Despite media coverage that has focused on the adverse effects of energy drinks over the past year, the category has continued to gain value and deliver profits for retailers and manufacturers alike. Part of this can be attributed to consumers wanting what they’ve been told is off-limits to them. The other part is a result of smart category management by retailers and manufacturers.
Retailers are no longer listing any and all energy drink innovation brought to them by manufacturers to capitalize on the energy drink wave. Instead, they are looking for products that play defined category roles to complement their retail selling strategy. They are searching for a total category solution that will help drive sales for both the category and the retailer. They may also be looking for a manufacturer to partner with to drive the strategy specifically for energy drink products. As such, the previous shelf sets that were littered with fewer facings and broader selection has now been somewhat streamlined to increase product facings of a narrower product assortment. Carefully defining their specific category strategies has helped retailers decide on how much and what to carry. For example, Loblaw has a wider product selection compared to Walmart. While both retailers carry the top products, that is where the similarities end. Walmart only has the top sellers within those specific brands while Loblaws carries more variety within those energy drink brands and some additional products. Walmart’s category strategy for energy drinks may be more indicative of a routine purchase, while Loblaws strategy exhibits more of a destination focus.
Manufacturers are also bringing deeper insights to the table to showcase the strength of their beverage brands and how they align with the retailer’s go-to-market strategies. With key discoveries on consumption habits and similarities with a retailer’s core shopper, the manufacturer is showing the buyers that they have a strong understanding of where category growth is coming from and how to target the most profitable demographics. A key example may be the energy shot segment’s growth fueled by 5-Hour Energy. Expanding on their marketing platform of alertness without the caffeine crash, the product has recently been marketed toward seniors that require an energy boost. Understanding the insight that seniors are not ready to slow down and also crave energy boosts has led to distribution gains within pharmacy centers and shelf space next to winkle cream and nutritional beverages.
As the Canadian retail landscape continues to change, profitability is top of mind for everyone – not just beverage manufacturers. Collaboration between the manufacturer and retailer becomes progressively important to ensure that the product categories are effectively managed. If a retailer has not partnered with their core categories’ manufacturers, now is the time to start!