5-hour Energy Improves Shot’s Taste

The 5-hour Energy line-up.  As stated in a press release, all their energy shots will undergo taste improvements this year. Image couresty of 5-hour Energy's twitter page.
The 5-hour Energy line-up. As stated in a press release, all their energy shots will undergo taste improvements this year. Image couresty of 5-hour Energy’s twitter page.

Taste exists as the primary and most crucial hurdle for consumables to overcome.  Even with marketing support, no product could sustain success if they produced really bad-testing drinks.  5-hour Energy kicks off 2015 by announcing that they’ve improved on the taste profiles for their entire line of energy shots (link here).

If 5-hour Energy has been able to find sustained success the past 10 years, their products could not have tasted that bad.  This is merely a product tweak, though an important change since it affects their total energy shot portfolio.  After improving flavor profiles, 5-hour Energy will be a better position to leverage their insights around demographics (targeting women & seniors) and frequencies (usage occasions and mixing opportunities).  That said, no one can equally focus on three different priorities.  So what should the energy shot provider do first: grow their customer base by targeting women & seniors, or increase consumption among their current customers?

Related post: 5-hour Energy’s Quest for New Growth

It seems like the answer was part of the statement by their director of communications, Melissa Skabich.  Here’s a partial statement from her:

“The message is clear. Our customers want an energy shot that tastes great, and we’ve given them what they’ve asked for,” said Melissa Skabich, director of communications for 5-hour Energy. “The new and improved taste of 5-hour Energy shots is a testament to our ongoing commitment to always improving our product, and we’re extremely proud of what we’ve created.  Fans of 5-hour Energy shots won’t be disappointed because we still offer the same 10 great flavors, as well as decaf,” Skabich added. “We’re optimistic that the better-tasting product will result in increased demand through the existing and new user base.”

Even as Skabich mentions existing user base, it would be clear that this is more about growing the new user base.  After all, there is only so many energy shots a single consumer can drink.  There is stronger growth potential for 5-hour Energy by targeting new demographics.  In fact, changing the taste is positioning them to reach new consumers more than satisfy brand loyalists.  Current customers will be rewarded with better tasting shots, but the priority is to attract new users.

Marketing to new users could prove more difficult than increasing consumption from their loyal customers, though the payoff will undoubtedly be more rewarding.  Following their Yummification campaign, 5-hour Energy already understands when people use their shots and what tastes delicious when mixed with it.  Leveraging these insights, they can target women & seniors through advertising or in-store coupons or bundled products.

5-hour Energy says they will be launching a new national advertising campaign in February to market the energy shots’ new and improved taste.  Be on the lookout for what would appeal to women and seniors, as it’s likely that the campaign may cater to them just as much as it caters to their current customer base.

5-hour Energy's Yummification contest from 2014.  Through this contest, the energy shot manufacturer was able to uncover new usage occasions and great refreshments to mix with the energy shot.
5-hour Energy’s Yummification contest from 2014. Through this contest, the energy shot manufacturer was able to uncover new usage occasions and great refreshments to mix with the energy shot.
Advertisements

5-hour Energy’s Quest for New Growth

The 5-Hour Energy Shot Line-up
The 5-Hour Energy Shot Line-up

It seems that the craze over energy shots have died down since 2012 and left 5-Hour Energy as the last company standing.  That shouldn’t be a surprise since existing consumers were fiercely loyal to the brand, to the extent that offerings from energy stalwarts like Red Bull and Monster failed to sustain sales in this segment.  After winning the battle for energy shot supremacy, 5-Hour Energy still faced challenges toward reaching a wider array of consumers.  The energy shot manufacturer need to reach other demographics to continue growing.  That spawned line extensions to reach women, as well as sampling events to reach seniors. This past summer, the company ran a “Yummification” campaign to leverage 5-Hour Energy as a mixer (BevNet’s Ray Latif has an in-depth look at the campaign here).  While all companies have growth barriers, what has 5-Hour Energy done differently to overcome these growth challenges?  And beyond its success, what other opportunities exist for them in the foreseeable future?

It would appear that targeting women and seniors are components of an overarching 5-Hour Energy growth plan, and the strategic objective is to increase consumption.  Reach new demographics isn’t all that different from what other companies do, so catering to women and seniors are not all that unique.  What is unconventional is their “Yummification” campaign.  5-Hour Energy recognized that taste was a blockage that would not be solved despite their efforts to highlight product benefits.  The “Yummification” campaign leveraged fans’ creativity in a contest to create recipes for mixing 5-Hour Energy with other beverages (mainly non-alcoholic ones) to lessen the medicinal taste.  As a side benefit, this contest required submissions through YouTube helped generate a lot of media exposure.  Beyond media impressions, the campaign showcase new usage occasions for 5-Hour Energy.  Contest submissions advertised concoctions to refresh the user during athletic training, waking up, and gaming among many others.  Athletic training, waking up, and gaming are occasions typically paired with other refreshments, such as sports drinks, coffee, and juice & water.  Energy drinks – let alone energy shots – seldom enter the conversation as refreshments during these times.  However, it looks like that will change following the success of their “Yummification” campaign.

5-Hour Energy's Yummmification Contest.  Courtesy of blog.5hourenergy.com.
5-Hour Energy’s Yummmification Contest. Courtesy of blog.5hourenergy.com.

Beyond the campaign’s success, it seems 5-Hour Energy has uncovered business opportunities that they were previously unaware of.  Serving as an ingredient as well as a standalone product gives them many more opportunities to sell itself.  Beyond the regular activities to feature the product as a strong standalone product, mixing the shot with other beverages now gives 5-Hour Energy many cross-promotion and marketing opportunities.  5-Hour Energy could try securing displays in the juice aisle to forge a stronger bond with the juices that could be mixed with their product.  Or secure displays in the coffee aisle to convert or steal coffee consumers.  Regardless of displays or other in-store activation tools, many opportunities have emerged to continue delivering growth momentum.

Judging by the potential that this campaign could provide to 5-hour Energy, it’s a surprise it took them so long to come up with it.  It may be the fact that the segment was riding a hot growth trend that nullified the need for marketing support.  Or that negative media surrounding energy drinks required more immediate attention than developing a sustained growth strategy.  Whatever the case, the campaign has now happened and translated fantastic success.  The one downside is that the campaign won’t be repeated, as said by Brandon Bohland, a special markets manager at the company.  Which means that the recipes submitted for the campaign are the only ones that will exist for the foreseeable future, until 5-Hour Energy creates other contests calling for recipe creations.

Visit 5hourenergy.com/yummification to see the videos and recipes for their Yummification contest.

Canadian Grocer re-post: Partnering to Win in Energy Drinks

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.

The 5-Hour Energy line-up.  Some targeted toward women, others toward seniors.
The 5-Hour Energy line-up. Some targeted toward women, others toward seniors.

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!

Liquid Enhancer Segment Legitimized With Powerade Launch

Sourced from www.coca-colacompany.com
Sourced from http://www.coca-colacompany.com

Funny how just a few years ago, no one has ever heard of liquid flavor enhancers but now many people have heard about and possibly tried MiO.  This is due in no small part to Kraft, which created the product segment and put a lot of marketing support behind their MiO to introduce and educate consumers on how to use this product.  And as Dasani introduced their own liquid enhancer to capitalize on the market trend, Kraft innovated to stay ahead of its competition.  These innovations include employing a dual brand strategy by launching Crystal Light Liquid, as well as extending MiO’s platform by branching out to energy and sports drinks.  With recent news about Powerade coming out with a liquid enhancer, this segment appears to provide legitimate profitable returns for manufacturers.  However, is the segment itself big enough for so many different branded offerings?  Will this spur Pepsi to participate in some shape or form?  Possibly with a Gatorade drop to maintain their market share in sports drinks?

Courtesy of www.makeitmio.com
Courtesy of http://www.makeitmio.com

Liquid enhancers have enormous growth potential and despite its infancy, have extended across sports drinks and energy drinks.  This has certainly broadened its consumer appeal and increased the segment’s awareness and adoption rates.  However, the segment still appears to be crowded with four branded players: MiO, Crystal Light, Dasani, and now Powerade.  And it only looks that way because the segment itself is still small.  For all the excitement around MiO, it is still only a $200-$300 million brand.  Combined with Crystal Light, Dasani, Powerade, and even private-label offerings, the segment itself is not predicted to be over $500 million.  But with more advertising support behind each of these beverage properties as well as higher levels of consumer adoption, the segment will grow to be large enough to house these four liquid enhancer brands.  MiO will certainly be rewarded for being the first mover.  Consider this the initial stage of energy shots, when 5-Hr Energy was the only one in the segment and it took some time to gain sales.  As more companies introduced their own energy shots, the segment gained popularity and market size.  Through all this, 5-Hr Energy became the de facto leader in energy shots and rebuffed Red Bull, Rockstar, and Monster.  5-Hr Energy capitalized on the news that other energy drink manufacturers brought to the segment and benefitted from being the most recognized name among the consideration set.  So while it currently appears that liquid enhancers is congested, the potential size of the segment mirrors energy shots, and may even outpace it given less consumer backlash.

With great potential, comes great competition.  We’ve seen Coca-Cola wait for Kraft to prove that this is a viable segment, and then furiously pursue them with their own offerings.  Why has Pepsi not done anything yet?  A Gatorade Drop would certainly gain lots of attention among athletes, not to mention give them another extension to complement their Gatorade Chew.  Pepsi could also come out with a tea offering to start off in a segment where there are no current liquid enhancers (though there are rumors that AriZona is coming out with one soon.)  Given that liquid enhancers can be sold warm and are so compact, they can be stocked on shelves and also at the cash register as consumers complete their purchases.  Pepsi would be missing out on a large opportunity if their only presence were in coolers or displays – far away from the point of purchase.  My guess is that they are likely in the works to launch their own enhancer soon, but only time will tell.

Liquid enhancers are here to stay and has proven to be rich opportunity for the participants.  As the segment gets bigger, it will spell of a missed opportunity for Pepsi if they remain on the sidelines.

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?

Amp Artwork Redesign - Old and NewBevReview.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.

Full Throttle Redesign - Old and New Artwork

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.

Nos Energy 473ml Assortment

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

TotalZero

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.

Xyience Targeting Female Energy Drink Consumers

Xyience Energy Drink line-up, courtesy of www.urbanclimbermag.com

A few posts ago I talked about 5-Hour Energy targeting the older demographics to expand their reach outside of the typical energy drink user (link here), and it appears that Xyience is trying a similar strategy.  To be concise, Xyience has always been an all-natural calorie-free energy drink, but now has the opportunity to capitalize on their positioning.

Xyience became a major player through their partnership with the UFC, where the energy was originally featured within the Octagon as well as other UFC apparel such as round cards, towels and t-shirts.  The partnership has since expanded to cover UFC fighters, which appear at autograph signing events when Xyience launches into convenience stores and grocery stores (more info from a beverage industry article here).  With their calorie-free energy drink, female consumers are a prime target since they are the ones that really look at the ingredient table to check on the beverage’s contents.

As energy drinks transitioned from an emerging beverage category to one that is stabilizing, manufacturers must be innovative and look for new growth opportunities or risk becoming irrelevant.  We saw Red Bull try energy shots briefly before discontinuing them, and also saw 5-Hour Energy targeting senior consumers groups with their energy shot.  Now we see Xyience targeting female consumers.  The main difference between Xyience’s target and that of Red Bull’s is that there should be little to no cannibalization for Xyience.  Someone that buys an energy shot may not buy an energy drink since both products perform the same function.  And Xyience is not necessarily penetrating a category that has numerous competitors (there are some energy drinks that target female consumers – Rockstar Pink, Pink Energy, Tab Energy, etc – but not many manufacturers are targeting the female consumer).  And the difference between Xyience’s target from that of 5-Hour Energy is that they do not have to educate the audience on the product’s benefits since the female consumer is already knowledgeable about energy drinks.

After all is said and done, Xyience stands a stronger chance to reach the female consumer than other energy drinks.  However, simply relying on the product’s ingredients to appeal to the target is not enough, so Xyience may need to adjust some of their packaging to better communicate with females.  For example, Rockstar Pink comes in a 12oz/355ml pink can (stereotypically female targeting, as no males would want to be seen drinking from a pink can) with a straw.  The insight may be that females would prefer to drink out of a straw than directly from the can, so the straw’s addition may help with reaching females.  Xyience may consider adding a straw in addition to changing some of the Venn circles to white or pink (again, stereotypical female colors).  This will allow them to keep the core colors of  black and silver constant, while making slight alterations to appeal to the opposite sex.

The female energy drinker is both elusive and profitable, and if Xyience effectively reaches them and can translate sales from this group, then we may see this mid-size energy drink player rising to the same status as Red Bull, Monster and Rockstar.

Red Bull to Discontinue Cola and Energy Shots

Red Bull ColaChoosing 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.

Red Bull Energy ShotThe 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

5-hour Energy ShotThe 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.

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.