June 17, 2013 Leave a comment
Funny how just a few years ago, no one has ever heard of liquid flavor enhancers but now many people have heard about and possibly tried MiO. This is due in no small part to Kraft, which created the product segment and put a lot of marketing support behind their MiO to introduce and educate consumers on how to use this product. And as Dasani introduced their own liquid enhancer to capitalize on the market trend, Kraft innovated to stay ahead of its competition. These innovations include employing a dual brand strategy by launching Crystal Light Liquid, as well as extending MiO’s platform by branching out to energy and sports drinks. With recent news about Powerade coming out with a liquid enhancer, this segment appears to provide legitimate profitable returns for manufacturers. However, is the segment itself big enough for so many different branded offerings? Will this spur Pepsi to participate in some shape or form? Possibly with a Gatorade drop to maintain their market share in sports drinks?
Liquid enhancers have enormous growth potential and despite its infancy, have extended across sports drinks and energy drinks. This has certainly broadened its consumer appeal and increased the segment’s awareness and adoption rates. However, the segment still appears to be crowded with four branded players: MiO, Crystal Light, Dasani, and now Powerade. And it only looks that way because the segment itself is still small. For all the excitement around MiO, it is still only a $200-$300 million brand. Combined with Crystal Light, Dasani, Powerade, and even private-label offerings, the segment itself is not predicted to be over $500 million. But with more advertising support behind each of these beverage properties as well as higher levels of consumer adoption, the segment will grow to be large enough to house these four liquid enhancer brands. MiO will certainly be rewarded for being the first mover. Consider this the initial stage of energy shots, when 5-Hr Energy was the only one in the segment and it took some time to gain sales. As more companies introduced their own energy shots, the segment gained popularity and market size. Through all this, 5-Hr Energy became the de facto leader in energy shots and rebuffed Red Bull, Rockstar, and Monster. 5-Hr Energy capitalized on the news that other energy drink manufacturers brought to the segment and benefitted from being the most recognized name among the consideration set. So while it currently appears that liquid enhancers is congested, the potential size of the segment mirrors energy shots, and may even outpace it given less consumer backlash.
With great potential, comes great competition. We’ve seen Coca-Cola wait for Kraft to prove that this is a viable segment, and then furiously pursue them with their own offerings. Why has Pepsi not done anything yet? A Gatorade Drop would certainly gain lots of attention among athletes, not to mention give them another extension to complement their Gatorade Chew. Pepsi could also come out with a tea offering to start off in a segment where there are no current liquid enhancers (though there are rumors that AriZona is coming out with one soon.) Given that liquid enhancers can be sold warm and are so compact, they can be stocked on shelves and also at the cash register as consumers complete their purchases. Pepsi would be missing out on a large opportunity if their only presence were in coolers or displays – far away from the point of purchase. My guess is that they are likely in the works to launch their own enhancer soon, but only time will tell.
Liquid enhancers are here to stay and has proven to be rich opportunity for the participants. As the segment gets bigger, it will spell of a missed opportunity for Pepsi if they remain on the sidelines.