The Fall of Cheetah Power Surge

Has anyone heard of the Canadian energy drink Cheetah Power Surge?  This energy drink uses all natural ingredients and no caffeine.  It had success getting product availability into grocery & drug stores like No Frills, Shoppers Drug Mart, and Sobeys.  It also secured a TV spot during CBC Hockey Night in Canada.  TV commercials during this time reach penetrate many Canadian households but certainly don’t come cheap.  See their TV spot below:

However, on recent trips to the grocery store I noticed that the product was being heavily discounted.  Feature pricing have dropped as low as $0.25 a can (tweet and image here), and the discount  level indicates that the regular retail was $1.49.  With most energy drinks like Red Bull, Monster, and Rockstar being at $2.99, this would appear to be a great deal and tons of product should be sold.  Still, as evidenced by the unopened trays and the amount of cases seen in the picture, the $0.25 rock bottom pricing didn’t really help move product either.  What went wrong with Cheetah Power Surge, and where are they now?

The second question is easier to answer than the first.  Cheetah Power Surge energy drinks are still available at their listed locations (I went into a Shoppers Drug Mart earlier in the week to check), but my guess is those cans are from the original shipment.  And once it is gone it will not return to store shelves.

Cheetah Power Surge in No Frills for $0.50

In terms of what went wrong, a google search reveals some level of insight.  This review site mentions that the energy drink contains high sodium content and leaves a bad aftertaste.  This  review site states that they do not feel any extra energy after consumption.  It appears that consumers were willing to try the product but it never met their expectations.  Based on these unpopular product reviews, Cheetah Power Surge had to rely more on it’s marketing and advertising to sell product.  When lowering the standard pricing from $2.99 to $1.99 didn’t work, it kept on cutting the price to stimulate sales.  Retailers also noticed its slow velocity and took the initiative to cut the pricing themselves, which is why you see the $0.25/can pricing.  Pricing anything at such marginal levels lends to the belief that there is something wrong with the product.  Even if these is nothing wrong with it, it conditions purchasers to expect low pricing and will only purchase your product again in the future if it’s priced just as low.

Cheetah Power Surge seems to have done it all wrong.  When consumer reviews and users sentenced the energy drink as subpar, the company launched additional flavors rather than re-formulate the product.  Aside from the regular (High Octane), Blueberry and Diet flavors, they expanded to include Green Apple and Mango flavors.  They continued advertising on a premium cost through Hockey Night in Canada to generate trial users.  They continued signing distribution agreements to gain availability in Canadian grocers.  All this has accelerated their demise because consumers do not like to feel tricked.  Increased availability meant more consumers bought it once to try the product, but they never returned because of the reasons listed above and from the review sites.

Cheetah Power Surge tried to outrun the problem of their product formulation by turning its attention to external factors.  In the end, this has led to $0.25 pricing and cases of product that has not left the grocery sales floor.  Unlike Full Throttle, consumers will not miss this energy drink when it disappears.

Canadian Grocery Re-post: Gas Pump Vending Machines Coming Soon?

Recently, the American publication Vending Times reported on some interesting news that may increase sales for beverages and other food items as well (link here).  Vendgogh, a company that provides “gas island solutions” have come up with a concept where gas consumers can integrate their beverage and snacks purchases with their fuel purchase.  The gas pump machine that normally asks the customer which grade of gas they want to fill up and if they want a car wash, can now also be programmed to prompt about purchasing drinks and snacks.  As more and more fuel stations are fitted with technology to allow for payment at the pump, these same stations are seeing their basket size decrease with less opportunities to influence the fuel customer.  The National Association of Convenience Stores (NACS) indicates that about half of all gas customers do not go inside the store, and therefore gas stations have half as many opportunities to drive incremental sales.  The premise of this concept gives petroleum stations increased opportunities to convert pay-at-the-pump consumers without them ever having to enter the fuel station kiosk or store.

While fuel is the core of this channel’s business, growing the basket size is just as important here as in other channels.  Customers may prefer paying at the pump since it’s convenient and quick, but gas owners prefer the customer come inside since there’s many more opportunities to up-sell the customer.  Have you bought a beverage or lottery ticket as part of your fuel-up?  That likely is a result of suggestive selling by the store clerk.  Without the ability to add on beverages, snacks, lottery tickets, or cigarettes, the gas station is only getting base business.  And with so many gas stations around, the competition is fierce for the customer’s dollar.  Even the same chain will be competing with the next closest gas station in the chain for the same dollars.

Vendgogh’s beverage gas pump unit re-establishes the suggestive selling opportunity for the gas station.  By maintaining the customer’s convenience to pay at the pump, the fuel station also has the ability to up-sell beverages and snacks, which drive over 40% of a gas station’s in-store sales.  Beverage purchases drive about 25% of the in-store sales, so popular beverage options such as energy drinks, carbonated soft drinks, and bottled water can be expected to be filled in the vending unit.

Gas stations can always rely on one thing: customer trips.  There will always be motorists that need to refuel, and therefore provide gas stations with opportunities to influence their refuel purchase.  Having a machine to assist in growing the customer’s basket should be a welcome tool across the overall petroleum convenience channel.

Rockstar Energy To Launch Energy Waters

At the National Association of Convenience Stores (NACS) show earlier in October, Rockstar Energy revealed that they plan on launching a line of energy water.  While the timeline has not be revealed, the initial assortment listed on the sell sheet image include the following flavors:  Tropical Citrus, Blueberry Pomegranate Acai, Orange Tangerine.  BevNet has some more information and a quick video on Rockstar Energy’s new products from the show (link here).

This launch from Rockstar Energy pits them against Coca-Cola’s glaceau vitaminwater lineup, and PepsiCo’s SoBe Lifewater and Aquafina Plus lineups.  The question becomes how Rockstar Energy can differentiate themselves against these already established brands.  Despite their positioning as “energy water”, it will be difficult for them to be considered a dissimilar product from flavored water.  It is still an enhanced water beverage and may very well be shelved alongside Aquafina Plus or SoBe Lifewater (Rockstar Energy products are distributed by Pepsi).  And since consumers already have certain expectations for the price point, the new energy waters will have to be priced in a similar range.  There really isn’t that much room for differentiation given what we already know.

So with Product, Place, and Price (the 4 P’s of the Marketing Mix) already determined and largely out of their control, Promotion is the remaining lever Rockstar Energy can use to stand out.  Even then it is still a uphill battle.  In Canada, Aquafina Plus has constantly been on price promotions, to the point where there’s also expectations for feature price points.  In the U.S., many retailers had ran similar promotions but also drove unit sales with a “$10 for 10″ feature strategy.  How can Rockstar’s Energy Water stand out?  Featuring on price – especially for a new entrant – will only upset the market dynamics and reduce profitability.

One option may be co-promoting with their energy drinks, which has an established presence that is much stronger than that of Amped, Nos or Full Throttle (possibly only Amped and Nos in the future, read about Full Throttle’s de-emphasis here).  Leveraging on their stronger identity in energy drinks, they can offer consumers an alternative or additional Rockstar beverage when they are in-store.  Enhanced waters also do not carry the negative stigma that energy drinks have, so transitioning the “energy” equity from energy drinks to energy water may be a tactic to completely re-position themselves.

Another option would be to fully leverage their entertainment and sponsorship properties to feature this new product – in tandem with their energy drinks.  Offering samples of their energy water at their music and sporting events will increase their exposure to a captive audience.  Especially when their competitive products (vitaminwater, lifewater, aquafina plus) are shut out from these venues.  Especially when they offer a differentiated product than Red Bull and Monster Energy, should it be a multi-sponsor event.

While this is a very unique expansion from Rockstar Energy haloing off their “energy” brand association, it will be interesting to see how it can defend against the pressures of larger and more established brands.  This impending product launch has a chance to succeed, but only if they can carve out their own niche against glaceau, SoBe, and Aquafina Plus.

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.

Goodbye Full Throttle, Hello Nos Energy

The above image is what the viewer sees when they visit Full Throttle Energy’s website – drinkfullthrottle.com.  However, the website will soon undergo changes to remove the NHRA logo and “drag racing” copy.  Various news outlets reported that Coca-Cola’s Mello Yello will be replacing Full Throttle as the title sponsor of the National Hot Rod Association (NHRA) in 2013.  The Sports Business Daily article also mentions some quick insights into why Mello Yello was given title sponsorship over other Coca-Cola beverage brands (link here).

This effectively spells the end of Full Throttle as Coca-Cola continues to reduce investments in this homegrown energy drink brand.  Full Throttle had four flavors existing in the Canadian marketplace as recent as just two years ago.  But with the distribution switch from Rockstar Energy to Monster Energy, and the rise of Coca-Cola’s other homegrown energy drink – Nos Energy Drink – there just wasn’t any room for Full Throttle.  First the underperforming flavors of Diet Full Throttle, Blue Agave, and Red Berry (Fury) were phased out leaving only the Regular Citrus as the sole Full Throttle marketing offering.  Then the website’s functionality was limited to the above image – there is no click-through possible except for privacy policies, contact info, and the link to NHRA.  And now the loss of the NHRA official sponsorship, which removes even more functionality from this brand.  One of the key questions left to be answered is that, since Full Throttle has been given less investments in the past few years, why hasn’t there been communication to acknowledge its discontinuation?

Even though Full Throttle has been at the end of its product life cycle for more than a year, it would appear that there were multiple factors playing into why no official announcements were made.  For one thing, Full Throttle was still the title sponsor of NHRA and it would be detrimental to Coca-Cola’s relationship with the NHRA if they discontinued their official energy drink while the sponsorship was still on-going.  How will the racing association look if their official energy drink was not even on the market anymore?  It is also during this languishing time for Full Throttle that Coca-Cola rapidly increased its sponsorships and visibility for Nos Energy Drink.  Nos Energy Drink obtained sponsorship for NASCAR, Formula Drift, and Major League Baseball among other organizations.  Occurring simultaneously was the portfolio expansion of Nos products.  Originally available only in a 650ml bottle, Nos began extending itself to a 473ml can, then increased its offerings to include a Sugar Free and Grape variant.  It recently introduced two other variants into the Canadian market: Cherry and Citrus.  The product proliferation was to further entrench Nos with the consumer market and expand their visibility at the point-of-sale.

Full Throttle’s role in the energy drink portfolio shifted from growth to flanker status – it’s purpose was to hold steady until Nos Energy Drink was ready to take over as the company’s official homegrown energy drink.  Now this transformation looks all but completely done.    In-aisle shelf space and cooler space has been shifted from Full Throttle Energy to Nos Energy Drink.  As such, consumers will likely be seeing an official Coca-Cola communication on the end of Full Throttle Energy in 2013.

Will Nos hang on to become Coca-Cola’s successful energy drink brand?  Only time will tell, but given the investments that the company is putting behind this brand, it will stand a better chance of success than Full Throttle.

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.

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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.