Retailers are employing a new type of energy conservation.
Just take a look at the beverage aisle, where it's evident that they're safeguarding the growing energy drink category.
Responding to the many new brands, flavors and sizes, including new 16- and 24-ounce cans, retailers are expanding shelf space, using more secondary displays, and boosting promotional activity.
While the category is positioned for continued growth, some potential challenges loom. One retailer SN interviewed said an SKU rationalization is inevitable, while an industry observer predicted a pricing battle.
At the same time, nutritional concerns have prompted at least one scientific study on the caffeine content in the beverages.
Though non-aseptic energy drinks are a relatively small beverage category, sales are booming. Dollar sales in supermarkets grew 55.6% to $405.2 million in the year that ended May 21, according to Information Resources Inc. Leading the category is Red Bull, followed by Monster, Rockstar, Full Throttle and SoBe No Fear.
Niemann Foods, Quincy, Ill., has doubled the amount of energy drink SKUs to 40 over the last year, said Martin Miller, category buyer for the retailer.
Niemann carries 15 SKUs from Pepsi-Cola alone, up from three this time last year. Martin attributes much of that increase to the launch of larger 16-ounce sizes.
Other marketers are introducing 16-ounce cans that retail for less per ounce as a way to offer a value proposition. But such pricing strategies haven't slowed Red Bull sales at Niemann.
"Red Bull hasn't flinched," Martin said. "It's still the category leader."
Kent Phillips, chairman of Data Bank USA, a market research firm in Fort Wayne, Ind., said the larger can sizes could indicate the start of a pricing war.
"The 16-ounce sizes are the first step" in such a battle, he said.
Ted Taft, managing director of Meridian Consulting in Westport, Conn., thinks the category is a long way from becoming price sensitive. Regardless of what happens with pricing, though, he predicted a huge influx of new products, only some of which will succeed.
"Energy drinks could explode and become a shining star, or settle into blackness," he said.
For now, retailers are enjoying the sales and margins that accompany the category's growth. The gush of new products prompted Niemann to increase its new energy drink sets to 16 feet, up from 4 feet.
Martin warned, however, that the many product introductions may necessitate a SKU rationalization in the near future.
"At some point, we're going to have to start picking and choosing," he said.
Until then, Niemann will continue to pour strong merchandising and promotional attention into the category. One way it's doing so is by using more coolers so it can sell cold cans of Red Bull and other brands on the front end.
Stop & Shop, Quincy, Mass., has also racheted up attention to energy drinks. The Ahold division offers about 24 SKUs, twice as many as last year, and has increased its use of temporary price reductions and bargain-aisle activity to promote the category, said Chris Oden, direct-store-delivery beverage buyer.
Energy drinks are experiencing a shot of double-digit growth at Stop & Shop, thanks to the involvement of Coca-Cola and PepsiCo, which have been distributing such brands as SoBe and Mountain Dew AMP (both from Pepsi) and Full Throttle and Rockstar (both from Coca-Cola).
"Now that Coke and Pepsi have entered the category, it has dramatically grown the number of products available," Oden said.
While all is certainly good in the category, future success may depend, in part, on whether it undergoes nutritional scrutiny as carbonated soft drinks have.
"The same kind of publicity surrounding soda in schools may affect energy drinks in terms of the caffeine content," Taft of Meridian said.
While the amount of caffeine in energy drinks is generally less than that in a cup of coffee, ounce per ounce, it's about twice that found in CSDs.
This concerns Bruce Goldberger, director of toxicology at the University of Florida's College of Medicine in Gainesville. Goldberger said consumers may know energy drinks have caffeine, but not how much.
Goldberger recently analyzed the caffeine levels in energy drinks and other beverages, and found that Red Bull contains 66.7 milligrams of caffeine per 8.3 ounces, while SoBe Adrenaline Rush has 76.7 milligram per 8.3 ounces. A cup of coffee has 80-150 milligrams.
Goldberger said he found that parents are giving energy drinks to their children before sporting events, in hopes that they will get a competitive edge.
Pepsi-Cola North America and Coca-Cola officials said most energy drinks are consumed by adults looking for an alternative to stimulants like coffee.
"Our products appeal to consumers who are looking for an added boost of energy, whether as a substitute for morning coffee, an afternoon pick-me-up, a drink for social occasions or as a precursor to a workout," said Pepsi-Cola North America spokeswoman Michelle Naughton.
Coca-Cola spokesman Scott Williamson added that these consumers expect to find certain ingredients, including caffeine. Along with Full Throttle and Rockstar, Coca-Cola also markets Vault and TaB Energy.
"[Even so,] the typical energy drink has less caffeine than the same amount of brewed coffee," Williamson said.
While that's true, even small doses can cause a variety of physiological effects, including elevated heart rate and blood pressure, Goldberger said.
The availability of 16-ounce sizes makes matters worse, Goldberger said. His research found, for instance, that a 16-ounce can of SoBe No Fear contains 141.1 milligrams of caffeine.
Goldberger said the Food and Drug Administration should require energy drink manufacturers to list the level of caffeine on the Nutrition Facts panel. Now, marketers are only required to show that caffeine is an ingredient.
Tom Pirko, president of Bevmark, a food and drink consulting company based in Santa Ynez, Calif., said caffeine concerns could slow the market's growth, especially at a time when CSDs are under fire for their sugar content.
Pirko pointed out that obesity concerns prompted a recent deal in which Coca-Cola, PepsiCo and Cadbury Schweppes agreed to sell only water, juice, tea and low-calorie drinks in schools.
Ali VanGorden, the registered dietitian at Penn Traffic, Syracuse, N.Y., said considering the popularity of energy drinks, they're likely to remain a strong presence on retail shelves. She said that while consumers should have choices, they should limit their caffeine intake.
"There's valid concern with young people drinking these beverages, given the caffeine content," she said.
By the Numbers
84.5 million
Gallons of energy drinks sold, 2004
152.5 million
Gallons of energy drinks sold, 2005
80.5% growth over one year
Source: Beverage Marketing Corp.
BEVERAGE WATCH
Soft drinks remain the most promotional of the top five beverage categories, with nearly three-fourths of dollar sales sold on promotion
CATEGORY: $ SALES* MILLIONS; CHANGE VS. YEAR AGO; % SOLD ON PROMOTION**; % POINT CHANGE VS. YEAR AGO
CSDs: $1,045.6 million; - 1.8%; 69.0%; -0.9
Milk: $802.6 million; -4.5%; 25.1%; +1.2
Beer: $682.6 million; +2.0%; 47.4%; -1.8
Bottled Water: $360.5 million; +15.6%; 51.4%; +1.5
Wine: $354.5 million; +7.5%; 42.9%; -0.8
Source: Information Resources Inc.
* Sales in food, drug and mass outlets (for beer and wine, food and drug only) for the four weeks that ended May 21
