OAK BROOK, Ill. -- There's been no stopping energy-drink volume growth since the category was established in the mid-1990s, but it's first real challenge by congressmen and potentially the U.S Food & Drug Administration (FDA)could put the category to the test in the next year or two.
The FDA confirmed in November that it is reviewing the safety of energy drinks containing caffeine and other ingredients that act as stimulants and may require regulatory action if evidence of a health risk is found.
The agency said that because energy drinks are new products that have raised safety concerns, they warrant investigation: "New products and patterns of use require us to remain vigilant, and we are working to strengthen our understanding of the nature of energy drinks and any causal risks to health."
Possible regulation could vary from an age limit to caps on the amount of caffeine allowed in a drink--as enacted in Canada in January--to an all-out ban of the products.
Consider it a warning, but until some action is taken, the category continues to deliver on the promise it has established over the past almost 20 years, growing more than 17% during the past two years. This comes after comparatively lackluster performance during the recession--including flat volume sales in 2008--but a healthy distance from the 27% growth seen in 2006.
Continued double-digit growth is anticipated in the next two years, as well.
"According to [product research firm] Mintel, we can anticipate 14% growth in total energy-drink sales in 2012 and 13% growth in 2013 and 2014," Guy Wootton, director of category insights for Red Bull North America, Santa Monica, Calif., told CSP Daily News.
The main drivers of this growth, according to Wootton, include:
- Energy drinks heavily over-index in two core emerging demographic sections: Hispanic consumers and Millennials, resulting in increased category penetration.
- Busier lifestyles are fueling consumers' need for an energy boost; 96% of the U.S. population claim to purchase a "pick-me-up product."
- Innovative products from the top three brands--Red Bull, Monster and Rockstar--continue to generate buzz and excitement among consumers and provide new reasons to enter the category.
Wootton said an increased focus on category management will mean additional growth for the category in c-stores. "Investment in these programs will inevitably drive growth as the category becomes more efficient and expands its in-store presence," he said.
Red Bull is doing its part in adding new products this year with the March rollout of its first three flavored line extensions.
Mixing it Up
Coca-Cola Refreshments is also making moves in the energy category with a hybrid new product that brings thirst relief to its NOS energy brand.
"NOS Active Energy is a hybrid between a sports drink and an energy drink," said Mel Landis, chief customer officer at Coca-Cola Refreshments, Atlanta. "We think this fits well into that space for consumers in an active, healthy lifestyle, the hydration space."
Rockstar has a hybrid extension of its own. Rockstar Energy Water is a noncarbonated, caffeinated vitamin- and herb-enhanced water beverage. Las Vegas-based Rockstar is urging retailers to merchandise the drink, which comes in tropical fruit, orange tangerine and blueberry pomegranate acai, in the enhanced-water section of the cold vault rather than with energy drinks.
It's part of a frequent refrain from manufacturers in the category to give it more space wherever possible.
"C-stores can continue to drive these trends by planning the right amount of shelf space for the anticipated future growth for the category," said Wootton. "By 2014, the category will be 30% bigger, and c-stores need to plan their shelf space to accommodate that. Additionally, secondary placement of cold product is critical for driving impulse purchase of energy drinks"
To read CSP's complete 2013 Beverage Report, see "Related Content" below.
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