Energy drink producers are banking on convenience store customers’ growing interest in better-for-you beverage products to energize sales.
By David Bennett, Senior Editor
Against a towering LED backdrop at The NACS Show this past October in Atlanta, singer CeeLo Green had showed up to greet onlookers at the +RED Elixir exhibit. In an opposite corner, Michael Ball, founder and CEO of the fledging beverage company, explained that +RED Elixir-brand beverages differ greatly from the general energy drinks sold at convenience stores.
The product, introduced this summer, is a functional drink, naturally caffeinated by green coffee bean extract and not weighed down by excessive sugar, he explained.
Ball is probably onto something. Today’s health-centric market has consumers on the search for better-for-you versions to their favorite products, and energy drinks and shots are no exception.
TESTING THE MARKET
It’s not surprising that the demand for performance drinks made with natural, healthy ingredients are on the rise, said James van der Valk, owner of Fast Lane Motor Fuels, based in Simi Valley, Calif.
The c-store owner had heard about +RED Elixir early on, testing the beverage at one of his four stores. The overwhelming response from patrons prompted Fast Lane to try the new functional beverage at the rest of its locations. The response, overall, was positive.
“That’s when I noticed people were looking for something different,” van der Valk said.
U.S consumers in the last few years have been drifting away from the high-caffeine, high-sugar formulas. The energy drink market continues to hold its own in light of declining soda sales, despite the fact that energy drinks have come under fire over consumer health concerns.
In a survey of 2,000 internet users aged 18 and older conducted by the Mintel Group this past summer, approximately a quarter of respondents said they would be more comfortable drinking energy drinks/shots made with all-natural ingredients and view natural versions as safer than regular ones.
This supports the growth of natural category offerings, but may challenge leading companies of regular energy drinks and shots by adding to the number of products in the space and appealing to top consumer trends, the Mintel report stated.
According to U.S. convenience store sales data from Chicago-based market research firm IRI, energy drink dollar sales for the 52-week period ending Oct. 2, 2016 rose 4.87% to slightly more than $9 billion, compared to the same period last year.
Changing some consumers’ perception that energy drinks aren’t as healthy as they could be is difficult, but not impossible, said Alex Beckett, global food and drink analyst for the Mintel Group.
“Competitively, it’s extraordinarily tough in energy drinks that claim to be better-for-you, so knowing which brand to stock is likely to be tough for c-store owners,” Beckett said. “Healthy energy is a trend that is well suited for on-the-go occasions though, so it should prove lucrative for the c-store channel.”
PROTEIN SHAKE-UP
Another energy beverage option resonating more with consumers on the go is protein-enriched energy drinks. Virginia Lee, senior beverages analyst at Euromonitor International, said one enticement could be that protein acts as a meal replacement for consumers on the go, which also applies to the convenience store patrons—especially Millennials.
“We are seeing the convergence of caffeine/energy plus protein,” Lee said. “Busy U.S. consumers are looking for energy-plus. They want the functional benefits of an energy drink, RTD (ready-to-drink) coffee, or energy shot but they also increasingly want the benefit of protein.”
One popular product line that typifies this growing thirst for protein in a can is Muscle Monster Energy Shake, which is designed to be a convenient two-in-one product for consumers who like both protein shakes and energy drinks.
“Muscle Monster Energy Shake contains 25 grams of protein and proprietary Monster Energy blend per 15-ounce can,” Lee said, referring to the instant dose of protein that consumers pick up with the Monster line.
Monster’s line extensions in coffee (Monster Java), tea (Monster Rehab) and protein (Muscle Monster) account for a sizable stake of the company’s sales.
“Protein-enhanced energy drinks tick the box for those active people who want an energy hit during a workout or recovery,” Beckett said. “The concept is a modern take on energy drinks, serving a 21st century consumer that is always demanding more from products.”
CONSUMER BASE
The current energy trends at the Army & Air Force Exchange Service (AAFES) show that energy drinks that are diet and or sugar-free are among the top sellers year to date. Monster Energy’s Ultra Sub-Brand is up 2.1%, and Red Bull’s Sugar-Free energy drinks are up 7.6% in dollar sales at AAFES, through September 2016.
Millennial-age Solders and Airmen are significant customers of the energy beverage segment at AAFES.
“Studies show that Millennials are the fastest growing market for energy, and extra protein ranks high on the list of influencers when purchasing more energy drinks,” said Dragana Ilic, non-alcoholic beverages buyer for the AAFES. “We have noticed trends that consumers who drink protein-based energy drinks are looking for extra protein. The current trend for energy shakes with protein is moving towards a drink with higher protein content.”
Trends show that chocolate and vanilla are still the most requested flavors among military members. AAFES has 700 stores on U.S. military bases throughout the U.S. and abroad, which include Exchange Express convenience stores.
As major brands such as Red Bull, Monster and Rock Star, which boasts more almost 20 different flavors, continue to adapt to meet changing consumer tastes, demand is expected to remain high.
“We believe overall, energy drinks are likely to have solid growth in the coming years because the category delivers on a very large consumer need-state, which is energy,” said Gary Hemphill, managing director of research for Beverage Marketing Corp. “The challenge for the category is to broaden its demographics beyond its core of youthful males.”
If companies do expand demographic reach, it will eventually lead to additional c-store sales.