Over the last few years, the consumption of energy drinks are growing significantly among teenagers and the market for the drinks globally is expanding substantially due to the rise in numbers of sports players or athletes. One key reason for growing demand for energy drinks is that consuming large amount of caffeine is primarily believed to be offering desired effects such as improved memory, increased alertness, and elevated mood.
Nevertheless, the global energy drinks industry is a highly-saturated market controlled by a few giants; thus, the market scope for new players in the industry is very minimal and discouraging. Meanwhile, the market is currently facing several challenges because of the wide availability of substitute drinks in the forms of packaged juices, aerated beverages, and malted health drinks that offer low prices compared to the energy drinks.
Main Compositions and Types of Energy Drinks:
On the basis of product types, two kinds of energy drinks are available; normal drinks and shots. Normal energy drinks has a size of ordinary soft drinks, available in 16-oz. bottle while shots have a concentrated caffeine amount with a container of 2 to 2½ oz. In shots, the levels of caffeine contents are around 113-200 mg whereas the normal drinks of 16-oz bottle contains 70 to 240 mg of caffeine. According to National Center for Complementary and Integrative Health, United States (US) Dept. of Health and Human Service, consuming large amounts of caffeine may, however, cause serious heart and blood vessel problems such as heart rhythm disturbances and increases in heart rate and blood pressure for children as well.
Some Major Manufacturers of Energy Drinks and their Current Market Portfolio
Red Bull GmbH and its Products
It is an Austrian beverage company and a privately held energy drinks manufacturer that introduced the drink in 1987 for the first time. Later, the company gained popularity when its famous product, Red Bull became a widely consumed drink in the US in 1997. Currently, markets for Red Bull are widely expanded across 167 countries with a strong sales experience in India, Japan, Turkey, Scandinavia, Russia, and Brazil. According to the company’s website, Red Bull GmbH sold over 7.5 billion cans in 2019 and contributed the highest market share for energy drinks globally. As per Forbes, the market value of the company was estimated at USD 20 billion in December, 2019.
Red Bull has many sizes including 12-ounce cans with different varieties such as original, sugar-free (5 calories), total zero (no calories), and Editions (cranberry, blueberry, tropical, zero-calorie orange, and zero-calorie cherry). The key components of the drinks are caffeine, taurine, B vitamins, sucrose, glucose, and carbonated water. The company heavily invests on advertising strategy and relies on extreme sports sponsorship, buzz marketing, and television ads.
MNST, a California-based energy drinks manufacturer, was considered to be the big challenger for Red Bull company’s products in the next few years after it was founded in 1990. It failed to compete with Red Bull in the late 90s but subsequently gained its popularity in 2002 because of the growing sales in the US. Currently, the company has its markets over 114 countries and is trailing after Red Bull; meanwhile, these two companies is presently controlling more than 70% of the US energy drink market. According to Euromonitor International, Red Bull had about 32% of the worldwide market while Monster had about 14% in 2013. As given in the company’s website, till June 30, 2020, the company had $921.3 million in cash and cash equivalents, $250.8 million in short-term investments and $2.1 million in long-term investments.
Monster Beverage Corp. (MNST) and its Products
Monster drinks has its popular 16-ounce cans with a range of 36 varieties including its flagship Monster Energy drink to double-strength, coffee-flavored, fruit-flavored, no-calorie, protein-enhanced, and other varieties. The main ingredients of Monsters’ drinks are carbonated water, sucrose, glucose, taurine, Panax ginseng, L-Carnitine, caffeine, B vitamins, glucuronolactone, inositol, and guarana, though ingredients vary somewhat by flavor.
Rockstar Inc. and its ProductsRockstar Inc., is a subsidiary of PepsiCo Inc., was founded in 2001 in San Francisco, Las Vegas. As of 2009, it covered 14% of the US energy drink market. The company’s tagline is that its energy drinks are “designed for those who lead active lifestyles.” Currently, the energy drinks of Rockstar are available in convenience and grocery stores in more than 30 countries including the US, Canada, Europe, and Asia; and its market strategies are solely based on affiliations with action sports, motorsports, live music, and models.
It has offered 27 different products ranging from Rockstar Original energy drink to zero carb (10 calorie) and zero-calorie versions, recovery drinks, coffee flavors, and more. Main ingredients of the drinks include carbonated water, sucrose, glucose, taurine, caffeine, L-Carnitine, milk thistle extract, ginkgo Biloba leaf extract, guarana seed extract, and Panax ginseng root extract. It currently contributes about 10% of the US energy drink market. According to Forbes, the annual average sales growth of the company has declined rapidly over the years.
Key Problems Associated with the Consumption of Energy DrinksSome negative outcomes are evident when energy drinks are consumed excessively. For quite often, many youngsters have developed a habit of either using energy drinks with alcohol or excessive consumption to reduce stress and stay alertness in several occasions. To mention some key problems of excessive consumption of energy drinks are as follows:
Excessive Caffeine Content
Considering the health problems associated with the excessive consumption of energy drinks, The US Food and Drug Administration (FDA) set a caffeine limit of 71 mg per 12 ounces of soda and about 120 mg per 12 ounces for energy drinks. However, energy drink manufacturers may choose to classify their product as a supplement to sidestep the caffeine limit. For companies that classify their energy drinks as beverages, the American Beverage Association published voluntary guidelines that advise accurate listings of caffeine content, restriction of marketing to children, and reporting of adverse events to the FDA. However, compliance to these guidelines has been found to be low.
Mixing with Alcohol
Combining Energy drinks and alcohol is a major trend for a large number of underage drinkers or young adults, which often lead to the situation of binge drinking. Studies pointed out that people consume more alcohol when mixed with energy drinks since caffeine keeps the body alertness and reduces the level of intoxication. As per the report by Centers for Disease Control and Prevention (CDC), those drinkers between the aged of 15 to 23 drinkers, who had the habit of drinking alcohol mixing with energy drinks, consume four times more to pursue binge drinking in the US. CDC also found that 10.6% of students in grades 8, 10, and 12 from US schools and 31.8% of young adults aged 19 to 28 have history of consuming alcohol mixed with energy drinks at least once in the past year.
Other Health Conditions
In some case, high consumption of energy drinks may be linked to adverse cardiovascular, psychological, and neurologic events, including fatal events. The International Society of Sports Nutrition suggested that higher-calorie energy drinks can lead to weight gain, and that their high glycemic load could negatively affect blood glucose and insulin levels. Thus, consumption of energy drinks for children and adolescents without the guidance of parents could result severe health conditions for the kids.
Current Market Trends and PerformanceAs per a detailed report, the global energy drinks market was valued at USD 51,728.4 million in 2019 and is projected to reach USD XX,XX3.2 million by 2027, expanding at a CAGR of 6.5% during the forecast period.
Among the two types, the nonalcoholic segment is dominating the global market for energy drinks because of the reason that it boosts the energy by improving physical and cognitive performance. In 2018, the nonalcoholic segment controlled the major share of the market that accounted for more than 50% of the global energy drinks market and the segment is expected to witness a higher growth during the forecast period. Meanwhile, the alcohol segment that contains an average of around 2% to 5% of alcohol by volume, is growing at a significant rate due to surge in demand from the mature economies such as the United Kingdom, Australia, the US, and Spain.
On the basis of the end user, the adult group segment are the major consumers of the products and contributed a major market share of around 45.90% in 2018, due to rise in consumption of energy drinks by working adults to maintain a healthy lifestyle. This segment is anticipated to grow with the highest CAGR of 6.70% during the forecast period, owing to increase in consciousness toward intake and diet among sports athletes.
Among the sales channel, the increase of retail sales through e-commerce platforms contributed huge opportunities for expansion of energy drinks in the global market. Online sales are growing rapidly and preforming well for energy market growth since many manufacturers have preferred to attach with the giant e-commerce retail shop. However, the wide availability of energy drinks on supermarkets are also contributing to boost the market expansion significantly.
At present, the United States, China, and Brazil are the major destinations for energy drink markets globally. Among regions, North America is currently occupying the majority share in the global market for energy drinks due to the higher consumption by a large portion of teenager population and increasing health concerns among consumers. However, Asia-Pacific is expected to grow at the highest CAGR of 7.4% during the forecast period and expected to reach USD 26.4 billion by 2025 due to the rise of disposable incomes of the large populations of the region. In combine, Asia-Pacific and North America is currently occupying more than half of the global energy drinks market share.
In Europe, the market share for energy drinks is projected to grow at a CAGR of 6.5% over the forecast period and to reach USD 19.52 billion by 2025 due to growing healthy concerns and increasing consumer adoption rate in the region, supported by the rise of marketing efforts by many leading manufacturers. The growing demand from the European consumers for healthy, zero-calorie, and low-sugar functional products, in order, also boosted energy drink production in the region. Although, markets for energy drinks in South America and Middle East & Africa have relatively smaller scope due to less consumers but observing the growing interest for children and adolescents for energy drinks in the region are expected to push the global market at a considerable rate.
Analysis of Market Strategies for Manufacturers
Other competitors in the global market for energy drinks include Arizona Beverages USA, Keurig Dr Pepper Inc., Living Essentials Marketing LLC., N.V.E. PHARMACEUTICALS, National Beverage Corp., Osotspa Public Company Limited, Power Horse Energy Drinks GmbH, Rhino Rush, Taisho Pharmaceutical Holdings Co. Ltd., Tweaker, and VITAL 4U. Many of these companies are actively engaged in adopting several market strategies such as product launch, entering partnership or collaboration agreements, and acquisition and merger to enhance their market position in the global footprint. Some of the major events for the manufacturers’ attempts for strengthening their portfolios are as follow:
- Early this year, Monster Beverage Corp. entered an agreement with the Coca-Cola Company to expand their presence in the market. Under the deal, Coca-Cola agreed to transfer its energy drinks including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless to Monster corp. In 2015, Coca-Cola acquired nearly 17% equity stake in Monster for USD 2.15 billion in cash and opened its global distribution arm to Monster to improve their manufacturing and strengthen their distribution. In return, Monster agreed to transfer its non-energy drinks such as Hansen’s, Hubert’s, Peace Tea, and Blue Sky to Coca-Cola, which helped to increase their sales globally.
- Monster and Rockstar have broaden their soft drink products to compete with smaller players. For example, Rockstar has an organic offering and Monster has its green tea products to widen their market presence. According to BeverageDaily, the market for energy drinks has been expanded with the addition of new products based on with branched-chain amino acids (BCAAs), protein, beetroot extract, and creatine.
- Other relatively new varieties of existing energy drinks are based on no sugar, no carbs, no calories, and, counter-intuitively, no caffeine products, which indicate a high selling point globally besides the availability of coffee flavors and non-carbonated flavors.
- Many manufacturers have adopted several marketing strategies including limited-edition drinks offered only in certain store chains and flavors tailored for different countries, to promote their products and increase their control in the global market.
COVID-19 Impact on Energy Drinks Market
Consumer products food & beverage companies are facing challenges since the global production and their business activities are largely affected by the ongoing COVID-19 impact. Energy drinks industry is among the major sectors of food and beverage category that suffers a drastic setback due to the sudden disruption of commercial productions and global supply chains. Consumption at home through the means of online retails has steady increased due to the emergency lockdown of outsource sources but the large sales growth is generally associated with the out-of-home consumption, which brings a major drawback.
Monster’s second quarter net and gross sales were adversely impacted by the COVID-19 pandemic, in part due to disruption in the supply of the company’s bottlers/distributors reducing their inventory levels. However, the company claimed to have experienced a sequential improvement in sales in the latter half of the quarter as certain countries and states began to gradually re-open. Based on currently available information, the company does not expect the COVID-19 pandemic to have a material impact on its liquidity.
Nevertheless, the slow return of global economy and the re-opening of various industries indicate an optimistic view of the future market for consumer foods and beverage products.