Coca-Cola Builds a Monster

Image courtesy of brandchannel.com
Image courtesy of brandchannel.com

Looks like Coca-Cola realizes what it’s good at and what it isn’t good at.  Their increased stake in Monster Beverage proves as much.  With $2.1 billion invested, Coca-Cola now owns 17% equity in the energy drink behemoth, and in turns switches up their product portfolios.  Coke will give Monster their own acquired or homegrown energy drink brands, which includes Nos, Full Throttle, and Burn among many others, while Monster trades them their non-energy drink products, such as Hansen’s Natural Sodas & Juice Products, Peace Tea and Hubert’s Lemonade.  This deal brings together the world’s largest soda manufacturer and the U.S.’s largest energy drink manufacturer.  Although both sides got a great win out of this, but who needed this deal more – Coca-Cola or Monster?  Let’s start by seeing what each side actually gets out of this arrangement.

For Coca-Cola, acquiring a larger stake in Monster and then trading energy drinks for teas & juices serves as a win in itself.  With consumer habits and preferences changing, fortifying their product portfolio to keep pace with these changes was a necessity.  And with key brands generating bad press lately (think Diet Coke slogan fiasco), Coca-Cola could not afford to keep beverage products that carry high negative publicity potential.   Nos, Full Throttle, and the like most certainly qualify given the category requires caffeine content regulation following linkages to caffeine poisoning.

Energy drinks didn’t necessarily fit into the brand image that Coca-Cola wanted to sustain.  Energy drinks focus around an extreme sports lifestyle, with key sponsorships across mountain biking and motor biking.  Distancing the brand from energy drinks better promotes Coke’s image as a family-oriented product manufacturer.  Furthermore, their marketing acumen is better leveraged across Monster’s non-energy products given Coca-Cola’s existing strength across juices and teas.  Coca-Cola has already made a strong name for itself behind Minute Maid, Simply, Odwalla, Nestea, and Honest Tea.  Giving up energy to return focus to juices and teas helps Coca-Cola stay sharp and work on what they’re good at.

Hubert's Lemonade, now part of the Coca-Cola family.  Will this lemonade brand grow exponentially?  Image courtesy of hansens.com
Hubert’s Lemonade, now part of the Coca-Cola family. Will this lemonade brand grow exponentially? Image courtesy of hansens.com

For Monster Beverages, this deal unlocks a stronger global distribution network to grow their product base.  They’ve also added some larger name-brand energy drinks to complement Monster.  A strong competitor like Nos now becomes a fantastic ally.  Full Throttle owns a cult following despite Coca-Cola’s neglect and has a very good chance of being resurrected.  This arrangement gives Monster a wide assortment of products to target energy drink consumers, both locally and internationally.

Monster has also done a better job at marketing energy drinks than Coke because they’ve invested in resources to build out an entire lifestyle.  Energy drinks are more integrated into a consumer’s lifestyle than some other beverages, given their wide target in terms of drinking occasions.  The soda drink manufacturer was not prepared to build out a 24/7 lifestyle like how Monster, Rockstar, and Red Bull have.  Though Monster’s success isn’t a defined blueprint, they already have the infrastructure in place for one energy drink and this could be scaled up for other energy drinks.

It’s really hard to say who needed this more though Coca-Cola benefits more in this new arrangement.  The soda maker had more to lose because they were never going to catch Red Bull, Monster, or even Rockstar with their homegrown products.  Giving up distribution bought them expertise and healthy beverage brands.  Similarly, Monster’s true success existed in the energy drink segment, so much that they even changed their company name to halo off some brand equity.  Their strength in energy drinks would have prevented them from properly developing their nonenergy product portfolio.

Regardless of who benefited more, this only proves that larger companies must take creative approaches to keep growing.  In the past, it was about building strong brands.  Now, it’s about buying a brand that’s already been built, and making it stronger.

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
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.

Rockstar Energy To Launch Energy Waters

courtesy of Beverage Digest's Twitter feed - October 9, 2012

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.

Rockstar Energy Water Lineup

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.

Goodbye Full Throttle, Hello Nos Energy

FullThrottleSplashpage - drinkfullthrottle.com

The above image is what the viewer sees when they visit Full Throttle Energy’s website.  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?

Nos Energy 473ml Assortment

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.

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.

What’s Going On With Full Throttle?

Is this energy drink being discontinued or phased out?  Full Throttle in Canada has only 3 flavors, after discontinuing their sugar-free flavor.  The 3 remaining flavors are the Citrus, Berry, and Agave (also known as the Regular, Fury, and Blue Demon).  There has been little to no new product launches, and products that had been released in the United States are slowly being discontinued as well.  Our friends south of the border had Full Throttle Mother, Full Throttle Hydration, Full Throttle Coffee (in Mocha and Caramel) – all of which has been discontinued.

The energy drink has been losing customers and market share to bigger players such as Red Bull and Monster.  The most recent market share numbers indicate that Full Throttle has lost over 2% of its market share, and the brand has been on a continuous decline the last few years.  A quick look at the energy drink’s website seems to show that there has been a re-branding effort because all the logos and packaging has been changed (website link here).  Wikipedia supports this fact reporting that the energy drink changed its formula and also re-branded in November 2009 (story here).

So when will this new packaging roll out in Canada?  Will there be any marketing media support to detail this?  Are there any innovations that will be introduced as well as the re-branding effort?  They better have something big planned or else the energy drink will likely fade into obscurity while all the Red Bulls, Monsters, and 5-Hour Energy companies gobble up their remaining market shares.