beverages, I think it speaks to the durability and long-term trend that we see with consumers guiding towards these healthier options.

ANDREW: Jim, thank you very much indeed. Jim Salera, research analyst in institutional equities and research at Stephens. Coming up, we’ll take one last look at the markets before we go.

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This BNN Bloomberg summary and transcript of the Dec. 3, 2025 interview with Jim Salera are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.