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Give your fridge an energy boost

'E' stands for energy but it also means 'exhausting' when you're trying to make a selection from the cold drinks fridge. ASCN takes a look at the current state of play in the fastest growing segment of the beverage market.

In days gone by, if you needed to quench your thirst, you swallowed a soft drink or water. If you wanted a boost of energy, you would pop a Pepsi or a Coke.

While those traditional favourites continue to be extremely popular occupants of the beverage fridge, they are under attack from the so-called 'energy drink' sub-segment of the cold drink market, a sub-segment that is a minefield in its complexity.

However, while it may be a minefield, it's also a gold mine. Despite still being a relatively young category within the Australian non-alcoholic beverage market, energy and sports drinks now generate almost $550 million dollars in annual retail sales.

More than Just a Drink

Busy lifestyles and more awareness of health issues has meant consumers are looking for - and spending more - on beverages that not only quench their thirst but also deliver something more, so they choose 'energy drinks' or 'functional beverages' that contain added benefits.

Leading European food and drink consultancy Zenith International defines functional soft drinks as having "a health benefit beyond their basic nutrition content by virtue of physiologically active added components".

Its latest report, published last year, breaks down functionality into four main categories:

• Enriched beverages, such as juices and waters with added vitamins and minerals;


• Sports drinks;


• Energy drinks, and


• Nutraceuticals, with targeted ingredients to provide specific medical or health benefits. Nutraceuticals embrace over 20 different types of claim, ranging from aphrodisiac and nicotine craving relief, through detox to digestion and cholesterol reduction.

In strict terms, 'energy drinks' fall within the FSANZ Formulated Caffeinated Beverages guidelines in that they must contain a minimum of 145mg/L concentration of caffeine in addition to other permitted vitamins and ingredients.

The Australian Soft Drink Association, which works with the industry and government on regulations, has applied for a new Formulated Beverage Standard which covers more water and fruit juice based drinks that are low in sugar and have vitamins and minerals added.

That concept is already well established, with many players now involved in the 'energy drink' market that don't necessarily include caffeine but do include other additives that either replace what the body needs after strenuous activity or sustain it to continue performing at a higher level than might otherwise be the case.

One such company is Solis Beverages which offers a range of four 'wellbeing drinks' which provide a healthy alternative to soft drinks. The range is 100 per cent all-natural and non-carbonated, and contains a variety of active ingredients which allow consumers to pick and choose to suit their needs at the time.

The range includes Bliss (added calcium and B vitamins), Cherish (added folate and Vitamin C), Power (with gingko biloba, guarana, and B and C vitamins) and Adrenalin (guarana, Siberian ginseng and B vitamins).

"A product such as our Adrenalin will give consumers the same energy lift as one of the more traditional energy drinks but our customers tell us it tastes much better," says Solis Beverages' MD, Brian Conroy.

"Its base is apple, cranberry and raspberry. It's a similar situation with Power which has as its base orange and carrot juice - but also offers a real energy boost.

"When you look at Bliss and Cherish, they contain the recommended daily intake of their relevant additives - Bliss with calcium and Cherish with folate - which means they make a serious contribution to our consumers' wellbeing," says Mr Conroy.

Red Bull's sales director, Mike Stacey, says it's possible to define all entrants thus: refreshment energy (usually a glucose-based drink), sports energy (replenishment such as Powerade or Gatorade) and functional energy. Given what Solis and others have to offer, it would seem this now includes not only what could traditionally be defined as 'true' energy drinks, but also some of the wellbeing beverages.

When you look at those, at least in terms of the strict FSANZ definition of energy, and the examples put forward by Mr Stacey, there are three main players. 'V', Red Bull and Lift Plus (from Coca-Cola), which all contain combinations of elements such as caffeine, B vitamins, taurine and guarana. Two of these ('V' and Red Bull) now also offer a sugar-free alternative in response to consumer concerns about excess sugar content.

But tagging along behind them are a host of others, both recent arrivals and more established names, that also fit the bill, perhaps in the ASDA's wider definition of energy drinks, but definitely giving rise to a blurring of the lines between the categories. Some, though, don't believe there is any confusion, at least on the part of the consumer.

"We don't believe there is a blurring of the energy drink and sports drink categories here in Australia," says Coca-Cola's public affairs and communications manager, Joanna Ryan.

"The industry and consumers clearly differentiate between the sports drink and energy drink categories. There is a very distinct difference and consumer need between energy drinks such as Lift Plus and sports drinks such as Powerade," Ms Ryan says.

One of the newest arrivals on the scene is Zenergy Functional Beverages which arrived on the market late last year, offering what it describes as 'enhanced water beverages'. The range includes a new-style energy water (Planet X Slam) which fits the strict definition of an energy drink, a recovery and rapid hydration formula (Smash Repair), and a low GI slow release energy sports water (Ride). There's also a low GI formula with diet and appetite control benefits (Slinky) and PLAY, which is a 'low GI kids' sportswater' with calcium and fluoride.

"We like to say water has just got better," says Zenergy's Sharon Evans, director and communications manager, claiming the range definitely fits into the 'nutraceuticals' category.

"But our range is not just about adding flavour. We want to push the pace of innovation in the market to cater for growing consumer segments.

More Than Just Water

"People are more aware of the need to stay well hydrated but they want something more than just water. We think our range offers something for everyone because each product has a different offer for wellbeing and various health benefits," Ms Evans says.

"Wellbeing has become a highly valued commodity for consumers. People are looking for ready-to-go convenient solutions in food and beverage to cater for this need. We do have an obesity problem in this country, we have a growing incident of lifestyle-induced diabetes and, in addition, we can't get away from the fact that - usually - we have very hot summers, so health and hydration are a key issue.

"So hydration products with enhancements for wellbeing and specific health needs are becoming more popular. People know they need hydration but they also recognise when they need more than just a quick fix caffeine or sugar hit. Our products offer ready-to-go convenience with a healthier hydration option than many traditional sports and energy drink formulations," Ms Evans says.

More than Just a Pretty Face

Another 'new kid on the block' is Wild Blast from Excite Beverages, which was first released in November last year. Predominantly available in Victoria at time of writing, the company expects to have the range available in Queensland and NSW shortly.

With three colours/flavours (Berry, Tropical, Lemon) on offer, Wild Blast stands out from the crowd - literally - with its bright, fluorescent-coloured contents, but it's not just a 'pretty face', says Excite MD, George Kotsiras.

"It contains taurine and B vitamins and about the same amount of caffeine as a standard cup of instant coffee, so it is an energy drink, but not just another energy drink, because it is flavoured.

"We did our research and development for three years and saw a niche for an energy drink with flavour, something that was refreshing and energising but without that sort of medicinal aftertaste.

"We're obviously not alone in that thought, because when we did some taste sampling with an audience of 4000 people, six out of 10 of them preferred Wild Blast to other energy drinks which are the market leaders.

"We believe it's the variety that will help our sales. If people try one flavour and don't like it, they have alternatives. With our rivals, if the consumer doesn't like the taste, there isn't an alternative, so they probably won't try it again," Mr Kotsiras says.

All these new beverages are fighting for space in the drinks fridge along with the market leaders.

Innovation is the Key

Frucor, which is now owned by Groupe Danone, started life in 1962 as a small New Zealand fruit juice business. Today, it's a leading Australasian beverage company responsible for the energy drink 'V' and the 'Mizone' range of flavoured sports waters, among other leading brands.

"Frucor is a cold drinks innovator," says John Sawicki, Frucor's beverages trade marketing manager.

"'V' was the first energy drink on the market in Australia and is the current market leader with a 52.1 per cent share, according to Neilsen [C*Track, MAT 21/12/03] followed by Red Bull on 34.4 per cent and Lift Plus with a 9.4 per cent share.

"We believe the success of 'V' can be attributed to above all, to fulfilling a consumer need, but also a quality product that delivers what it promises, and a strong ongoing marketing campaign which has created and maintained consumer and category awareness."

Red Bull's Mike Stacey is full of enthusiasm as he talks to ACSN, reporting the company has just posted its best ever year in Australia: up 53 per cent on 2002 sales and has also had a great year overseas.

"For 2004, we're expecting bigger and better again. We're predicting growth of around 40 per cent and we're going to put $20 million into marketing the product in Australia, up by about $4 million on last year, which should reassure retailers that we are here for the long run and will support the product.

"Convenience stores were particularly good for us - it's really our biggest market and we're now the number three 'soft' drink in the channel: Coca-Cola, V and us."

The Red Bull spokesman says last year's addition of a sugar-free version to the range has been a great success, helping to build sales by another 10 per cent.

"Unfortunately, many retailers aren't yet stocking sugar-free and they should be. It's not cannibalising sales, it's adding to them and that means adding dollars - which should be an attractive thought!" Mr Stacey says.

While operating as an individual company, Red Bull also falls under the sales and distribution mantle of Cadbury Schweppes which effectively has a 'foot in both camps': Red Bull and Gatorade.

"These two icon brands have not only pioneered their respective categories and reached global share leadership, but also represent the fastest growing brands in their respective categories within the Australian market," says Cadbury Schweppes' Karina O'Meara.

"In building the sports energy category in Australia, Gatorade has identified consumer education as the key to drive consumption. More active, healthy consumers recognise the importance of added electrolytes and carbohydrates in maintaining their hydration levels and avoiding the effects of dehydration.

"However most Australians still have only a tacit understanding of the value of these drinks, so manufacturers have a role to play in building that understanding if they want to build consumption," says Ms O'Meara, Cadbury Schweppes' corporate communications manager.

Behind the top three, according to MAT figures (brand shares, 21/12/03) is Red Eye which offers five flavours in bottles and one flavour in a can.

"We were the first company in Australia to make energy drinks but at that stage - 1995 - it was illegal to add caffeine. Once it was legal to import drinks with added caffeine, such as Red Bull and 'V', the rules changed," says Red Eye's owner and managing director, Theo Kotiadis.

"We are a smaller player but we are out there, and from my knowledge of the segment, it's the small players who have all the ideas and add the variety so retailers shouldn't close their fridge doors to someone offering something different.

"I think part of the reason we're sitting so high in the market place, for example, is that we do offer variety. We do offer different flavours whereas the market leaders only offer one, and people like variety.

"Red Eye will be expanding its range, but we won't just be about 'energy drinks' as they are perceived - we're working on some 'new-age' wellbeing beverages because we believe the traditional 'energy drink' market has stabilised and there's a demand for more variety," Mr Kotiadis says.

Merchandise for Easy Identification

Somewhere in the middle of all these 'new' arrivals is an extremely well-known name: Lucozade. Now with three flavours, it has been around for over three decades, however it has lost ground over the last few years.

"We've been hit hard by all these new entries into the market and this is something we need to address - but the brand continues to perform well, where ranged," says GlaxoSmithKline's Carol-Ann Stewart.

"That's because Lucozade is the original energy drink! It has heritage and people know it works as a day-to-day pick-me-up. The body prefers glucose as a source of energy and ours is the only pure glucose syrup formulation available, so it is unique to the energy category in that sense and should be merchandised as such.

"The important thing for retailers is to be very clear in the way they merchandise these different categories within the sports and energy category, so it's easier for the consumer to identify the type of beverage they need and then find it on the shelves.

"By matching the merchandising to consumer needs, this category will perform strongest for you," Ms Stewart says.

The experts say growth in the energy drinks category is being driven by changing consumer lifestyles as well as solid promotional activity, and it is the fastest growing beverage category in Australia.

Experts in the industry predict even further growth and their optimism is hardly surprising when you note that consumption in Australia is still well down on other counties such as New Zealand where the figures stand at 3.4-litres per person per year against 1.2 litres here.

Cadbury Schweppes points to an even bigger gap in consumption.

"In the US, where the sports energy segment is now 40 years old, consumers have grown up with Gatorade embedded as part of their sporting ritual and consumption stands around 10-litres per head, compared to three litres here. There's a long way still to go in Australia."

When it comes to advice about what more can be done to build consumption, from a retailer's perspective, all our experts have a wish-list as well as good suggestions.

"There's certainly an opportunity there to build up the take-home side of the business," says Red Bull's Mike Stacey.

"More combo deals are always a good way of selling product, or offering two at a value price. That way you're getting beyond these drinks being simply an impulse buy and encouraging the customer to take more," Mr Stacey says.

"Retailers in P&C have made great advances to ensure that energy drinks were receiving their fair share of shelf relative to sales, but there's still much that can be done," says Frucor's John Sawicki.

"Space that is currently allocated to traditional carbonated soft drinks, in particular cola varieties, needs to be reviewed in light of the strong growth and demand that is being experienced by categories such as energy drinks and functional waters.

"There's still too much attention being paid to traditional carbonated soft drinks when the consumers are demonstrating that they want functional products. This is clearly highlighted by the fact that 'V' is now the number two selling beverage brand after Coca-Cola in the P&C channel, according to Neilsen," Mr Sawicki says.
[Source: AC Neilsen, C*Track. MAT 21/12/03. Value Share]

"It's also a more appealing proposition when you consider that there are higher profits in energy drinks versus other beverages."

GSK's Carol-Ann Stewart agrees with Mr Sawicki's assessment, and his advice.

"Consumers probably still need more education to determine what will best suit their needs at that time, whether it should be water or an energy drink or a sports drink, and the retailer can help with that via clear merchandising.

"If your range is still predominantly soft drink, you need to re-think your approach and offer a wider range in line with consumer trends to maximise your sales and profits. Pick the best sellers in each category of course, but do also offer a choice of products that meet different consumer needs and they will walk off the shelves.

"Talk to your suppliers and use their data to set up your shelves - the consumers will buy more, if they can find it easily."

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