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.

Canadian Grocer Re-post: Stopping Beverage Category Erosion

Happy Labor Day everyone!  Normally I provide fresh content on a weekly basis but this week’s original content also appeared on my Canadian Grocer blog from not too long ago.  Not completely fresh content, but there are some relevant points to consumers, not just retailers.  So this week’s post is a re-post of what I wrote up for the publication: Stopping Beverage Category Erosion.

___________________________________________________________________________

Soft Drinks like Coca-Cola and Pepsi have long been featured on the front pages of flyers at deep discounts to drive traffic in-store and shopping trips.  These deep discounts have benefitted the retailers as consumers reward retailers with their grocery dollars in addition to buying the featured soft drinks.  However, other retailers see the increased foot traffic and participate with deep discounts themselves.  This has led to category erosion as profits are stripped away, ultimately conditioning shoppers to only look for the lowest prices.

As a result, both manufacturers and retailers looking to protect category margins have conceded margins on other segments, such as water and energy drinks.  Have you noticed that the pricing on these products have gotten more aggressive and feature activity has increased?  What are the next steps for manufacturers, and how do they resolve these category eroding issues?

Manufacturers have adapted to this new reality by charging identical prices on smaller packages, and creating supersized packages to charge higher price points.  Examples of smaller packaging include the 600ml bottles becoming the 591ml bottles for soft drinks & bottled water, and the non-carbonated beverages coming in 341ml aluminum cans rather than the traditional 355ml aluminum can.  Upsizing examples include the larger 473ml cans from Red Bull and the 710ml cans from Monster Energy and Rockstar Energy.  Smaller package sizes are slightly modified to look similar to the current packaging and may not be noticeable by the shopper.  And the fewer liquid in the container allows the manufacturer to save on each unit’s product costs, effectively taking a price increase.  The larger sizes are an attempt to trade up the buyer, and may also be at a price point that makes the original feature look less attractive.

While manufacturers have gotten creative to curb the deep discounting, retailers have persisted to promote the category on price alone.  What are some alternatives for the retailer to avoid this deep discounting?  For one, use better analytics to understand whether these deep discounts are actually driving new business.  Ensure that the retailer is not subsidizing purchases that would have occurred regardless of the feature.  Also investigate whether the features are happening too frequently and try to match the features with the customer’s purchase cycle.  Understand the discount levels to see if a slightly lower discount will yield the same results – would a 30% discount yield the same results as a 40% discount?

Keeping the customer in mind should be the top priority for retailers, but protecting the category profitability is also a key responsibility.  Only with stronger profitability will the category be able to survive and bring innovative products to store shelves.

vitaminwater zero Quietly Arrives in Canada

Has anyone noticed the subtle changes to the low-calorie vitaminwater lineup in Canada?  There used to be three vitaminwater10 variants available: go-go, resilient-c, and recoup.  Now they have quietly replaced the go-go and resilient-c 10 calorie offerings with zero calorie offerings.  The recoup (peach mandarin) doesn’t appear to be on the market anymore, in favor of a zero calorie version of XXX, renamed as XOXOXO (acai-blueberry-pomegranate).  It appears that the United States’ transition in December 2010 has finally made its way north of the border this past April.  As it stands right now, there are 9 regular calorie flavors of vitaminwater, along with the three new low-calorie offerings.

One has to wonder why glaceau did not simply launch the zero-calorie offerings from day one, rather than wait a year to eliminate the 10 calories inside the bottle.  How did the 10 calories get eliminated after a few months’ launch into Canada?  Was it fear that Canadians would not adapt to the zero calories right away and needed to be transitioned away from calorie-filled beverages?  Was there a delay in getting approvals on the ingredients, particularly the sweetener?  In any case, the complete Canadian vitaminwater line-up still stands at 12 flavors.

Having 12 flavors makes it challenging to manage the product portfolio.  The benefit of this vitaminwater zero transition is that it will not impact the overall shelf spacing – only the existing area that vitaminwater product occupies.  However, 12 flavors for any product is quite significant, and getting a retailer to list all 12 at the same time will certainly be difficult.  Take for example Red Bull, which has found success with only three variations (Red Bull, Sugar Free Red Bull, and Red Bull Total Zero).  Or Coca-Cola, which also has three offerings (Coke, Diet Coke, Coke Zero).  Both these brands have fewer flavors and have been very successful.  Monster Energy and Rockstar Energy are also successful as a result of their broad portfolio of products – but not all products get listed in the retailer.  The most successful brands have fewer variations and can command more shelf space.  They also tend to be leaders in their respective categories.  vitaminwater seems to be buck that trend.

Is vitaminwater a leader in the enhanced or flavored waters category?  Sales data would almost guarantee it as such.  Why would they need so many flavors, when traditionally four or five flavors will be enough?  The answer is portfolio shelf space relative to sales.  If the vitaminwater portfolio commands 40% of the category sales, they should be allocated 40% shelf space.  After all, the argument is that the cooler space should reflect market conditions for the consumer.  This is why in the summer there are less shelf space allocated to juices, but more to water and sports drinks.  Having a broader portfolios always gives you more opportunities to create shelf space and in turn sales.  Just look at how Gatorade has been able to gain more shelf space following its prime/perform/recover extensions.  So while the majority of sales may come from the most popular flavors, the less popular flavors also have a significant role to play in creating and extending shelf space for the vitaminwater total portfolio.  Imagine that the sale for one vitaminwater flavor was marginal relative to the total portfolio, but had two shelf facings.  That flavor still remains on shelf to “hold space” for other better performing flavors, and allow the retailer to reduce that flavor to one facing while increasing facings for another better performing flavor.

Optimizing the shelf space ultimately falls onto the beverage category manager’s responsibility.  As long as vitaminwater’s broad portfolio keeps making sales, it makes difficult for other enhanced waters like Aquafina Plus to gain shelf space.  Once you secure the shelf space, it’s up to you to structure and space out your products to protect your shelf space.

 

 

 

Energy Drink Wars – Coke Learns a Lesson That Pepsi Has Not Learned

In light of recent news about Coca-Cola’s interest to buy Monster Energy and then later refuting their interest (link here), the energy drink category has continued to cause headlines in the beverage industry.  However, most of the noise is generated from the leaders like Red Bull, 5-Hr Energy, Monster, Rockstar, and Xyience.  Amp Energy is Pepsi’s own energy brand, while Full Throttle Energy is Coca-Cola’s home grown energy brand.  Both have languished in the category as the two refreshment manufacturers focused on other beverage categories (carbonated soft drinks, sports drinks, and coconut water to name a few).   Given Coca-Cola and Pepsi’s distribution contracts with Monster and Rockstar Energy respectively, and their focus on growing other beverage categories, will Amp and Full Throttle Energy survive?

BevReview.com has a great piece on what Amp has been up to recently (link here).  Pepsi’s own energy drink product has gone through packaging redesigns, name changes, and a re-focus on functionality.  What remains constant is the brand’s partnership with NASCAR racing.  Amp has re-positioned itself and it’s product offerings, but has not simplified its offerings – there are still seven flavors.  Given it’s varied product portfolio, Pepsi will be hard pressed to find a retailer agreeing to take in all seven flavors of its energy drink, unless Pepsi provides the retailer great profit margins.  Retailers have product buyers that determine what products are brought into the outlet, and are mandated to grow the retailer’s beverage portfolio with products that provide strong sales and high profits.  Having a product that isn’t within the top 5 selling energy drink brands, with seven flavors, poses a challenge at getting listed.  It will be tough to convince the retailer to give Amp a chance unless there are less flavors to choose from or very high margins to compensate for their lower sales velocity.  Ultimately, the buyer may tell Pepsi to pick and choose two flavors to get listed – and Pepsi would be better off having a less complicated Amp portfolio.

What about Full Throttle Energy?  BevWire previously detailed that Full Throttle was also undergoing packaging redesigns (link here).  Since that time, advertising and marketing support for Coca-Cola’s in-house energy product has diminished even more.  A quick look at their website drinkfullthrottle.com reveals a splash page with two links at the bottom, and a general link to the NHRA (National Hot Rod Association).  Visiting various Canadian grocery stores reveal that there is only one remaining flavor that is stocked regularly and that is the original Full Throttle Citrus flavor.  Gone are the Berry and Agave flavors.  Despite the change in artwork, it appears that there still has not been any support behind Full Throttle Energy; Coca-Cola instead focused on growing Nos Energy.  In this case, it would appear that Nos Energy will be replacing Full Throttle in no time.  Both Nos and Full Throttle have auto racing sponsorships like Amp, but having your brands occupy the same space and also compete against products in the exact same space is redundant.

If there was a lesson to be learned here on supporting your beverage brands, it appears as if Coca-Cola has learned that lesson.  Full Throttle has gradually reduced their flavors voluntarily and focused on the core product: Full Throttle Citrus.  Even in that regard, it certainly appears that Coca-Cola will be phasing out Full Throttle completely and gradually replace it with Nos Energy.  Nos Energy was previously only available in 650ml (22oz) cannisters but has expanded its 473ml (16oz) offerings in addition to expanding its flavors.  Pepsi does not appeared to have learned the same lesson as their main competitor.  Should Amp Energy remain competitive, Pepsi must support the beverage more than just re-skinning and renaming the products.

Red Bull Total Zero: Sticking With What Works

Red Bull is anticipated to launch Red Bull Total Zero this April in the U.S. – an energy drink formulated with no calories, carbohydrates, and sugar.  U.S. trademark and patent files indicate that the colors are silver and grey, with a yellow band across the top.  A pretty sleek looking can from my perspective.

The launch will come in the can size that Red Bull made popular (250ml) and likely retail for the same price as existing Red Bull products (Original and Sugar Free).  With only two products variations available and selling, Red Bull undoubtedly needed to innovate and come out with new products and re-gain their lost leadership position from Monster Energy.  Is Total Zero going to help them with that?  The latest innovation is a very safe line extension, capitalizing on existing energy drinkers that are concerned about calories and carbohydrates.  Red Bull is sticking to what they know best and using this to build upon their success.

Total Zero is a product that is very similar to what everyone has come to know and expect from Red Bull.  It is a product that many expect it to perform the same way as its other two beverages, but calorie-free and carbohydrate-free.  It will likely be shelved in the same cooler space as the 250ml Original and Sugar Free variety, making it less of a delineated extension (ie Red Bull Cola in the cola section, Red Bull Energy Shots at the cash register).  These factors give it a higher chance of success than their previous innovations.  However, the launch of Total Zero isn’t likely to gain a lot of additional shelf space in the cooler door, so the facings for Red Bull Original and Red Bull Sugar Free will have to be reduced.

While there may be some cannibalization with their existing products (expected), Red Bull is hoping to attract those drinkers that may have left for Monster, Rockstar, and Xyience because of the calorie-free option.  Since the growth of energy is slowly tapering off, the importance of converting a category shopper to a Red Bull shopper is even more important.  As long as they are buying your company’s products and not the competition’s, you at least keep their dollars within your organization.

Are there other product extensions or adjacencies that Red Bull can leverage?  Cola didn’t work and neither did energy shots.  There’s only so much space in the cooler’s energy door for Red Bull, so they will really need to look beyond that one section to drive growth.  Are there growth opportunities in the juice door, or the water area?  Or expand into confectionary offerings like Jolly Rancher and Jones Soda Co?

Total Zero’s launch makes the most sense for Red Bull because it’s a safe bet and should work very well with energy drinks, but Red Bull should also be thinking about where to go next beyond Total Zero.

How Big Can Recovery Beverages Grow?

Initially piggybacking off of energy drinks, beverage experts are now defining recovery drinks to merit their own category (BevNet article here).  BevWire also previously reported on Lush Recovery Drink (recently rebranded to Amara Recovery Beverage).  As recovery drinks are still in its infancy along the beverage product life cycle, how can this category grow?  Who are the major players and what is being done to bring news/attention to the category?

The more well-known major players are energy drink manufacturers that each have their own line of recovery beverages such as Monster Rehab and Rockstar Recovery.  However, as Monster and Rockstar are companies that have built their name associated with “energy”, Rehab and Recovery may find it hard to grow within the companie’s beverage portfolios.  Despite their organization’s international distribution network, marketing budgets are devoted to the energy drinks since there’s more competition and the larger energy drink brand’s awareness needs to be maintained.

Given these circumstances, there are high reward opportunities for lesser known manufacturers to drive awareness to their recovery drinks.  Amara builds awareness through event sampling where the consumer can firsthand understand and experience the functions of the recovery beverage.  Also interesting about Amara is that their rebranding effort also included coating their aluminum cans with flourescent material so the packaging will glow when it’s on the shelf and in coolers.  BevNet’s article describes GTOX as another recovery drink manufacturer that is driving awareness for their product with Dennis Rodman as a spokesperson.  Code Blue is another manufacturer that is trying to re-position itself as more than just a hangover recovery beverage by targetting exercise recovery and hydration.  Although not all these beverages have national distribution, each of them are driving news and awareness to this category.

The theory is that companies that bring awareness to the category bring awareness to the product, and consumers are likely to reward these companies with their business.  It happened with Coca-Cola and Pepsi with carbonated soft drinks, it also happened with Red Bull, Monster and Rockstar with energy drinks.  Consumers also rewarded vitaminwater with their business for growing the enhanced water category.  The market leader for each of these respective beverage categories are typically those that started off bringing attention to the category.

On the original question on how big can this emerging category get, one needs to look at the path of the coconut water category.  The major players that drove category awareness – O.N.E. Zico, and Vita Coco – either purchased or signed partnership agreements with PepsiCo, Coca-Cola Refreshments and Dr Pepper Snapple Group in the past two years.  The beverage conglomerates recognized the potential of coconut water and quickly brought on experts in the business.  Even AriZona has gotten into the game (link here).  That said, it is still not time to put a dollar figure on the category worth of recovery drinks, but it certainly draws parallelisms to coconut water. There are only a few main players for now, but all the potential lies with names that are not nationally known.

The next time you go into your grocery store or convenience store, look for where they stock the Monster Rehab and Rockstar Recovery, and keep an eye out for other recovery drinks.