June 25th, 2008 Energy Drink Market Research Research primarily from Energy Drinks 2007 Mintel Report Overview of the Energy Category Size o More than $3.2B in 2006 o Is the drink segment with the most significant growth over the past 5 years Growth o 516% adjusted $ sales growth during 2001-2006 o Can be attributed to: The proliferation of distribution channels Increasing number of retailers and brands Product finally emerged from introductory stage of PLC Increase in consumer base: Primarily among woman Hispanics & Blacks (which are the two population groups with high energy drink consumption) o U.S. sales forecasted for a 10.2% annual increase through 2011 Trends driving the growth o More individuals fighting fatigue and looking for energy boost Busier and more chaotic lifestyles – more “multi-tasking” Variety of sources: Supplements (59%) Food (51%) Beverages (30%) Americans reducing # of sleep hours 6.8 hours of sleep a night on weekdays o .2 hours less than 2001 o Energy Drinks Provide a short-term energy boost due to high sugar Works as a stimulant to prevent sleepiness “Energy boost” is the primary reason for use o Young adults driving the market Consumer lifestyles match with marketing idea of “needing energy” o Hybrids ~50% like energy drinks with fruit juice in it ~33% desire use of non-carbonated energy drink and energy drink/soda hybrid ~33% would likely choose an energy drink/tea hybrid o Pre-mixed alcoholic energy drinks Energy drinks have been used as a mixer for alcohol Many beer company’s are putting products out 2005 – Anheuser-Busch launched BE – beer/energy drink
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2006 – Miller launched Mickey’s Stinger – a malt energy drink Rockstar plans to launch Rockstar 21 Monster plans to launch a malt liquor-based energy drink Trends potentially hurting the Energy Drink growth o Medical research paying close attention to the negative health effects Emergency cases from caffeine overdose to refuting functional claims o “Soda Hybrids” Products with similar beneficiaries at soda prices, which is approximately an 80% discount from 20oz FDM prices o Competition from outside the industry Energy bars, energy food, and energy supplements could hurt the overall drink market Energy drinks that don’t “cause the crash” and are more healthy – products with ginseng and natural caffeine boosters o Forecast of potential factors hurting sales: Obesity, Dietary, Health factors, Product safety, Product innovation, Price competition & Private label
Top Players & Any Interesting New Entrants o From data/survey, 35% of consumers report using other brands The interest of other brands could be due to price differentials from top brands, use of taboo names, and/or racy marketing messages Red Bull (launched 1997) o Sales 42.7% market share But has lost 15.6 points in market share to new competitors 1.6B cans in a year between 2003-2004 o Growth Available in 120 countries o Innovation Plans Possible expansion into Asian, a primarily untapped energy drink market “Red Bull Simply Cola” Launching a slightly more caffeinated cola in an 8 oz. Can within the next year. Continuing sports sponsorship of extreme athletes and new extreme events, including NASCAR sponsorship soon Red Bull Flugtag, Air Racing, Rampage, base jumping, and even Graffitti Art exhibits o Target (consumer) Adventurous, dare-devil (and life in danger at times) individuals Younger demographic aimed at pushing their limits “It Gives You Wings” – those needing a huge burst in energy
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Those not as worried about a great taste (one of the worste tasting by consumers) o New news? Monster (Hansen) (launched in 2003) o Sales 16% market share 2005 - $269M in energy drinks Increase of 138% from $113M in 2004 o Growth o Innovation Plans Has a Lo-Carb version (launched in 2003) Has 3 different size cans (8.3oz., 16oz., and 23.5oz.) Launched an energy/juice combo (M-80 & Khaos) Also just launched “Java Monster” – Coffee + Energy 3 flavors – Big Black, Mean Bean & Loca Moca o Target (consumer) Bold individuals who are typically extreme athletes or hard working “go go go” people Appealing to many college aged students and recently turned legal people o New news? PepsiCo – SoBe & Amp Brands o Sales Amp brand - $23M in 2006 o Growth o Innovation Plans o Target (consumer) Avid soda and hybrid soda/tea Drinkers looking for more energy than what they get from those products o New news? Rockstar International (launched in 2001) o Sales 12.1% market share $77M in 2006 Only in about 7 countries worldwide o Growth In 2005, penned a deal with Coca-Cola to expand its distribution (Coke doesn’t have any brand ownership though, just shares in profits) o Innovation Plans In 2006, added Rockstar Juiced Targets the juice consumer Launched Rockstar Roasted recently Coffee & Energy w/ 50% more caffeine than original Rockstar (3 flavors: Mocha, Latte, & Light Vanilla) Launched Rockstar Punched recently
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Energy + Punch with more caffeine Also have launched Zero Carb, Sugar Free, and three juice flavors (Guava, Mango, Pomegranate) o Target (consumer) Those who are adventurous and like to live a bold lifestyle Those drinking Product has milk thistle in it, which apparently helps fight hangovers o New news? Coca-Cola – Full Throttle, NOS & Rehab o Sales Full Throttle 10% market share o Growth o Innovation Plans 2006 Launched Sugar Free products Launched Full Throttle Fury & Blue Demon – targeted to Hispanics Launched Tab Energy for women – first energy drink targeted at women Just launched a new Full Throttle – Hydration in April First energy drink with electrolytes to hault dehydration o Target (consumer) Targeted at blue-collar workers Full Throttle skewed to an older demographic – don’t advertise towards younger individuals as much “Full Throttle Demon” – positioned towards Hispanic men age 2030 o New news?
Consumer Insight Who drinks energy drinks? o Adult Consumer 14% of respondents are likely to drink energy drinks (Simmons Survey) 31.6M adult energy drink users o That number grew by 14.3M during 2002-2006 Skewed towards Men o 1 in 6 males (25M men) o 1 in 10 females (15M women) However, the number of women using energy drinks has nearly doubled during 2002-2006 Age 18-24 – 34% of respondents (9.9M) – largest adult age group 25-34 – More than doubled to 8.8M from 2002-2006 4
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Hispanics (27%) & Blacks (21%) more likely to drink energy drinks vs. Asians (16%) and Whites (12%) – 2006 data o Figures have nearly doubled from 2002 – Hispanics (13%) and Blacks (12%) o Teen Consumer 33% respondents are likely to use energy drinks Likely a higher % because can help them augment their rebellious image – legally Increase consumption from 2002-2006 – From 1 in 5 likely to use to now 1 in 3 Race 1 in 2 Hispanic teens is likely to drink energy drinks Asian teens are second most likely to drink (vs. dead last in the races for the adult segment) Likely to consume 5 glasses of energy drinks per month 11% higher consumption than adults Many teens have high participation in sports, and use for better performance. Almost twice as likely to use other brands compared to adults – teens are deriving higher consumption through other brands Either b/c of affordability issue, or experimentation with a range of brands before becoming brand loyal Teens are more influenced by price, different taste and different positioning than adults Those likely to drink energy over those who don’t: Higher rate of taking risks (Male: 62 to 58; Female: 58 to 46) Keener sense of adventure (Male: 50 to 47; Female: 55 to 54) Like to do unconventional things (Male: 36 to 34; Female: 33 to 30) Important to be attractive/opposite sex (Male: 67 to 60; Female: 61 to 56) Exercise at least once a week (Male: 60 to 59; Female: 59 to 51) Where, When, Why o Where Purchasing 59% - Have reported purchasing from both supermarkets and convenience stores 38% purchased energy drinks from Wal-Mart 15% at drug stores, 13% at a bar, 11% at club stores, and 11% at mass merchandisers.
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Consuming Likely to drink at home ~50% likely to drink in the car or at work ~20% at a party or a bar o Loyalty 1 in 3 report sticking to one brand 38% report using 2 to 3 brands and alternate between them 1 in 3 having no preference for energy brands o When 63% likely to drink in the afternoon (energy boost to fight fatigue) 38% in morning 28% early evening 22% with lunch 20% late evening 11% with dinner o Why Purpose 76% - Energy Boost 35% - Mental Alertness 21% - Hydration 18% - Health & Nutrition 12% - Weight Management 34% as a refreshment, 32% for taste, and 18% to mix with other beverages Ingredients Valued 1 in 3 value the added ingredients (other than caffeine) 1 in 4 value the caffeine 1 in 10 for added ingredients for health Why don’t non-drinkers drink energy drinks? o Reasons for not drinking energy drinks (Among non-consumers): ~33% for high price ~33% for high amount of caffeine ~25% because of taste ~25% don’t think of drinking them ~20% find unsafe to drink ~17% not knowing enough about ingredients
Overview of the Current Starbuck’s RTD Coffee Portfolio Products Positioning Target (consumer)
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“Which of the following brands of energy drinks do you consume?” CONSUMPTION OF ENERGY DRINKS, BY BRANDS, BY GENDER, JANUARY-OCTOBER 2006 Base: 3,356 adults aged 18+ who drink energy drinks
Red Bull Rockstar Full Throttle SoBe Adrenaline Rush AMP SoBe No Fear Arizona Extreme Energy Shot 180 Hansen's Lipovitan B3 KMX Whoop Ass Other Brands SOURCE: MINTEL/FALL 2004 SIMMONS NCS
All % 61 22 17 12 12 12 10 6 6 6 4 4 35
Male % 64 24 18 12 12 13 10 6 6 5 4 4 35
Female % 57 19 16 12 12 12 10 6 7 6 5 4 36
Male % 60 19 23 15 10 10 8 8 8 64
Female % 59 22 14 8 8 3 4 4 3 63
“Which of the following brands of energy drinks do you consume?” FIGURE 52: CONSUMPTION OF ENERGY DRINKS, BY BRANDS, BY GENDER, JANUARY-OCTOBER 2006 Base: 518 teens aged 12-17 who drink energy drinks All % Red Bull 59 Rockstar 20 SoBe Adrenaline Rush 19 Arizona Extreme Energy Shot 12 Whoop Ass 9 180 7 KMX 6 Hansen's 6 Lipovitan B3 6 Other brands 64 SOURCE: MINTEL/SIMMONS FALL 2006 TEEN SURVEY
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