ENERGY DRINKS: IN THE MONEY
Don't miss out on a staggering success story. Here are drinks with great margins and a great future says Richard Hall of Zenith
Of all the soft drinks success stories in the past few years, energy and sports drinks have been the most overlooked by retailers.
But things have moved on. The energy and sports drink market has started to boom. Grocers who ignore it are missing out on premium prices, premium margins and continuing growth.
The basic facts are staggering. UK sales are forecast to exceed £700m this year, nearly 10% of the total for all soft drinks and well over twice the level of 1998. Single cans of Red Bull outsold single cans of Coca-Cola in British supermarkets last year. Lucozade Energy sales averaged £840 per corner shop in 1999.
Yet 19% of retail outlets do not stock energy drinks and 64% do not stock sports drinks.
The first thing for grocers to do is understand the market. The main consumers are aged 15 to 24 and demand is particularly high at weekends.
There are three distinct product groups:
- Refreshment energy which is built around the everyday glucose based appeal of Lucozade Energy and Lucozade Low Calorie and includes competing labels such as Pulsar and Red Card.
- Sports which consists mainly of isotonic drinks led by Lucozade Sport, with Gatorade and Isostar also present. Isotonic means in balance with your body fluids, so vitamins and minerals are more rapidly absorbed to replenish lost energy.
- Functional energy which is dependent on the addition of caffeine, taurine or herbal energy and is led by Red Bull, accompanied by a wide range of other labels including Indigo, Lipovitan B3, Purdey's and Solstis.
Taurine is a naturally occurring amino acid already in the body.
Functional energy drinks are the newest segment and the fastest growing. Their volume trebled in 1999. The reason why is because they represent the next stage in the development of the entire soft drinks market.
People already have a huge choice between different soft drinks in terms of taste, refreshment and identity. As we enter the 21st century, they are beginning to look for more than that.
Functionality is the key. The emphasis of many new product developments is towards greater staying power, more physical energy and longer mental alertness. Consumers are turning to functional energy drinks because more and more find they actually work.
How then can grocers take advantage of these trends? The answers are surprisingly straightforward.
Step one is to stock the brand leaders in each of the three segments: Lucozade Energy for refreshment energy (22% are missing out at present); Lucozade Sport for sports (65% are currently losing out here); and Red Bull for functional energy (62% stand to gain from this).
Step two is to provide more space, preferably in a clearly defined group to make it stand out. High cash returns make it worth also considering eye level locations, drawing attention by signage and adding extra floor displays next to tills.
Step three is to take advantage of the excitement and interest of all the variety and innovation on offer. In functional energy drinks, for example, Lipovitan B3 sells over 1000 million cans a year worldwide and is well supported by advertising. Indigo, Oasis Revitaliser and Purdey's are all in unique packs. Red Devil and Solstis have high sales rates where stocked.
Power Fusion, Shark and Umbro have just been launched. More are on the way.
Step four is to try one yourself, especially after reading a long article.
Richard Hall is chairman of the specialist drinks consultancy Zenith International.
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