Two-ounce shot and can sales have been on an upward growth trajectory since 2010 and with the economy improving the category is expected to continue on this positive growth path.
By Pat Pape, Contributing Editor
Despite speculation that the energy category would bottom out, the drinks, shots and mixes that perk up fatigued consumers are thriving.
Energy products make up a small part of the beverage industry, but the category grew 60% between 2008 and 2012, according to Packaged Facts, a consumer research organization.
More recently, Monster saw its c-store energy drink business jump 12% during the third quarter of 2013 on top of a 9% increase in Q2. Officials at Mintel, a consumer research organization, said it expects energy products to experience steady annual growth, with sales jumping from an estimated $11.3 billion in 2013 to $18 billion in 2018.
Wells Fargo Securities surveyed 15,000-plus convenience retailers about beverage categories that gained or lost shelf space in Q3 2013 as compared to the same quarter in 2012 and found that the energy category had earned extra real estate.
“Results indicate that energy gained the most space, consistent with ongoing trends,” said Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities. “Our respondents also indicated that carbonated soft drinks are losing shelf space, particularly colas.”
C-Stores Dominate Energy
Consumers who want energizing products know that convenience stores are the place to buy them. Packaged Facts reported that 59% of all energy drinks, shots and mixes are sold by c-store operators. Mass merchandisers placed a distant second place, selling just 13% of energy products.
The sales of energy drinks and shots receive a boost from new product launches, and there are plenty of those since fresh offerings are introduced regularly. Despite the competitors, Red Bull, Monster and Rockstar remain the category’s top performers.
“We carry the major brands,” said Lisa Dell’Alba, president of Square One Markets, which is headquartered in Hamburg, Pa., and operates nine convenience stores. “Right now there are some [energy products] on the market that are really cheap. But we try to stay with the brands people know and trust and work closer with our vendors to price promote.”
When energy products first rolled out, the typical consumer was the young male, but the demographics may be changing. Experian Simmons, a consumer research organization, reported that there is a small segment of heavy users in the energy category. This includes 5% of adults that consume energy drinks 5-7 times monthly and less than 2% that down the drinks 10 or more times each month.
In addition, Hispanics, Pacific-region residents and adults with children at home tend to use energy products more than other groups.
A report from Mintel found that consumers turn to energy drinks and shots because they believe the products are more effective than coffee and sodas in boosting energy levels and sustaining alertness.
“We sell a lot of energy drinks to the guys out there working construction,” said Dell’Alba. “Most customers are 18- to 30-year-olds, but a few years ago it was probably 18-25. As that population continues to age, I think they’re still consuming that same product.”
The newest energy product patron may be the young mother. According to researchers from Nielsen Homescan data, energy drinks are more likely to be consumed by busy moms in charge of what has been dubbed “young bustling families.”
Recognizing the potential mom market, 5-hour Energy developed a pink lemonade flavor designed to appeal to women during Breast Cancer Awareness Month in October 2012. The company donated a portion of each sale to the Avon Foundation Breast Cancer Crusade, an effort that raised more than $387,000. Although planned as a one-time promotion, the pink drink generated such positive response from consumers that it has since become a permanent product.
Other brands also target the woman on the go. Monster caters to the busy woman with Zero Ultra, a no-sugar and zero-calorie energy beverage packaged in a white can with “feminine design elements.” Rockstar introduced Rockstar Pink, a berry-citrus-flavored beverage with only 10 calories. It comes with a straw so the targeted demographic won’t smear her lipstick.
Shots and Mixes
Energy drinks make up about 78% of the energy market, and energy shots, account for about 18%. Energy drink mixes—both liquid and powder—make up the remaining 4%.
The shots appeal to anyone who wants to feel alert, such as students, long-haul truck drivers and shift workers. But Dell’Alba believes that time-crunched women also use them to get through the day.
“I think it appeals to a different customer,” Dell’Alba said of the shots. “A female customer may put one in her purse and consume it later. But it’s still a shot, and it’s not quenching her thirst.”
When it comes to the small segment of energy mixes, MiO Energy brand is the hands-down leader for 2013, according to IRI, a Chicago-based market research firm. MiO is followed by Crystal Light Energy in second place and private-label brands.
Energy mixes, either liquid or powder, allow consumers to control the power and taste of their drink when they combine an energy mix with water or juice. Customers concerned about their health can use the mixes to tailor their own energy-boosting beverage.
“Those are doing well,” Dell’Alba said of the mixes. And as a bonus, “they give us an opportunity to sell a bottle of water [or juice] to the consumer.”
Handling Health Concerns
The biggest challenge facing the pocket-sized products is the public’s concern about health and safety. In July, the Food and Drug Administration confirmed that investigators are looking into several cases that may be connected to the use of energy shots. Although too soon to speculate, FDA officials admitted that the cases could be due to the improper use of the product.
Dr. Marc Gillinov, a cardiac surgeon with the Cleveland Clinic, has publicly stated that in order to die from a caffeine overdose, a person would need to consume 10 grams of caffeine. By comparison, a tall cup of Starbucks coffee has approximately 260 milligrams of caffeine and the typical cup of tea only has 40 milligrams. Adults who consume more than 500 milligrams a day can experience negative side effects, such as a speeding heart, trembling muscles and insomnia, according to the Mayo Clinic.
Last year, Canadian authorities passed legislation officially capping the amount of caffeine permitted in a single-serving energy drink bottle to 180 milligrams, which is about the same amount as found in an eight-ounce cup of coffee. The new Canadian regulation also requires energy drink manufacturers to report sales data, consumption and health incidents annually for the next five years.
Moving forward, industry observers expect manufacturers to enhance the health benefits of energy products in an effort to counteract the public’s perception.
When used properly, the shots and drinks are pretty much the equivalent of a cup of coffee. Mintel and Packaged Facts both predicted that the market would benefit from more flavorful products as manufacturers work to attract the growing number of former soda drinkers.