Energy by the Numbers
Although 2009 was the second year in a row of unusual weakness in liquid refreshment beverages’ performance, the worst may be over, said Michael Bellas, chairman and CEO of Beverage Marketing Corp. “Beverages are likely to be one of the first categories to benefit with a job-led economic recovery because they represent an inexpensive form of pleasure.”
Ready-to-drink teas and energy drinks each saw sales expand in 2009, reflecting consumer demand for healthier and more functional beverages.
“A functional element alone was not enough to sustain growth in challenging circumstances, however, as the atypical decline in sports beverage volume demonstrates,” said Gary Hemphill, vice president of Beverage Marketing Corp.
Beyond that, energy drinks’ 0.2% growth in 2009 was much slower than it had been in recent years. “Carbonated soft drinks remained by far the largest liquid refreshment beverage category, but they continued to lose both volume and market share. Yet certain soda trademarks, such as Dr Pepper, did achieve growth.”
As the economy improves, so will the fortunes of the energy drink category. Energy is a huge consumer need and companies are working hard to broaden the category’s demographics. In its earlier days, energy drinks were primarily consumed by younger males but the core consumer has broadened.
“The energy category still is very viable, without a doubt,” said Terri Murray, general manager for retail for Gulf Oil’s Massachusetts Turnpike Operations. “Customers just love it and want it. Bear in mind that I’m located on a major highway, so everybody I get is long-distance driving, for the most part. They want that energy drink, and they want that boost.”
The “refreshment beverage” market in the U.S. contracted by 3.1% in 2009, based on data from New York City-based Beverage Marketing Corp., a leading research, consulting and financial services firm dedicated to the global beverage industry. This represented the second consecutive year of declining volume and a more intense decrease than the 2.1% dip registered in 2008, which had been the first down year on record.
“The weakened economy once again affected the market,” said Gary Hemphill, vice president of Beverage Marketing Corp. Even so, certain key beverage types and brands continued to advance even as most of the larger categories lost volume.
Though not themselves energy drinks, bottled waters continued to be a popular beverage of choice for active, health-conscious consumers, providing still more competition for the same dollars.
Marketing messages and media take on added importance among younger consumers, especially in a category with as much inherent charisma as this one. Retailers trying to grow the category would be wise to tie in to promotions and advertising any chance they get.
Watts Wacker, founder and CEO of FirstMatter LLC., a retail consulting group in Westport, Conn., said convenience store retailers need to recognize that energy drinks, much like coffee, are “the perfect elixir for the 21st-century” because of their energy kick. “Remember, that for college students it’s all about the beverage brand experience.”
Retailers and suppliers alike are targeting this demographic. For example, Rockstar Energy recently became the official energy drink of the Lucas Oil AMA Pro Motocross Championship, MX Sports Pro Racing and Alli Sports. Along with that came the introduction of the Rockstar Energy Fastest Lap competition.
Rockstar has also initiated a relationship with Fuel TV, the action sports lifestyle network for skateboarding, snowboarding, surfing, BMX, motocross and wakeboarding, seen in 30 million American homes and available in more than 50 countries.
“Anything that allows young people to collaborate is huge,” Wacker said. “The need for community is not a fad, and it is much more than a trend. The importance of community involves a systemic versus a cyclical kind of change. Always look for the systemic things; people are desperate to find people like themselves. That is what I call neo-tribing. Part of the success of this program will be the analog-to-new-to-social-media connection. You have got to include all of them into this now.”
Consumers seem to love that they can get the energy boost from shots without having to drink as much. “If you’re looking for a volume drink, you’re probably going to go w
ith a can,” said Murray. “But if you’re going into a meeting and you really feel exhausted, at that point you’ll pop the little energy shot bottle.”
Coney Elliot, vice president of marketing at Midland, Texas-based Kent Cos., said when you look at everything available in the category, the selection is almost overwhelming.
“We really don’t need additional brands, but we’re presented with something new in the energy category probably every two or three weeks,” Elliot said. “There are close to 100 brands with multiple flavors available out there.”
Several factors influence Elliott’s buying decisions, including market share and distribution. “We’re at a point where we can’t take on more than a small percentage of what’s presented to us, so marketing power and distribution are major considerations in addition to the drinks themselves,” he said. “Of course, we have Red Bull, and another brand called Redline, which is packaged in a bottle, and it’s doing extremely well.”
Red Bull is still the sales leader on the Massachusetts Turnpike, Murray reported, with Monster coming in second. “The category has been consistent over the past two years,” she said adding that 5-Hour Energy is the leader for shots, with Red Bull shots a solid No. 2.
“I still see the energy category being extremely strong,” said Murray. “I believe hot coffee will still be strong, and then we’re going to have to wait and see what will happen to the isotonics. My people tell me that SoBe Life Water has really picked up. Together with vitaminwater it has definitely impacted sales of isotonics for the last several years.”
Murray praised a concept offered by Hess Oil’s convenience stores called the Tower of Power, where they merchandise all of their energy drinks in one place. Murray herself uses something similar: a Red Bull fast-lane cooler separate from her cold vault to put those drinks on special display. Energy shots, as in the majority of convenience store chains, are merchandised right on the front counter.
While her assortment of isotonic drinks generates “heavy-duty activity” during the summer months, Murray nonetheless said it has been a “sinking” category over the last several years. “I’m not sure what is in store for them once the hot summer months begin, but I do know that vitaminwater has to have taken a big chunk out of their sales.”
Responding to price concerns, Elliott offers a value-priced energy drink called Rip It, produced by Shasta, which does extremely well, as well as another energy drink called Rush, which is ordered through its grocery distributor. “We are certainly seeing consumers trading down from the higher retail energy drinks to the less expensive 20-ounce soft drinks,” he said.