By Howard Riell, Associate Editor
The energy category continues to be a staple of the convenience store mix. And while top-selling brands such as Red Bull and Monster remain on top, consumers are coming to look for new flavors and favorite spin-offs.
Energy drinks and shots posted gains of 56% between 2009 and 2014, and the categories are forecasted to continue their strong growth through 2019, according to research firm Mintel.
In the first half of 2014, ready-to-drink coffee was the top performer in the U.S. liquid beverage market, gaining 8.3% in market share, compared to the first six months of 2013, according to New York-based Beverage Marketing Corp. Comparably energy drinks displayed a similar vibrancy, rising 6.3% over the same period.
BIG BRAND ON CAMPUS
This is good news for retailers that are clearing more space for energy drinks, anticipating more sales.
“Profit-wise it’s the most popular beverage category for me,” said Lara Bowman, the manager of University Market, a convenience store on the campus of Portland State University in Oregon. Monster is the store’s leading energy brand. “I’ve got all the Monsters, and I do really well. On this campus, I carry all of the Monsters, all the coffee brands, the low fat, the low carbs and the new organic flavored ones.”
Industry experts project that energy drink sales are likely headed even higher as major beverage companies invest more in the category. This past August, Coca-Cola paid $2.15 billion in exchange for a 16.7% stake in Monster. As part of the deal, Coca-Cola transfers ownership of its worldwide energy business—including Nos, Full Throttle, Burn, Mother, Play and Power Play, and Relentless—to Monster.
Just based on momentum, products like Ultra, Monster Energy Ultra Black and original Monster Green energy drink continue to do well, as do Juice Monster, Punch Monster energy drinks and Peace Tea Line.
For retailers, perhaps the biggest challenge is attempting to stay ahead of the wide curve.
Red Bull dominates the category in multi-outlet market share and sales, Mintel researchers found. “Yet the second leading company, Monster Beverage, is closing the gap.” PepsiCo and private label experienced the most drastic sales declines in the 52 weeks ended May 2014. Living Essentials’ 5-hour Energy brand is the third key player in the energy drink/shot category, though it struggled slightly in 2014 with losses in both sales and market share.
“Monster already has superb widespread distribution,” said Gary Hemphill, managing director of research for Beverage Marketing. “But the new partnership has the potential to improve distribution in down-the-street channels like convenience stores, where the Coke system is exceptional.”
Growth prospects for 2015 continue to be solid for the energy drink category overall, according to Hemphill. “We’re projecting growth for 2014 in the 5-7% range. Energy shots, on the other hand, are experiencing slower growth.”
Still, c-stores are in a good position to prosper as energy drinks continue to evolve.
“Convenience stores still account for about half of all energy drink sales,” Hemphill said. “Most sales are impulse-driven, so it is vital to give products a place of prominence in stores, and even merchandise near check-out if at all possible. We don’t see any major obstacles to the future continued growth of the category right now.”
WET AND WILD
According to Mintel and to no one’s surprise, young adults and men remain the top consumers of energy drinks and shots. Core consumers for energy drinks and energy shots are young adults aged 18-34 and men overall. “However, new flavor launches, sugar-free options and new marketing strategies are pulling consumers from other categories: more women and older consumers.”
While young men will most likely remain the category’s core market, new consumers are expected to continue its growth. “Energy drinks’ variety of products, flavors and refreshment characteristics, encourage use beyond the core consumer group.”
According to Experian Marketing Services, America’s energy drink consumption hasn’t changed significantly over the past six years—remaining about four-and-a-half drinks/glasses over a month’s time. This suggests that sales increases can be attributed to more consumers entering the category.
Maybe, that’s because there are so many brands to choose from, currently.
If there is a good testing ground for new and popular energy brands, it’s America’s college campuses, such as the University of Portland. There, the traditional-brand energy drinks do well, Bowman said.
“But the newest, hippest energy drinks do twice as well.”
In fact, new labels seem to be hitting the market faster than retailers can make room. Some of the labels that retailers might want to track in the near future—according to Bowman—include:
•Viso has varieties that include Vigor, Dynamo, Will, Razor, Star, Snap!, Ecstacy and Orchid.
• Runa, which is made with guayusa, a native Amazonian tree leaf brewed like tea for thousands of years by natives of the Ecuadorian Amazon.
• Guayki, made with yerba mate, from the naturally caffeinated leaves of the South American Rainforest holly tree.
• High Brew Coffee boasts the slogan: “Goes down smooth with lower acidity and a jolt of natural caffeine so you can make your own bold move.”
• Kombucha Wonder Drink is fermented, according to the company, “to create an effervescent elixir said to restore health, promote longevity and bestow mental clarity to all who drink it.”
• Bai 5, which is infused with coffee’s superfruit and available in Kenya Peach, Mango Kauai, Panama Peach and Tanzania Strawberry flavors. “Bai 5 is brand new for us, and it’s selling very well,” Bowman said. “Runa teas do very, very well, too.”
“The other thing that’s an energy drink that I think a lot of people aren’t thinking about are the cold-brewed coffees,” Bowman said. “Their shots are cold shots of espresso. The kids are drinking that like nobody’s business. High Brew is the brand name, and then Stump Town Coffee does a super-dense cold-brewed coffee, too.”
Most of her store’s energy drinks are regionally marketed or have local ties, which seems to engage
Millennial-age consumers. This is where a solid relationship with her distributor has come in handy, Bowman said.
“He’ll say, ‘Lets talk about this, let’s look at this.’ Then we sample those products with our 25 student employees, and if they like it then we know it’s going to do well,” Bowman said.
After obtaining cases of nontraditional brands, the c-store conducts samplings every term with willing students, she added. “After a sampling, if their beverages don’t stay going, then we don’t keep them.”
Bowman called Red Bull, which her store does not stock, the largest obstacle to selling energy drinks. “I don’t sell Red Bull because I’m a Monster store, but I think that’s the gold standard in the consumer mind. If they’re not going to a shot of energy, like 5-hour Energy, they’re looking at Red Bull.”
Still, Bowman suggested that while Monster and Red Bull remain the category’s leaders, c-store operators should look to alternative or regional brands to bolster category sales.
“I would definitely be looking at the ‘hippest, newest, now’ energy drinks because the young people who are into energy drinks are into hippest, newest, now,” Bowman said.