Segment or Brand – Article From Beverage Spectrum

An online article from Beverage Spectrum’s Gerry Khermouch sheds light on how some beverage categories are strong with opportunity to grow while others just have one strong brand while other competitors barely make a dent (article link here).  In the article, Gerry Khermouch mentions that vitaminwater, 5-Hour Energy, and Gatorade spawned a new beverage category (enhanced water, energy shot, sports drink, respectively) and copycat products eager to captialize on the category have entered the market but without much success.

“It implies that what appears to be abundant opportunity really is a solo success story, and all the pretenders are doomed to exhaust a lot of money, energy and credibility in a fruitless effort. That doesn’t mean there aren’t ways to build off that conspicuous success, but it won’t happen just by throwing your hat in the ring with your own version. ” ~ Gerry Khermouch

The article mentions that there has been success for other brands, but the success has not been easy to come by. Pouring lots of money to market the product doesn’t always bring success either (as seen by numerous enhanced water beverages, energy shots, and sports drinks in the marketplace).  Sobe Life Water, Red Bull, and Powerade have all seen limited success given the amount of resources they have put into growing their brands.  Competing on price doesn’t always help either.  If you have poured significant funding just to enter and compete on price alone, the likely result is that your product is no better than a private label product – so why bother entering the market?

The real opportunity to gain market share would be through innovation.  Innovation either improves on a beverage already on the market, or launches a new category altogether to meet a previously unmet need.  Let’s use the energy drink category to draw examples from.  Jolt Cola and Red Bull.  While Jolt Cola entered the market first in 1985 with their offering, Red Bull came in two years later with their version of an energy drink.  Red Bull improved on areas where Jolt Cola was lacking and quickly gained the majority of the energy drink market.  Jolt Cola may have contained more caffeine, or Red Bull’s marketing expertise helped them gain the leadership position.

Or Red Bull and 5-Hour Energy for another example.  Red Bull may have been the first to launch an energy drink and grow the category, but 5-Hour Energy innovated and spawned a segment within the category.  While other energy drinks entered the market to compete against Red Bull in the cold vault and cooler doors, 5-Hour Energy developed a small energy shot that was located at the till rather than where the rest of the energy drinks were.  Customers shopping on impulse would still see 5-Hour Energy at the checkout counter after the rest of the energy drinks are left behind in the cold vault.  As the article mentions, Red Bull’s energy shot offering is still fighting to gain significant market share.

As Gerry Khermouch says, “Healthy skepticism must be maintained about brands that are just expecting to cruise down the roads carved by segment pioneers.” You just cannot rely on your brand name to bring you success.  The beverage company has to work on developing a great product through innovation and market it properly in order to succeed.

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