Shot in the Arm
Small bottles of energy shots continue to reap big sales.
Don’t let size fool you. At a mere 2 ounces, they may be a mere fraction of their larger uncles. But stored in a small bottle, liquid energy shots are delivering an uncanny surprise. In 2010, energy shots generated more than $770 million in the convenience-store channel, with an increase of 31.2% in per-store sales, according to the NACS State of the Industry Report of 2010 Data.
And like energy drinks at the start of the 21st century, shots are exploiting favorable brand recognition.
“What we’re seeing in energy shots is that a signifi cant brand starts the trend and then a lot of followers move in,” says Garima Goel Lal, beverage analyst for worldwide market intelligence company. Mintel Group Ltd. And with its logo bursting in the image of a rising sun, that leading brand is 5-hour Energy. “5-hour Energy has already established itself as a brand leader. They have testimonials on their website, which has helped the brand in category trust,” Goel Lal says.
Brand testimonials show consumers want high productivity, and the numbers prove it. 5-hour Energy had 87.1% share of c-store energy-shot dollar sales in the 52 weeks ending Dec. 26, 2010, according to SymphonyIRI Group, pushing back competitors such as Monster and 6 Hour Power, which are enjoying success in the convenience channel.
Expect those numbers to climb as these producers expand their programs. 5-hour, for instance, is expanding its multipacks, rolling out new merchandising racks. “[That] will allow retailers to merchandise our new four-packs without taking much space,” says Elaine Lutz, spokeswoman for Living Essentials’ 5-hour Energy, based in Farmington Hills, Mich.
Recent years have shown energy shots’ ubiquity in the convenience channel, winding up in multiple points in the store, from cold-vault attachments to the coffee bar and their No. 1 real estate, the coveted checkout counter.
Yet it would be shortsighted to dismiss energy shots as only an impulse item. “They’re being consumed for their functional attribute, and that’s why they’re so popular,” Goel Lal says.
Karen Finocchio, marketing vice presi- dent for NVE Pharmaceuticals, Andover, N.J., maker of Stacker 2 6 Hour Power energy shots, sees the product’s benefits for an on-the-go workforce. “People are working such long hours now,” Finocchio says. “I think we really burn a candle from both ends in the states. We have to stay awake, to stay on task. Energy shots really do help.”
And when consumers hit the dreaded midafternoon slump, energy shots are easy to reach for. “People appreciate the fact that they’re so portable and convenient. They’re a viable solution for when you’re traveling,” Finocchio says. “I keep mine in my purse.”
‘What-How’ and Where
Understanding consumer motives is key to managing the category. Matt McCourt, director of convenience/spirits for SymphonyIRI Group, Chicago, argues consumers tend to look for energy shots in the same areas where other pick-me-ups are displayed in the store. Thus, he strongly recommends some bundling or leveraging that area as a cohesive opportunity.
“Where do people go in the store when looking for a ‘boost’? They grab coffee, soda, alternative alcohol beverages,” McCourt says. “Looking at adjacencies in the transaction data would give the retailer a clear look into what’s being purchased.” Lutz of 5-hour Energy agrees, pointing out that beyond the checkout, operators have found success coalescing energy shots around the cooler and coffee station. “For retailers with larger stores, we offer a variety of stand-alone displays and shippers,” Lutz says.
For McCourt, deciding which energy-shot brands to carry comes down to two core questions: the “what-how” and the “where.” “The ‘what-how’ is which brands [retailers] carry and how many, tied back to their consumer strategy and corporate initiatives,” he says. “The ‘where’ is their merchandising strategy for the product. Is it by the register, or do you add it to the coffee/ dispensed beverage areas?”
To choose from the growing number of brands, McCourt says retailers should consider what consumers are willing to pay, combined with their attitudes toward brands based on the perceived value of energy shots.
Partnering with other manufacturers for bundle promotions is one way retailers can expand beyond displaying energy shots at the checkout line. Paul Marquardt, director of marketing for Phoenix–based 21st Century Brands, owner of E6 6-hr Energy Shot, has used free offers to drive in-store sales. Examples range from pumptoppers promoting a free energy shot with a gallon of gas to partnering with Nestlé Waters.
By giving out a free energy shot with a gas purchase or a bottle of water, consumers can sample the product. “From where I sit, I will support any marketing program that promotes our products and helps our retail partners drive in-store sales,” Marquardt says. A strong merchandising strategy creates opportunities to reach the consumers who are turning to energy shots now more than ever.
And in an effort to keep those consumers coming back, brands have been paying attention, too. 5-hour Energy, 6 Hour Power, Monster and private labels offer a range of fl avors to cover up the aftertaste of caffeine. “Consumers over the last 10 to 20 years have developed a very fickle palate, so the need for different fl avors is a must,” McCourt says.
The next few years could bring unique flavor combinations, beyond the current favorites of grape, peach and citrus. “It could be banana-chocolate swirl to vanilla latte,” McCourt says. “It’s really what the manufacturers are seeing from their research about consumer trends and attitudes.”
Outside flavor, energy shots contain roughly as much caffeine as a cup of coffee and boast zero sugar and zero calories. Goel Lal points out that the demographic for shots is more diverse than energy drinks, which typically appeal to young adults. “5-hour is actively going after older adults, and [this demographic] is also looking for the functional energy boost more,” she says. As incremental growth occurs for other brands, the focus may continue to shift more to working professionals than young consumers.
“Basic category management principles will lead you to conclusions,” McCourt says. “The one area to think about today is the ‘consumer needs and wants’ proposition. Remember what your break points are around shelf-space management. A retailer should include other channels as a point of reference when factoring in these decisions.”
Manufacturers and brands promise changing fl avors and price points, and a growing number of consumers now rely on the practical benefi ts of energy shots. “Although we sell to all classes of trade, convenience stores continue to be our largest,” Lutz says. “We attribute this to the quality and effi cacy of the product, effective advertising and front-counter merchandising in c-stores.” What seems clear is that this little beverage will continue to deliver big profi ts for years to come.