Though they come in small bottles, liquid energy shots continue to deliver a big sales punch on convenience store counters.
By Howard Riell, Associate Editor
Despite widely publicized health concerns about some of the ingredients in energy drinks, Bob Falkenberg founder of Alpharetta, Ga.-based BeveragePulse.com research firm, said he expects sales to continue to increase another 10% “give or take” this year.
Chicago-based Mintel forecasted that energy drink sales, which reached $7.3 billion in 2012, will grow to $11.9 billion by 2016.
The energy drinks category has been around for about 10-15 years, making the earliest adopters around 30 now, said Falkenberg. While the new cohorts of young consumers are still the major source of growth, the challenge for manufacturers is to get these early adopters to continue to choose energy drinks over coffee when they need an energy boost.
Energy beverages in general continue to be the solution of choice to consumers’ need state. The two- and three-ounce energy shot sub-segment has quickly become a dynamic beverage category, offering consumers the same functional benefits of regular-sized energy drinks, but in a more portable, convenient, down-the-hatch format.
John Strickland, Jr., president of Wayne Oil, described the energy shot category in three words: hot, growing and profitable. But, he added, “I’m sitting here wondering when in the world it’s going to get regulated and start losing sales volume, or if the price is going to start increasing.”
Wayne Oil operates 14 Ballpark Stores in North Carolina and distributes Exxon, BP and Chevron fuels to company-operated and dealer locations.
Indeed, the same federal and state governments that seem to want to regulate or squeeze revenue out of everything in sight is already looking hungrily at the energy shot category. “At the very least I think we’re going to find that it has become an age-sensitive category,” Strickland predicted, “meaning it will become like tobacco and alcohol, where we can’t sell it to someone under a certain age.”
Momentum Continues
Still, the numbers continue to be strong. Between 2008 and 2012, the energy shots category took off like a rocket, experiencing 168% growth over that period, said a recent report from Rockville, Md.-based Packaged Facts research company.
Of the 246 million units sold during that period, 206 million of them were from category-owner Living Essentials’ 5-hour Energy, Falkenberg said. This is not to say that consumers are getting tired of energy shots.
Energy shots are a $1.3 billion business, according to Jamil Satchu, a partner with Symphony Consulting, part of the SymphonyIRI Group market research company.
At Tedeschi Food Shops, pink lemonade 5-hour Energy had the fastest take-off of any of the flavors, aside from the rollout of the original, said Michael Turco, category manager for the Rockland, Mass.-based chain. But, said Falkenberg, line extensions are not likely to broaden the category appeal over the long-haul. In fact, too many flavors can easily lead to cannibalization in the category.
So while some regulators may be looking at energy drinks and shots, it really isn’t hurting sales. “All the negative publicity on energy has largely washed over and has had little effect,” said Tom Pirko, president of BEVMARK LLC, a retail consulting firm in Buellton, Calif. “The caffeine segment is wide awake.”
Why is that? According to Pirko, Monster and Red Bull have entered the consumers’ consciousness as what he terms omnipresent brands. “They are just like the mega-soft drink brands, in your face at c-stores. They are securely part of the beverage universe of choice.”
Marketing Matters
Sales of energy shots have risen by about 15% over the last year or so in his stores, Strickland said. “It’s growing, and it’s growing rapidly.”
That growth is being fueled by both Wayne Oil’s marketing and merchandising efforts and by societal trends.
“Obviously, we’re marketing it pretty well, (and) vendors are really putting some efforts behind marketing the product,” he said. “I’ve seen 5-hour Energy shots on TV advertisements now, and that’s something you didn’t see a few years ago.”
Strickland also noted how interesting he finds the positioning and tone of those ads. “The company is running TV ads aimed at businessmen and women looking for a boost to get through the day,” he said. “Those are wide open demographics that will ensure the brand continues growing for years to come.”
Lower-priced energy shots, Strickland added, have also failed to slow 5-hour’s momentum. “There are a lot of good products out there, but it’s hard to beat Red Bull on energy drinks and 5-hour Energy shots in terms of brand recognition and sales volume,” Strickland said.
Like other c-store operators, Ballpark Stores plants the energy shots squarely in front of customers at the checkout counter. It also offers two-fer deals: buy two and save about a dollar.
Unfortunately, Strickland said, energy shots, at least until now, have not lent themselves to cross promotions. “It’s hard and we have tried with a host of items, but many of them have failed to sustain long-term success.”
Kera Smith, merchandising specialist for Emmaus, Pa.-based Top Star Express convenience stores noted that the increase in energy shot sales in her stores has been slight (“not nearly as drastic as we had seen in past years”). But, she noted, the introduction of new flavors and four packs has helped to keep sales high.
Top Star Express runs approximately 2-3 promotions a year on energy shots and/or energy shot four packs, said Smith. “These promotions are effective for us because they entice new customers to try the product for a discounted retail.”
