Consumer spending remains sluggish, but energy drinks still pack a punch.
During a time when most food shoppers have scaled back on spending, the category's price stability and the availability of multipacks has helped drive double-digit growth. Overall category sales grew 11.2% to $654 million in supermarkets during the 52 weeks ending Sept. 7, according to Information Resources Inc.
Dahl's Food Markets, Des Moines, Iowa, is capitalizing on the trend.
“We've realized that a lot of people who buy energy drinks aren't just drinking them, they're downing them one after another after another, so multipacks really make sense,” Ross Nixon, executive vice president and chief operating officer of Dahl's, told SN.
Several years ago, the chain stocked mostly individual servings ranging in size from 6-ounce “bullet” cans to oversized 16-ounce containers. A few years after those hit stores, manufacturers started making four-packs. Today, store managers are making room for 12-packs.
“College-age kids are a big demographic,” said Nixon. “They're buying a ton of energy drinks to stay awake while studying, and if they are of drinking age, they buy them to mix with alcohol.”
John Clevenger, managing director of Meridian Consulting Group, Wilton, Conn., expects multipacks to capture an even greater share of the market in the coming years. “These will be good for supermarkets, because c-stores are their biggest competition in the category, and they move a lot of single servings,” he said. Supermarkets have room to merchandise these drinks in bulk, whereas convenience stores don't.
Dahl's dedicates most of its shelf space to major brands like Red Bull and Monster. Nixon believes that these beverages are following the same path that wine coolers took years ago.
“When wine coolers were first introduced, there were tons of brands, but only a few survived,” he said. “After everything shakes out, there will probably only be a few energy drinks left, too, so we're focusing on the tried-and-true brands now.”
The biggest sellers at Dahl's are also faring well at retail outlets nationwide. Dollar sales of single-serve Red Bull increased 9.7% to $253.8 million in the food channel during the 52 weeks ending Sept. 7, according to IRI. During the same time period, sales of single-serve Monster products were also up. Monster Energy, Monster Energy XXL and Monster Khaos Energy rose 16.3% to $105.8 million, 39.8% to $13.1 million and 4.9% to $5.5 million, respectively.
Energy drink sales have remained steady at Fresh Encounter, Findlay, Ohio, according to Eric Andersen, co-president for the chain. As with Dahl's, Red Bull and Monster are king there. The chain also carries a handful of other brands like Amp, Full Throttle, Sobe and Rockstar.
“Energy drinks are like coffee to teens,” said Andersen. “They drink them whenever they need a boost.”
According to Andersen, this is one category that practically sells itself, so Fresh Encounter rarely promotes it.
Two- to 3-ounce energy shots are increasingly popular. Nixon has been pitched everything from 5-Hour Energy and Mini Thin Rush to Nitro2Go and ZipFizz. He does not allow them in any of Dahl's stores for one reason: pilferage. “Their small size makes them a prime target for shoplifters,” he said.
Clevenger sees their size as an advantage. He suggests that retailers put them at the checkout to inspire spontaneous purchases.
With energy drink sales up annually since the category's inception, everyone wants a piece of the pie. Meijer has gone so far as to create its own private-label energy drink. Although it's tight-lipped about the highly anticipated beverage, Frank Giglielmi, spokesman for the chain, confirmed its creation.
“Meijer will be launching an energy drink soon,” he said. “There are already hundreds of Meijer products in stores. Customers like those, so we're confident that they'll go for a Meijer energy drink too.”
Fresh Encounter won't be following suit. Unlike Meijer, the retailer doesn't move enough volume to warrant the investment, Andersen said.
Gary Hemphill, managing director, Beverage Marketing Corp., New York, agrees that high-volume retailers with well-developed private-label programs are more likely to be successful with their own private-label energy drinks.
“Consumers love energy drinks, but they are pretty expensive,” he said. “Private-label energy drinks that still deliver the same function at a lower price should be a hit.”
Jim Hertel, managing partner, Willard Bishop Consulting, Barrington, Ill., expects the process of private-label development to move quite slowly. Because the category has yet to level off, it will be a while before anyone knows for sure what kind of sticking power it truly has, he said. “Retailers may wait to see whether some of the alternatively formulated products succeed before they decide to launch in the category.”
Most shoppers want more energy. However, not everyone is comfortable consuming full-calorie, additive-infused drinks. Fortunately, there are diet versions of most.
Rockstar, for instance, has a diet drink with 10 calories per 8-ounce serving. Original Rockstar has 140 calories per serving.
Meijer stocks Diet Rockstar next to full-calorie Rockstar, Red Bull, Sobe and other traditional energy drinks. The retailer also carries a wide array of organic energy liquids, protein waters and energy shakes near the pharmacy. A recent store visit in western Michigan revealed 16-ounce single-serve bottles of USDA Certified Organic Guayaki Pure Empower Mint, made with yerba mate. Organic Guayaki-brand Traditional Mate is also sold there in bottles bearing the message “an energizing yerba mate beverage.”
“We put our healthier energy drinks by the vitamins and other supplements, because they tend to appeal to older consumers, who would not be drinking something like Red Bull,” said a store employee.
Indeed, healthier alternatives are often geared toward a different demographic; Ocean Spray's Cranergy targets moms seeking sustenance for their families.
“Everyone else went to the young bar-hopping males with slim cans and high-octane ingredients,” Ken Romanzi, chief operating officer of Ocean Spray, told SN. “Cranergy is geared toward the female heads of home, 40-plus. We know that once this drink is in the house, the whole family will love it.”
Staples such as milk have been the target of retailers' price reductions in recent weeks.
|CATEGORY||SALES*||% CHANGE VS. YEAR AGO||% SOLD ON PROMOTION**||% CHANGE VS. YEAR AGO|
Source: Information Resources Inc., a Chicago-based market research firm.
*Sales in food, drug and mass outlets (excluding Wal-Mart, club stores or gas/c-stores) for the four weeks ending Sept. 7.
**Display, feature or price reduction.