Red Bull Aims to Grow Category With New “Editions”

Red Bull has held out for a long time, but has finally decided to launch new energy drink flavors to complement their original, sugar-free, and calorie-free flavors.  News from the National Association of Convenience Stores Show broke out that Red Bull will be bringing the three flavors that they had previously launched in Europe into North America.  The folks over at BevNet.com got a chance to taste the Red Bull Editions – Blueberry, Cranberry, and Lime flavors – and have posted their thoughts here.  These new flavors are expected to fully launch in March 2013, but will be available in limited edition capacity in November/December at 7-Eleven.

While this may seem like a genius move for Red Bull to launch new flavors, does anyone wonder why it took so long?  After all, Monster Energy and Rockstar Energy have launched so many new flavors, and have done so for over a few years.  The jury is still out on Red Bull’s most recent innovation was the Red Bull Total Zero – a line extension (see post here).  And both of their prior innovations are already discontinued (see post here).  Despite leveraging the “energy” association, their entry into energy shots was not a success.  All this really points to is that Red Bull has a bad track record when it comes to extending itself beyond their core offering and comfort zone – energy drinks.

This flavor launch fits the profile of introducing new products in an arena of familiarity.  These Red Bull Editions have existed in Austria and Germany for over a year, so there is a history of success and some sales figures to analyze before launching in North America.  Red Bull is sticking with its bread and butter with this launch.  Even the flavors that they picked – Blueberry, Cranberry, and Lime – are common and safe to make this a sure-win.

That said, what can Red Bull expect from the North America energy category with this launch?  Like the Red Bull Total Zero, the Editions will be shelved with the rest of the Red Bull family in the cooler.  And there is limited cooler space despite an unlimited assortment of energy drinks to choose from – for the consumer as well as the retailer buyer.  Unlike other energy drink manufacturers , Red Bull has the benefit of secure shelf space.  Most coolers will have at least two full shelves of Red Bull for three energy drink flavors so they have the ability to reduce facings for their own products to make room for these new flavors.  Of course, the more plausible selling story would be to remove competitive offerings to make room.  Simply choose the slowest mover in the category and replace it with the new products.  The Editions also stand a greater chance of adding dollars to the category dollars.  The European market sales figures hinted that more than half of the purchases were additional items, versus substitution items.

Consumers like trying new products, but they still want to do it within a comfort zone.  These Editions should do well given the strong  Red Bull brand name.  And beyond these three new flavors, there may be other Red Bull flavors that will come out soon enough.

POM Wonderful In the Headlines For Good & Bad Reasons

Pomegranate juice manufacturer POM Wonderful has frequently been in the headlines these past few weeks, and not all are positive headlines.  Earlier this month the juice company extended their product line to include a smaller single serving bottle: the 236ml (8oz) bottle (one of many new articles link here).  Just last week they were involved in headlines for supposedly losing a Federal Trade Commission (FTC) ruling on deceptive advertising; it’s really about perspective as POM Wonderful believes they have won a considerable measure from the ruling (link here).  What does the FTC ruling mean for POM Wonderful now?  Will consumers still see the same advertising health claims from?  And is the 8oz bottle extension good for business, given that size proliferation eventually leads to product rationalization?

On the issue of the FTC ruling, POM Wonderful’s first reaction was to roll out some advertisements celebrating the judge’s ruling.  While they can no longer claim to prevent heart disease or prostate cancer without scientific research, the ruling agreed that there are indeed significant health benefits.  Beyond the first wave of advertising response, POM Wonderful may likely ramp up their health claims to test the limitations of the FTC ruling.  However, there will be a paragraph about how there was scientific research conducted to prove the particular health claim. The real question then becomes whether it will affect how other beverage products are advertised in the media (ie energy drinks with their claims of alertness, or energy shots claiming no crash, etc).

Relating to the introduction of the 8oz bottle, this line extension should fit well with the rest of the line-up.  One might argue for cannibalization, but the 8oz is going after a different consumer segment and a different consumption occasion.  Unlike soft drinks which has sizes like 8oz, 10oz, 12oz, 14oz, etc, the next largest size from the 8oz bottle is twice as large (16oz).  There stands to be more cannibalization between the 16oz and the 24oz bottle than the 8oz and 16oz formats.  Also, POM Wonderful appears to be targeting the health-conscious parent that wants their kids to think and drink healthy.  The 8oz bottle is perfect for kids, where parents can pack the beverage into lunchboxes or even be sold in school vending machines.   Even at such a small serving size, the bottles are resealable so the actual consumer (children) can use the bottle throughout the day.  In terms of grocery location, the 8oz bottle may not lead to product rationalization just yet; it may not even appear in the same location as the other POM products.  At such a small size, the 8oz bottle may appear in impulse coolers or ice barrels near the checkout where thirsty shoppers may want something tasty, small, and inexpensive to quench their immediate thirst.  The added benefit is then that POM Wonderful now has a secondary location to attract the shopper’s purchases.

In all likelihood, the 8oz bottle should sell well individually and not hurt the sales of other products in line-up.  Given that it is a single serve bottle that is targeted at youth, the natural line extension beyond the single bottle would be a multi-pack like 6x8oz bottles or 12x8oz bottles.  We’ll have to wait and see when that time comes, and what type of advertising health claims the communication shows.

V8 Launches Energy Shots

In the increasingly popular energy shots category, V8 has launched their own energy shots.  Using green tea extract as their natural caffeine ingredient, this 2.5oz (74ml) energy shot also includes nine fruits and vegetables such as blackberries, raspberries, apples, and tomatoes.  While the green tea extract serves as the energy component, the nine fruits and vegetables provide the user with antioxidants and vitamins.  The V8 energy shot are currently in a pilot rollout, as its only available in certain American markets, including Minneapolis, Jacksonville, and Colorado Springs.  The retail price for the energy shot is $2.99, and will be found in convenience stores, drug stores and grocery supermarkets.

My main questions for V8′s energy shot would be: in light of Red Bull recently discontinuing their energy shots, does V8 stand a chance in this category?  What makes them different from other energy shot products on the market?

Both questions can be answered by V8′s positioning.  The very thing that differentiates V8 different from their competitors is also what might give them a fighting chance in this category.  Not only is V8 a brand that the public trusts and recognizes, the ingredients themselves also source from healthy and easily recognizable ingredients.  Other energy shots still use healthy ingredients (such as taurine, tyrosine, and guarana), but their naming may easily confuse the shopper.  If you had a choice to pick up a product that contained green tea extract compared to tyrosine, which one would you pick?  Or one that contains strawberries and raspberries compared to guarana and phenylalanine?  The easily recognizable names are common natural ingredients that a shopper sees on store shelves anyway.  As such, it makes it less curious as to what the product is made of.  And from the V8 energy shot nutritional information (link here), they do a good job of providing a common name for the vitamins aside from the chemical name – again helping the shopper make the connection of what’s actually inside the bottle.  All in all, this will help differentiate themselves for other manufacturers.  A trusted name with easily recognizable ingredients certainly helps in this aspect.

In terms of their execution strategy,  V8 may have paid some attention to Red Bull’s energy shot and made the conscious decision to launch regionally.  Red Bull’s energy shot was a national launch in Canada after their introduction in the United States, and their product just wasn’t moving leading to their decision to re-focus solely on their core offering.  By introducing the product in specific regions and channels first, this may help the energy shot in gaining traction (and increase demand) from other regions if it is successful.  And if it is not gaining momentum, the regional rollout will minimize market impact on their losses.  The implication for Canadian consumers is that if this product is only in pilot rollout down south, it is likely to take some more time before it will appear in Canada.

It appears that V8′s marketing strategy to introduce their energy shot is well thought out.  On the sales side, a $2.99 market price point and available in the convenience, drug and grocery supermarkets also help.  All that remains is to see (and taste) the product.  Will it have competitive shelf space at the cash register?  Will the taste itself be too strong or too sweet?  For curious readers in the Minneapolis, Jacksonville, and Colorado Springs area, please try this product and leave me a comment on your thoughts!

Red Bull to Discontinue Cola and Energy Shots

Choosing to focus on their core offering – the canned energy drink  - Red Bull has decided to sell through the remaining inventory on their Red Bull Cola and Red Bull Energy Shots, and cease further production.

This may come as a surprise to certain some people, but predictable among other.  Red Bull Cola being discontinued seemed only a matter of time, as it never really gained distribution like their energy drink and faced tough competition from Coca-Cola and Pepsi and their broad array of cola offerings.  In grocery stores where it could be found, it was never placed in a position where attracted much attention from aisle shoppers and never really got a chance to succeed.  Adding to their demise was the opening price point, priced on average 50 cents higher than a 12oz (355ml) can of Coke or Pepsi.  While Red Bull products are generally higher priced based on its premium brand status, consumers were not receptive to Red Bull Cola as being a premium cola (or both Coca-Cola and Pepsi loyalists were simply that – loyal to their current cola offerings).  Red Bull Cola entered several markets to much fanfare especially in Europe and the United States, only to be discontinued starting in May 2011 in the United Kingdom.

The Red Bull Energy Shots being discontinued is more of a surprise.  Despite their late entry into the energy shots segment, Red Bull was a well-known manufacturer and thus many experts predicted that there would be carry over success from their canned energy drinks.  However, consumers may have already gotten used to look exclusively for 5-Hour Energy.  Though well-known as a energy drink brand, the competition was more fierce for Red Bull Energy Shots as many entrants were already in the category, and the shelf space for energy shots were extremely limited.  Not to mention the premium price point (50 cents higher than 5-Hour Energy and other competitors) served as a stronger deterrent given the absolute price points range anywhere from $2.49 – $3.49.

In choosing to focus on their core product – the canned energy drink – Red Bull may remain successful and possibly more profitable.  Though two revenue streams will soon be closed off, the disappearing costs to promote and maintain those two streams may provide them with more money to keep on the core product.  Their cooler door presence will just be as strong, as their unique size (8.4oz, 250ml) eliminate many competitive products from being placed side-by-side with them.

Since Red Bull will stop making energy shots, what will other manufacturers do?  The only success story in this market is really Living Essential’s 5-Hour Energy, as most products are even struggling to sell through before the expiration dates.  My guess is that in the next year, we will see more energy shots being taken off shelves, as grocery stores realize that the market is peaked.  The shelf space for these products, generally at the cashier will be available for faster moving products such as mints or gum.

Energy Shot’s New Target Audience: Baby Boomers

The Wall Street Journal reported that baby boomers are now the target for energy shots like 5-hr Energy (link here).  At first look it sounds like a bad idea, targeting seniors and baby boomers with energy shots since there is so much negative connotations with energy drinks for the general public, and now it is targeting seniors which may be more susceptible to the health concerns of energy shots.  Yet the American Association of Retired Persons (AARP) has allowed for 5-hr Energy to advertise their product in the AARP bulletins and hand out samples at their events.  In short, 5-hr Energy and other energy shots are supported in the AARP’s marketing position toward seniors.

Should seniors really be positioned as a market for energy shots?  And now that their parents or even grandparents are drinking energy shots, how will this affect the product’s reach toward their core demographics?

As much as this may seem like a shocker, this appears to be a good marketing ploy for Living Essentials (the makers of 5-hr Energy) to position toward seniors.  The category may have peaked, but it is still gaining sales at a decreasing rate compared to the previous year.  With the variety of energy shots that need to be delisted to make space other products, there always seems to be an unexplored market that finds energy shots intriguing.  And advertising the product as a sort of dietary supplement toward seniors hits the sweet spot.  Since everyone is healthier and living  a more fragmented lifestyle nowadays, why deny baby boomers their entitlement as long as they have the energy to do so?  If a boomer needs an extra kick to golf 18 holes and choose to consume something other than coffee, why not 5-hr Energy?  The AARP’s research concluded that there are no specific harmful effects of the beverage, and has thus allowed 5-hr Energy to promote the product as their events.  And positioning to boomers helps the product gain distribution to other areas where they would not traditionally be found, like shelving the product with wrinkle cream and nutrition shakes.

As for the second question of whether the product would lose popularity among the core audience (young adults), I believe 5-hr Energy would be safe.  While the product is essentially identical, the reason behind the usage varies slightly.  The communication message is different for each audience, and the product is found is different places as well.  For seniors, the product is marketed as a dietary supplement, and would likely be foundin drug stores or grocery supermarkets near medicine or coffee powder.  For young adults, the product is positioned as a caffeinated energy boost and found in the beverage aisle as well as near the cash registers.  The product should ultimately be ubiquitous with consumers both young and old without much concern for it being your grandparents’ choice of product.  After all, if grandparents ate asparagus and drank tomato soup, would young adults not eat asparagus or drink tomato soup?  Doubt it.

Good for Living Essentials to notice this trend and stimulate sales growth for their product.  For a category that seems to have peaked and matured after its initial climb to popularity, 5-hr Energy has provided it with a second life.  The next question then becomes which energy drink competitors (ie. Red Bull, Monster, Rockstar, etc) will try to carry over and gain the shelf space along with 5-hr Energy to target the seniors.

Energy Drinks Are a Health Risk

BevWire’s newsfeeds pulled an article (link here) from The Globe and Mail titled “Energy drinks pose serious health risk to kids: Canadian medical journal” reporting that these beverages contain a much higher caffeine level than the suggested portion for kids.  Kids.  Not teenagers. The article says that the suggested caffeine level for kids aged 12 or under is 85mg but energy shots and energy drinks contain more than that amount.  What can be done about this situation?  Why are kids buying these drinks in the first place?  Should these beverages contain a warning label similar to alcohol and tobacco?

Kids should not be consuming energy shots or energy drinks in the first place, so it is a curious situation as to how they get hold of these drinks.  If older siblings have left these drinks open on the table or in the fridge, then there needs to be some more communication to warn against their younger siblings.  It might come down to a parenting issue but that’s a totally different topic that is out of this blog’s context.

My focus is on what should be done about energy drinks.  Should there be a warning label placed on the packaging to warn of the health affects similar to alcohol and tobacco?   BevWire believes that will help but it is only part of the solution to prevent kids from buying these beverages.  Putting a warning label may deter some consumers, but it acts more as a communication awareness piece instead (link here).  That said, has anyone stopped buying tobacco just because there is a warning label on it?  In fact, it has had the opposite effect in getting people to quit smoking (link here); they are aware of the negative consequences but still continue to do it anyway.  The other half of the equation may be to treat it age-restrictive purchase item.  Health Canada should not only start putting warning labels on, but also impose a minimum age to buy the product.  This will at the very least limit younger kids from actively being able to buy the drink themselves (save for bypassing this law illegally).

Will this effective stop kids from being exposed to energy drinks?  Of course not.  There are always ways around the system to get what you want.  However, it does increase the government’s involvement in educating consumers about the health affects with warning labels and age limits.  With the right communication dedicated to bringing consumers’ attention to this issue and parenting (mentioned briefly earlier), the health risk energy drinks pose to kids will be decreased.