Manufacturers continue to invent various healthier-for-you energy drink offerings for health-conscious consumers.
By Jeffrey Steele, Contributing Editor
During the last few years, convenience stores have provided a big boost to the energy drink category. Patrons finding their get-up-and-go flagging can quickly locate just the tonic to revive their drive and stamina, and be on their way.
During that same time, the category has seen robust competition as manufacturers vying for more market share have developed different flavor profiles to capture new consumers. Some examples are acai berry and kiwi apple.
Such innovations, said Susan Viamari, vice president of thought leadership for Chicago-based IRI, continue to show momentum in this category, [as] a result of consumers looking to keep things different and enjoyable. Manufacturers also continue to invent various healthier-for-you options. Some examples include drinks with low sugar, and added vitamins and minerals to appeal to health-conscious consumer segments, said Viamari.
Energy drink sales have remained relatively stable during the past year, Viamari added. Convenience store dollar sales in the 52 weeks ending Nov. 5, 2017 increased about 0.9% to more than $9 billion. Most of the growth is attributable to the non-aseptic shelf-stable (SS) drink sector, where sales rose nearly 1.7% to $8.3 billion, compared to the previous year. Comparably energy drink mix sales spiked 23% to $1.9 million during the same period.
Meantime, energy shots have witnessed a slowing of sales after several years of steady growth. Convenience store dollar sales in the 52 weeks ending Nov. 5, 2017 declined 7.4%, to nearly $721 million, compared to the previous year. Leading the way, 5-hour Energy Shots earned almost $666 million during that period.
“Convenience stores are well-positioned as a provider of energy shots,” Viamari said. “As an impulse and convenience-driven channel, it’s a great spot for a quick hit of energy on the go. C-store retailers need to capitalize on this by offering very convenient merchandising, next to the register for instance, for quick grab and go.”
The energy drink market is heavily focused on Millennial and younger Gen-X shoppers, Viamari added.
“Messaging needs to convey the needs and wants of those shoppers, tailored for unique needs and wants because these shoppers are more focused than others on being seen as individuals; local feel [in] flavors, product forms and packaging; natural flavors; additional functionality; and personal-emotional connection,” Viamari said.
At Saukville, Wis.-based Mad Max Convenience Stores, with 10 stores extending from Oshkosh down to Port Washington, energy drinks are flat to up 1-2% this year, said Steve Magestro, company president.
“Monster and Red Bull are still the heavy hitters in this category,” said Magestro. “We run a two-for program on all our energy drinks all year long internally. But it is always nice to have the brand promote with you, for better retails and profits.”
ROCKSTAR continues to build market share by conducting three-for-one promotions at or almost at the same retail as two-for promotions, he added. AMP, NOS and Full Throttle are losing ground, but Mountain Dew’s Kickstart is increasing in sales at Mad Max locations.
There are no new brands breaking ground at his stores, but Magestro is eyeing a new brand called Bang Energy to carry at all Mad Max locations, due to cost and retail. “We will bring it in shortly and see how it goes,” he said.
“If it does not do well, out it goes. If it does well, then we’ll make a home for it in our carbonated soft drinks (CSDs). I am also looking at what it would take to private label energy drinks.”
Energy drinks sell best in that space, because consumers want the drinks cold, Magestro said. Mad Max sells energy shots exclusively at the front counter. While the two-for-one campaigns are offered year round, Mad Max uses three-for-one promotions to promote the products of brands wishing to push sales for a month or quarter. Other marketing initiatives include the use of website promotions and point-of-purchase displays.
When deep discounting is undertaken at Mad Max, sales rise and margins fall. “Usually the deals help the customers but rarely help the stores make more profit,” Magestro said. “I do not think it brings in new customers, but it does help retain them.”
Energy drinks don’t play a major role in Mad Max’s overall day-to-day business, Magestro said. However, they do play a significant role in the CSD space. What growth energy drinks display appears to be coming at the expense of carbonated beverages, whose sales continue to ebb. “I am currently looking at different layouts for our CSD as new 2018 agreements will be coming up,” Magestro said.
Magestro expects more changes in the CSD space at the retail chain.
“I am thinking about not having any contracts with the soda companies this coming year so we can try whatever we want in our CSD space,” he said. “There are so many other liquids we could sell [in space] that these contracts make us take.”
Noting “energy drinks and shots are tremendous items that continue to grow,” Scott Zaremba said his three Zarco USA stores in Lawrence, Kan., where “Discover the Oasis” is the tagline, are responding accordingly.
“We’re continuing to add shelf space and secondary cooler space,” said Zaremba. “It doesn’t matter whether it’s in the cooler or not. It’s what specific promotions are coming up for these items. Customers are buying multiples of the products, not just singles.”
“If they’re a specific brand purchaser, they’re buying multiples of that brand. And I’m seeing multiple flavors being purchased. [For instance] they are not buying three grape energy drinks, they’re buying multiple flavors in that brand,” he added.
Red Bull and Monster are the big players in Zarco USA stores, Zaremba added. The company has had ROCKSTAR, Full Throttle and Kickstart for some time, but the newer names in the category are not able to unseat the favorites.
Promotions tend to center around two-for and three-for-one deals, he added. Which are chosen depends on what promotional support is forthcoming from manufacturers. Like others, Zaremba is not seeing the same sales volume in the shots as in the drinks.
“I can’t nail down who’s purchasing, but Millennials are in the particularly active group of buyers,” he added. “A lot of the purchasing is across the board. And it’s the males that are getting the larger product purchases.”