As summer gets underway, energy drink producers, as well as convenience stores, hope consumers will embrace new energy selections.
By Anne Baye Ericksen, Contributing Editor
The Beverage Buzz Memorial Day Retailer Survey by Wells Fargo Securities reported recently that beverage sales notched upward 5.5%, which is a slight improvement over the 4.9% recorded during last year’s three-day holiday weekend. What’s even more encouraging is that retailers observed strong foot traffic.
According to the survey, retailers, especially c-stores, expect foot traffic this summer to grow by as much as 6.7%. That, along with low fuel prices and increased miles driven on roads and highways during the summer, has many in the industry looking forward to the next few months.
“Like most, if not all retailers, we really put a lot of expectation and strategy into a huge summer campaign,” said Damian Wyatt, senior beverage category manager for MAPCO Express Inc. “Liquid refreshment is a key to the success of our summer. We place a large emphasis on three things: in-stock, cold and variety.”
The Brentwood, Tenn.-based MAPCO operates 349 stores in seven states.
These also are encouraging indicators for the category of energy drinks and energy shots. Since their introduction, energy drinks and energy shots recorded impressive growth percentages so far this year.
More recent figures from Wells Fargo revealed energy drink sales in all retail channels grew by less than 2% for the four weeks leading up to May 21. Red Bull saw dollar sales drop by nearly 5%, which basically was balanced out by Monster Energy’s 4.2% dollar sales gain. Rockstar, however, bolstered the category, registering a 10% spike in dollar sales.
Still, c-stores remain a predominant retailer of choice for energy drink customers. In fact, Wells Fargo research indicated the category in the second quarter of this year will produce an 8% year-to-year increase in c-store dollar sales.
“Energy drinks continue to be very strong in convenience stores where they meet the needs of the core young male demographic,” said Roger Dilworth, senior editor of the Beverage Marketing Corp.
That seemingly affects both energy drinks and shots at some c-stores.
“We have seen healthy growth in both energy drinks and energy shots in dollar sales and unit movement. From a growth percentage standpoint from 2015 to 2016, they are almost identical,” Wyatt said. “This said, the energy drink category far surpasses the energy shot category in overall unit and dollar volume.”
In years past, Wyatt regularly expanded the category’s cooler real estate to add more SKUs; however, he’s assumed a different approach this year.
“This year seems like we have reached a good place in our overall energy space. We didn’t increase the space all that much. Instead, we increased the variety within existing brands while introducing a few new brands,” he explained.
“As a segment within beverages, energy drinks do get most of the cooler space as they account for 40% of overall beverage sales,” added Dragana Illic, non-alcoholic beverages buyer for the Army & Air Force Exchange Service (AAFES). The organization operates 700 stores on U.S. military bases throughout the world, including Exchange Express convenience stores.
“May sales for energy drinks were up 2.8% versus May 2015. Energy shots sales are up 3.8% over the last 52 weeks, [but] flat over the last 12 weeks,” Illic added.
CONTINUED INNOVATION
Monster Mutant has been touted as a “super soda” and is positioned to be a gateway into the carbonated soft drink (CSD) category and compete with brands such as Mountain Dew Kickstart. It will also allow Monster to capitalize on the distribution infrastructure available via the partnership it forged with Coca-Cola Co., last year. Mutant will come in red and green flavors and will retail at $1.99 for a 20-ounce bottle. Its release is slated for some time in the third quarter, initially through convenience stores and eventually adding take-home channels.
“Monster’s CSD product can generate $150 million of retail sales in the first year of its launch,” said Bonnie Herzog, senior analyst for Wells Fargo Securities. “However, we note that this estimate could prove conservative.”
Hydro, Monster’s other new offering, is being called a noncarbonated, lightly-sweetened energy hydration drink. It’ll come in four flavors and be priced between $2.69 and $2.89 for a 500-milliliter plastic can.
“Based on our analysis, we believe Monster’s new product innovation (including a yet-to-be-announced platform) could conservatively drive over $1 billion in incremental gross retail sales, or $525 million in net sales and 37-cents in earnings per share by fiscal year 2018,” Herzog said.
Other beverage producers have focused on broadening flavor profiles, such as Red Bull’s Edition line. Illic added the Red Bull Summer Edition in Kiwi Twist to AAFES coolers this season.
“In the energy shot category, 5-hour Energy launched a peach mango flavor last fall and it is receiving a favorable response,” she said. “New flavors have been received well by Exchange customers, further driving the overall category sales.”
AMP Energy by PepsiCo also has added new flavors to its mix, including Wild Berry Cherry and Mandarin Orange in its newly-introduced Boosted line. Other flavors include Blueberry White Grape, Passion Fruit and Watermelon.
“Rockstar seems to be emphasizing unique flavors recently with SuperSours, Revolt and Ginger Brew,” said Dilworth.
ENERGY RELEASED
Companies also have begun experimenting with various formulations, such as adding dairy and protein elements.
“5-hour is coming out with a protein shot soon, which we will be testing. From every indication, this will be popular with the healthy-minded consumers,” said Wyatt. “In regards to dairy energy drinks, the cold coffee energy category continues to impress. We are seeing it as one of the fastest-growing segments in the cold vault and have added a tremendous amount of variety to choose from in both can and bottle.”
Plus, there are various artisan energy drinks catering to customers’ desire to choose better-for-you products. For example, some feature plant-based ingredients and others are sweetened with honey.
“We have added a few organic energy items and the verdict is still out on those as they haven’t started to really move the needle one way or another,” Wyatt said. “Though just a small share of the overall energy category, sugar-free continues to hold its rightful place in the cold vault. We are seeing more and more consumers seeing this as a better-for-you energy [drink]. The sugar-free trend continues to rise in both purchases and availability to the consumer.”
Although sales of energy drinks and energy shots aren’t as rigorous as they once were, most c-store owners and operators as well as industry analysts believe the category will maintain a dominant presence in the retail channel throughout summer and beyond as long as producers continue to cater to customers’ evolving tastes.
“The strong competition in the segment ensures that more experimentation seems to be the norm, whether in flavors or in hybridizing into other segments,” said Dilworth.