There can be fewer more thankless tasks in a convenience store than merchandising the energy drinks section. As fast as you perfect your display another SKU enters the market and you’re back to square one.
That’s the rise in volume sales of the UK sports and energy drinks from 2007 to 2012, according to Mintel
Red Bull head of category marketing Simon Hewitt agrees it’s a crowded category. “In the past five years we’ve seen the biggest increase in new entrants and significant competition. Across 2012 there were 81 new energy SKUs entering the market, taking the figure to 420 in total.”
No Fear sales and marketing director Glenn Hudson says he has a lot of sympathy for retailers trying to make sense of it all. “There are just so many products. If I were a retailer I think I’d be confused.”
Only in the past month well-known drinks brand Vimto entered the market with Extreme, aiming at a target audience of 18- to 24-year-olds attracted to a thrill-seeking, extreme sports lifestyle. The range consists of two products: Extreme Energy and Extreme Sport.
While brands such as Vimto bring quality to the category, there are fears that the value end of the market is in danger of taking money out. Says Hudson: “There are lots of one-man-bands starting up and putting product in, and a lot of it is very disappointing. Inevitably, there is a sense that some value has been taken out of the market.”
The problem, says Hewitt, is that the cheaper brands not only strip value from the marketplace, but they send out the wrong signals, stirring up negativity which continues to stain the sector. “It’s not good that the cheapest drink in the shop that children could potentially buy is an energy drink, and I’m not sure that’s where we really want to be as a category.”
“We sell the standard big-name brands such as Red Bull and Lucozade, but then we also sell some natural energy boosters that are less well known, and our customers seem to like that choice.
“We don’t tend to bother with the middle range. Our biggest seller is Red Bull definitely, and we sell the editions, too. There are so many new energy drinks on the market, but we tend to stick to our core range. The chiller is sited next to the food-to-go area and it’s a good spot for them.
“A broad range of customers buy energy drinks - not just young people, but anyone up to 40-plus. I think older people use it as an afternoon boost.”
James Brundle, Spar Walthamstow, London
Hudson agrees. “If you can walk into a convenience store and find energy drinks at pocket money prices this is obviously a bad thing. We’re all aware of the rigorous publicity that energy drinks attract, and this really doesn’t help,” he says.
However, he predicts that a lot of the very cheap SKUs will disappear. “The middle area is starting to consolidate a bit, and the bottom area will probably end up as two main players, and one of those will probably be an own brand. If you go back you could see all sorts of brands at very cheap prices, but after a period of time, unless a brand has got something to recommend it, people move on.”
All this activity has led to some phenomenal growth in the sports and energy market, with 64% growth in value sales between 2007-2012 and 8% year on year (source Mintel), and volume growth of 10.7%, with forecasts for the market to reach £2bn by 2017.
The driving force behind this growth is energy drinks, which account for more than 80% of sales and grew in both volume and value sales by almost 80% from 2007-2012.
But for the industry, and for retailers selling the products, the big question is can the sector sustain this phenomenal growth? Red Bull’s Hewitt thinks so. “Absolutely!” he says: “The category, at the top line level, has a household penetration of only 40%, so there is a lot of room for growth.”
He says that the impulse sector, in particular, will benefit. “Since the beginning of the year symbols and independents have been outperforming the total off premises market.”
To continue to grow, the market may find itself having to adapt to ensure longevity. The recent emphasis on refreshment and flavour from all the major brands is a clue that they are doing so already. The taste of energy products in particular has long been a traditional barrier for some consumers, with Mintel pointing to more than a quarter of consumers saying that they are put off from buying the products because of it.
The market has been addressing this with a variety of flavour launches. Red Bull introduced its Editions range last year which, says Hewitt, has been extremely successful. Britvic’s latest, Amp Energy powered by Mountain Dew, has been designed to incorporate the citrus taste of Mountain Dew, but with extra caffeine, B vitamins and taurine.
Rockstar has certainly embraced the flavour trend with NPD including SuperSours Bubbleburst and the recent Xdurance Tropical Orange. Earlier this year CCE brand Relentless brought its revamped range to the market, including new flavours and improved formulations such as apple and kiwi. Its Relentless Lemon Ice, for instance, gives no hint of its energy credentials and tastes pretty much like a standard lemonade.
Another barrier for a marketplace so firmly associated with youth is an ageing population. According to Mintel, while sports and energy brands have benefited from youth-focused marketing, growth lies in the positioning of these drinks as a lifestyle aid, appealing to a much wider demographic.
Mintel points to the fact that there will be a growth in the number of 25-34s in the market by 2017 and a rise in the number of over-55s. AG Barr head of marketing Adrian Troy says that he sees changes afoot already. “The market is not just a youth market we see expansion of the category into adult as well. For many consumers, energy drinks have replaced traditional coffee and tea consumption, particularly for people at work, or when they’re out and about during the working day. Brands, including Rockstar, are adapting to the changing demographics, although our core consumer is still 16-to-24.”
Reach for the stars
One thing that the energy drinks market leads in is its strong associations with sports and entertainment, and seemingly bottomless marketing budgets. Obviously, Red Bull’s trip into space with Felix Baumgartner is an extreme example, but its close links with thrill-seekers is echoed throughout the energy drinks world.
Newcomer Vimto has the licence to produce the sports and energy drinks under the pre-existing Extreme brand by the Extreme Sports Company, already an established brand with a global presence and a sports TV channel reaching 26.1 million consumers every month.
Monster, strongly linked with motorsport, has just launched an on-pack promotion offering customers the chance to win exclusive Monster Energy team gear which is usually reserved for pro riders and athletes. The clothing isn’t available in stores and up until now has only been available to brand athletes Ken Block, Valentino Rossi and Harry Main.
CCE’s other brand Relentless has strong musical links and recently doubled its year- on-year spend for TV and digital advertising, which includes an ad campaign featuring Professor Green, Pure Love and Zane Lowe, and sponsoring the Kerrang! Awards for the fifth year.
No Fear, which last year linked up with the phenomenally successful Batman film The Dark Knight Rises, is currently putting its money behind a sponsorship deal with Superman movie Man of Steel. No Fear sales and marketing director Glenn Hudson says: “If you want to sit in the middle ground you have to make yourself stand out from the others.” The partnership is being further cemented with an on-pack promotion giving fans the chance to win a trip to Florida to ‘fly like Superman’ with a zero gravity flight experience.
According to Hewitt, Red Bull already benefits from having both a core market of 16-to-29-year-olds and the 30+ drinkers who have grown up with the brand. He says that while youth will continue to dominate the market, the sports and energy drink sector will inevitably widen to incorporate other drinkers and usage occasions: “We know that Red Bull plays a big part of the working day and I think we need to keep an eye on the 30-39 age group of tomorrow as these are the youth of today.”
Hudson says that the continuing move towards refreshment and fruitiness will also help to change the demographic of drinkers. “The market has gone from 100% functional for an immediate boost to a requirement of refreshment and a fruity taste. We’ve definitely taken No Fear down that route with No Fear blueberry.”
He says that the brand will be bringing out further flavour NPD in the future.
Hudson says that this quest for refreshment on top of the functional aspect of the drinks helps to explain the demise of shots. “They just didn’t offer any refreshment,” he points out.
He predicts that flavour NPD will settle down at some point, which will lead to further emphasis on the quality of the liquid, with new mixes and formulations creating new usage occasions as part of that.
Focus on format
As the market changes and incorporates older drinkers, it could also see a drift away from single-serve, larger cans that dominate the youth market. Hudson says that older consumers are probably not going to be interested in drinking that much liquid at once. “When we launched No Fear we specifically made it resealable. I think as the age profile increases the formats may have to be looked at and we might see more bottles or resealable cans, or more 250ml sizes.”
CCE brand Relentless has recently moved into the 250ml format on its Origin variant, which is also available in a four-pack for take-home - another huge opportunity for the sector.
Hewitt says that take-home could be part of the answer to the real challenge for the industry, which is to make energy drinks relevant to everyday life. “Lots of people drink coffee on a daily basis and take vitamins, and no one says that’s too much energy. However, in energy drinks there is still a slight negative feel, which is why you’re seeing us have a focus on mainstream sports and working life. It’s not just about jumping out of the highest rocket, but it’s about helping you do great things throughout the day it’s about helping you achieve your goal.”
Troy says that the market has changed dramatically in the past five years. “We’ve seen the expansion of formats, flavours and price segments. However, the most important observation is that the market is defining a new ‘added value’ need for soft drinks among many consumers, that of an energy boost. This has enabled soft drinks to expand into more traditional tea and coffee occasions such as when working, studying or even to drink with lunch.”
With the sports and energy focus shifting slightly to everyday life, more manufacturers are talking about the opportunity afforded by the 3pm energy flag and afternoon usage occasion. This is particularly highlighted in the growth in the protein category, which not only focuses on protein milk drinks as an alternative to isotonics, but also as an everyday lifestyle aid and afternoon pick-me-up.
GSK was one of the first to embrace this trend, when earlier this year it announced that it was expanding its Maximuscle brand with the launch of Maxiprotein milk, specifically aimed at new consumer groups, such as men who didn’t traditionally drink fitness foods.
Arla Foods is also targeting men with its chocolate dairy drink containing 5g of protein per 100g. The manufacturer says that the launch comes on the back of research pointing to a group of men who are not being served by the existing dairy drinks category. These ‘balancing blokes’ are men in their 30s and 40s who are looking to beat hunger without resorting to the usual packet of crisps and a chocolate bar. Hudson says that the interest in protein could see a blurring of the lines between energy/sports and protein drinks. “It’s not too far of a stretch to see one of the energy drinks going into protein,” he says.
Protein: building up a following
Protein as the new isotonic? Well, that’s what some in the industry think, which might explain the plethora of protein drinks beginning to appear on the market.
Nurishment marketing manager Nyri Chambers says that isotonic drinks may end up the casualty of this trend. “There’s a lot of focus on isotonics sports recovery, but here you have these protein milk drinks coming onto the market. I think the isotonic drinks might suffer - there’s not enough space for everything.”
The brand has recently introduced Nurishment Active, an enriched milk drink especially formulated to help the body recover after exercise. The drink contains 35g of protein per pack, as well as a blend of 22 vitamins and minerals to aid post-exercise recovery.
Chambers says: “There is a growing interest in the use of milk as a rehydration solution as it’s a natural provider of water, sugar and electrolytes.”
She adds that this focus on lifestyle and the way that protein fits into it is one that the Nurishment brand has been focusing on for years. She explains: “I think Nurishment as a brand has always been a lifestyle product. It wasn’t really aligned to sports, but people did drink it as that.”
She says she finds the current segmentation taking place in the market for protein drinks interesting. “The market has evolved and you can now get a protein drink for breakfast, lunch and so on, and I think the multiple usage is only going to grow.”
Many manufacturers agree that a major hurdle to addressing the afternoon opportunity is getting consumers to become used to buying the category as part of their lunchtime shopping mission. For many shoppers, the sports and energy category doesn’t figure in lunchtime food-to-go purchasing, not being traditionally associated with food. Earlier this year GSK repositioned its Lucozade Revive brand away from sports and energy category into the enhanced and flavoured waters category with highlighted vitamin (4x energy releasing B vitamins) and reduced calorie claims on pack in a bid to pick up extra customers.
It recommends that retailers merchandise the brand within the new section. The accompanying marketing campaign had the magic 3pm hour at the core of its message.
A further barrier to consumption is the amount of sugar that consumers perceive to be in the drinks. Health is still a major driver within the soft drinks market and the rise of healthier variants may also help to engage drinkers with the one in four launches in 2012 boasting a lack of artificial preservatives, additives or reduced calories (source: Mintel).
Other research points to 46% of the 16-24 year age group spending less on energy drinks due to sugar content vs 40% of total soft drinks consumers (source: Pepsico/Britvic), which might explain why the sugar-free category is growing by 24% year on year (source: Nielsen).
Earlier this year Britvic launched a sugar-free version of its Mountain Dew brand, signalling the first sugar-free PET format drink in the UK energy category. GSK also reduced the sugar content of its Lucozade Energy by 9% in response to the trend.
Of course, not everybody who drinks sports drinks is doing so at their desk, and new launches and formulations continue to address the needs of those that take part in sport as well as watch it. Earlier this year GSK launched Lucozade Sport Champions Choice in partnership with the Vodafone McLaren team, with a formula that blends glucose and electrolytes for improved physical performance, with added caffeine for improved mental performance. The launch was supported by a £1m marketing campaign fronted by Jenson Button. The company’s message for 2013 is educating consumers about the scientific benefits of sports drinks during exercise.
CCE brand Powerade is taking inspiration as its marketing message this year. Says operational marketing director Caroline Cater: “This is quite a change to how we position the brand. We will look to build on our core audience of ‘born sportsmen’, but also take our message to a wider audience with the positioning ‘You are more powerful than you think.”
So with barriers being addressed and NPD flooding the market, how do c-store retailers cater to the new markets and usage occasions? Don’t be afraid to include them alongside more traditional lunchtime drinks is the advice, and consider offering them as part of a meal deal or secondary siting them in the food-to-go area.
Hudson says that getting the mix right is half the battle. He says that it’s a given that some consumers will drink Red Bull and nothing else, and it’s important to have it onshelf. In the middle ground, where No Fear sits, he says pick one or two and merchandise them well.
“The good thing about this market is there are lots of brightly coloured, well designed cans which look fantastic when merchandised in a well stocked, well maintained chiller. They have strong visual impact, and if you keep the fixture well stocked you can see a phenomenal uplift in sales.”
Ones to watch
Be in it to win it
Monster is repeating its promotion supporting its wholesale and retail customers this year. The Win a Year’s Supply promotion offers 100 prizes of a 12-month supply of the brand. To enter, retailers have to purchase six cases of Monster during the promotional period.
tel: 08457 227 222
Amp it up
New from Britvic, Amp Energy powered by Mountain Dew is available in a 500ml can format with an rrp of £1.39 and a 99p pricemark to kick-off its introduction. The drink has the citrus taste of Mountain Dew with added caffeine, B vitamins and taurine. Digital activity supports the launch.
tel: 0845 758 781
To the Extreme
Vimto has entered the energy market with Extreme, aimed at the 18- to 34-year-old market. The brand already has a TV channel and the name is synonymous with extreme sports globally. There are two products in the range: Extreme Energy and Extreme Sport.
tel: 01925 220122
Value energy drink Emerge embarked on its biggest ever marketing campaign last month. The drink has partnered with Warner Bros’ Pacific Rim, out this summer, and will be investing in TV sponsorship with Channel 4’s 4Music Network. The brand also has a new tagline ‘Sorts You Right Out’.
tel: 01509 674915
Rockstar Xdurance has added a new flavour to its range with Tropical Orange. Orange is the biggest flavour in sports and energy after original, so maker AG Barr hopes that this will fuel sales. The 500ml cans are available in pricemarked and non-pricemarked packs.
tel: 01204 664295