Negative press has simply boosted US energy drink sales, analyst

By Ben Bouckley

- Last updated on GMT

Related tags Energy drinks Energy drink Red bull

Negative publicity concerning the possible adverse effects of energy drinks has only encouraged US energy drink growth in recent years, with consumers attracted by ‘edgy’ product positioning, but another formula is needed to boost growth.

That’s according to analyst Richard Haffner, from Euromonitor International, who noted that from “humble beginnings”​ where the US lagged in third place regarding total volume sales (behind Japan and Thailand) the country now held pole position.

And far from deterring consumers, negative headlines concerning the supposed ill effects of products had only contributed to growth within the sector, Haffner said.

“Contrary to having a negative effect, over the years, this controversy had undoubtedly contributed to energy drinks’ healthy growth.”

Haffner added: “Brands with names as openly provocative as Monster, Full Throttle and Rockstar, are not out to attract consumers for their health or nutrition credentials.”

‘Edgy’ market position

Since many of the people who purchase energy drinks do so for their controversial image, Haffner said it would be hard for brandowners to move away from this brand perception.

He said: “So the core US market is likely wedded to the current edgy positioning to maintain its high level of volume and minor changes around the edges can be used for incremental growth. But double high digit growth does not appear to be in the cards for the future.”

Phenomenal pre-recession volume growth in the US (34 per cent growth on a compound annual basis from 2003-2008) had given place to 4 per cent growth in 2010 compared with 2009.

Haffner said that Euromonitor data suggested that growth was likely to remain muted in other major markets such as Western Europe and Australasia, where (together with the US) almost half global production volumes sales were focused.

He said: “Expansion to new markets, especially in Latin America and the Asia Pacific, will need to become more of a focus for international brands.”

“Arguably, the recession may have may have impacted the volume of these relatively expensive products, but the old growth rates appear to be a distant memory,”​ Haffner added.

After the US recovers from the recession, perhaps we could see volume growth rates in the high single digit range. But it does not look like consumers in the US will again be increasing their thirst for energy drinks at a 34 per cent rate.”

Shedding the ‘bad boy’ image

Haffner identified the introduction of concentrated energy shots (in 1-2oz servings) onto the US market last year as an attempt by brandowners to shed the “bad boy”​ image and move beyond a loyal, youthful following.

“Thus we saw Monster Hitman and Red Bull Energy Shots. These energy shots were intended to be a quick-fix pick-me-up for a more conservative consumer, for example bankers or office workers.”

But Haffner noted that these line extensions of edgy brands “did not appeal to the new crowd and are now largely absent from store shelves”.

Predicting high single-digit growth for energy drinks firms going forward, Haffner said that rapid urbanisation in developing markets could nonetheless restore growth rates to around 20 per cent by volume, with edgy positioning playing well.

He added: “But until we reach the medium term, the category players will need to search for another formula to expand the user base, and thus volume, of the category.”

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