Energizing Product Sales

energyAn increasingly competitive market for “energy-boosting” products continues to propel energy shot sales. As such, overall growth of energy drinks and shots has been influenced positively by new product launches and expanded retail distribution.

By John Lofstock, Editor.

Convenience stores are increasingly becoming known as the place to purchase energy shots. The industry now accounts for nearly 60% of 5-hour Energy’s shot sales, and the brand has a 90% market share in the convenience category.

The quick in-and-out nature of the c-store transaction suits the character of energy shots.

As for the shots themselves, new flavors and packaging are helping stem the tide of slowing sales due to maturation. Also helping is the fact that more consumers are becoming interested in them. A recent Mintel study found that the fastest-growing segment of energy shot buyers are adults aged 55 and older, which could mean greater sales opportunities for retailers in general, and convenience stores in particular.

Indeed, Mintel recently identified several market factors that will impact the energy shot category over the next several years. Among them:• Safety is a factor in consumers’ minds. “About 59% of current energy drink or shot customers worry about the safety of energy drinks and energy shots,” Mintel reported.
• While unemployment rates for 2013 are decreasing, indicating a rise in disposable income, the young and multicultural consumers—key energy drink and/or shot buyers—still struggle with the highest rates of unemployment.
• Asian and Hispanic populations are slated to grow the fastest through 2018. “Growth could be good news for the energy beverage category because these consumers are more likely than whites to use energy drinks and/or energy shots,” the Mintel study found.

Like other product categories, demographics play a key role in marketing. “5-hour Energy came out at the right time, at the height of the energy drink craze,” said Matthew Paduano, vice president of category management for Nice N Easy Grocery Shoppes Inc. in Canastota, N.Y. “Unfortunately for those older than 35, Monster and Red Bull were targeted to a much younger age group. I was a former energy drink consumer until 5-hour came along.”

As part of the older age group, Paduano said, the energy drinks offered him too much. “I did not need to consume a beverage with all that sugar that energy drinks have. 5-hour was a great alternative boost without the sugar and quick rush and quick crash.”

5-hour has kept the brand fresh with its new flavors, such as pink lemonade, and the new camouflage package the company recently introduced. Plus, it has secured a great location in the convenience store. “Most chains realize the product needs to be merchandised at the counter since this is a great impulse sale and generates great margins for the retailer,” Paduano said.

Looking at 2014
Jon Regan, director of marketing for Alliance Energy, in Waltham, Mass., said that his category team has found that the energy shot sales have dipped slightly in 2013 when compared to last year.

“The energy drinks themselves are still a hot item,” Regan confirmed. “But they’re not as explosive as they were in the three years prior. The shots are seeing a little bit more of a decrease than the regular energy drinks themselves.”

The reason? “My guess, and this is strictly a marketing guess, is that it could be just an over saturation of the market.”

Alliance Energy is the largest Exxon Mobil brand wholesaler in the Northeast, with 125 company-owned and -operated convenience and gas stations in the New England area, from Maine through southern Connecticut.  The company acquired a lot of the properties that ExxonMobil sold in 2010. Its new convenience store concept is called Alltown.

To respond to the market forces, Alliance is taking what is basically a two-pronged approach. One focuses on category management and in-store merchandising. “Right now I don’t have the 2014 reset or store plans yet. Those are being conducted by the category team,” Regan explained. “But we have been staying pretty strong with the 5-hour Energy Shot. We have them placed close to the cash registers. That’s really the best place for the energy shots, because they are a true impulse buy.”

This is especially true in Alltown locations, many of which see strong traffic from tourists, primarily weary motorists. “A lot of the I-95 or parkway sites we have serve a lot of travelers going in and out of New England, from New York or Maine and the northern Massachusetts,” Regan said. “They always seem to be looking for a quick pick me up.”

Peter Kempton, Alliance’s director of merchandising, pointed out that product expansions and extensions, as well as new players in the field, have helped drive his company’s sales on energy drinks. “As 5-hour continues to pour mega advertising dollars into non-conventional purchasers like women and families, as well as new extensions, such as cherry, pink lemonade and camouflage with money to the troops, this brand and category remains fresh and impactful,” he said.

Marketing Maters
When it comes to the 2014 reset, Regan said his guess is that his category team will end up not deviating from its current strategy very much at all. Nor will product selection be expanded. “I know that we don’t typically have multiple varieties of energy shots.” The reason is purely logistical. “Here in the Northeast we don’t really have a lot of space. In Texas or Georgia or even Virginia you have much larger footprints. With us, most of our sites are 1,000 or 1,500 square feet, so we don’t have the luxury of merchandising multiple brands of energy shots.”

Instead, Regan and his colleagues are augmenting space with cyberspace. The company maintains what he characterized as a large digital marketing footprint. “We have pretty dynamic Facebook and Twitter pages. We have almost 5,000 combined followers with those two platforms. We try and support anything at the store level with that digital marketing piece,” he said.
The company also just launched a new mobile payment app that operates payment to gas pumps and applies loyalty points: customers save five cents per gallon and receive a $5 credit every time they spend $99 on gasoline.

“We’re going to start importing a lot of the products that we sell inside the app,” he explained. “We will send out push notifications and advertise specials on energy shots or drinks as the person is fueling up. We’ll also be able to send them some coupons in real time. It has a lot of potential and we’re really excited about it.”

Kempton urged c-store operators not to be tempted by the lure of discount brands promising the big sales.

“Energy shots are becoming more ubiquitous, with front-counter displays, power wings and even suction-cup racks on cold vault doors,” he said. “But you always need to focus on what your customers want, and that’s brands they trust.”

Going forward, Regan said he remains an advocate of lifestyle marketing, especially in product lines like energy shots. “I think what’s important is to find out where the consumer shops and what that person enjoys. I’ve always been an advocate of marketing to customers where they eat, drink, shop and play. If you’re a mobile phone user, I feel like in-app advertising is the best way to communicate with you. If you have a favorite app or two that you visit regularly, then that’s where I would start targeting you.”

Regan also remains a believer in direct mail marketing for products like energy shots. “Believe it or not it is still one of the greatest marketing tools left in the traditional marketing space. It is great for targeting local residents, and for complementing anything that has to do with any digital or mobile marketing, as well,” he said.


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