Energising Innovation: Energy drinks in the P&C channel

Over the last two years, the energy drink category has jumped in value by more than $261 million, or 45 per cent of total packaged beverage value growth, according to the Australian Association of Convenience Stores (AACS).

As stated in the AACS State of the Industry Half Yearly Report 2023, energy drinks continued to drive strong value growth of more than 12.9 per cent after experiencing more than 8.9 per cent growth in the first half of 2022.

Deb Cooper, Head of P&C at Frucor Suntory Oceania, says growth in the energy drink category has been fuelled by the introduction of new product ranges.

“We’re expecting the beverages channel to grow by $424 million dollars by 2027 with energy drinks contributing 61 per cent of that growth,” Cooper said. “Frucor Suntory is dedicated to ongoing category innovation to meet future consumer needs as well as attract new consumers to the category.”

David Forde, General Manager – Convenience and Petroleum at Coca-Cola Europacific Partners Australia, says there is more opportunity in the energy drinks category, due to increasing reliance on the beverage category within the P&C channel to drive sales.

“The drinks category is being increasingly relied upon within P&C to drive sales, and the energy category is the largest component within drinks,” Forde explains. “With the ever-continuing impact of cost-of-living pressures and the increasing prices of petrol, providing value is key to this channel, which is why we continue to innovate within our brands Mother and Monster.”

“P&C is where a lot of our innovation happens first, with new product developments often brought to market in this channel before selling elsewhere.”

Rise of ‘better for you’ beverages

Founder of Australian beverage brand Straight Up Energy, Jake Sheriff, says one of the biggest changes he is seeing within the energy drink category is consumers seeking out ‘better-for-you’ options.

“While I think there will always be a place for the full-sugar energy drink options, we are seeing growing demand for ‘better-for-you’ energy drinks,” Sheriff explains.

“Introducing new brands and ranges is a great way to bring more consumers into the energy category while also targeting current customers who want a healthier option.”

Straight Up Energy launched its first energy drink range earlier this year. Available at BPs across Australia, the range comes in three flavours – Green Apple, Mango and Passionfruit, and Watermelon and Pineapple.

“We saw a gap in the energy drink category for an Australian made, better-for-you product. Consumer feedback so far has been positive, and we look forward to expanding our range of flavours within the next six months.”

Sports supplement company Athletic Sport has also recently entered the energy drink market with the launch of its Kamikaze Energy drink.

Steve Trinder, Director at Athletic Sport, says the ultimate goal for Kamikaze Energy is to have a strong presence in the P&C channel.

“As a sports nutrition brand, we’re excited to bring some of the fun flavours we work with regularly over to the energy drink sector,” said Trinder.

“Following the success of Kamikaze Energy, we’ll soon be launching a new lightly carbonated hydration and amino drink, which includes specific sport nutrition ingredients like Essential Amino Acids, Himalayan pink salt and coconut that help with hydration, alkalising, amino replenishing and keeping energy levels up.”

Demand grows for zero-sugar

Forde says one of the main trends energy drink manufacturers are seeing in the P&C channel is the uptake and growth in zero sugar and flavour variants.

“The growth of zero sugar and flavours demonstrates the value and success of innovating in the energy category for this channel.

“The uptake in zero sugar variants is likely to continue as consumer expectations change. It is important that retailers capitalise on this outside growth, while continuing to protect the core energy range.”

Drawing from this insight, Coca-Cola Europacific Partners Australia launched Monster Zero Ultra Energy Peachy Keen exclusively to the P&C channel in August this year.

“This was an exciting new offering that was strategically aligned to growing consumer preferences for bold flavours via no sugar products,” Forde said. “Monster Zero Ultra Energy Peachy Keen has been a huge driver of growth and one of our best performing new products.

“In October, we also released a new Mother flavour called Rainbow Sherbet. We are continuously innovating across the Mother and Monster Energy brands to satisfy demand and have a large pipeline of new products launching in 2024, under both Monster and Mother, which we’re excited to bring to market.”

‘Engine room’ of the category

While sugar free is where a lot of growth is coming from in the category, Forde says that doesn’t discount the importance of offering customers and consumers the choice of a full range.

“Full sugar energy drinks are the engine room of the category, accounting for 78 per cent of energy drink sales. Retailers need to leverage the outside growth in sugar free, while protecting the core energy range to ensure consumers are provided with choice and selection, as both sugar and no sugar still have their place in the range,” Forde said.

As Cooper explains, Frucor’s core demographic of consumers still want a full-flavoured sugar drink.

“Traditional energy drinks continue to be the largest segment of the category and continue to maintain strong year-on-year growth – with V Energy leading this charge,” said Cooper.

“We launched ‘Tropical Tang’ to our V Energy beverage range in May this year; our first full-sugar product released since V Raspberry Lemonade in 2020. The fact that it’s experienced a lot of success so far confirms the strong demand for the full-flavour, sugar energy drinks.”

For the first time in 26 years, Frucor Suntory has also upgraded its iconic energy drink V Green.

“The enhanced flavour and refreshed packaging were carefully crafted to retain all that fans know and love, while dialling up the best bits,” said Cooper.

“We’ve refined what people already enjoy about V Green based on research insights from fans. We spent time with drinkers of V Green during the development to understand what they loved most, which has resulted in a smoother, more invigorating energy drink.

“By updating V Green – both from a flavour and design perspective – we believe we have met the needs of existing drinkers and new ones.”

Opportunities and challenges

Cooper says understanding space to sales is key to retailers to ensure they can accommodate energy drink growth.

“One in five Australians consumes an energy drink every day and approximately 61 per cent of the total beverage growth within the P&C channel is going to come from energy drinks,” explains Cooper.

“In terms of opportunities, it’s really important for retailers to look at what their total space to sales allocation looks like. Within the next five years, energy drinks are going to make up 40 per cent of the beverage category, so if you’re looking at your main fridge that has an eight-door layout, three of those doors need to be allocated to energy drinks. Ultimately retailers should make sure they’re allocating space for the future.”

Forde adds that even though P&C traditionally services single-serve drinks, retailers shouldn’t discount the role of multi-packs.

“We know that people in the energy drinks category have a high purchasing frequency; often buying in volume,” Forde said. “With energy drinkers having a high tendency for drinking now and drinking later, it’s a chance for the channel to capitalise on this opportunity and leverage multi-packs.

“With a growing focus on value, energy and food bundling will be a growing trend. However, while energy is a major player in the P&C channel and is only going to continue to grow, retailers shouldn’t discount other categories when it comes to value pairing with food. Energy drinks has a smaller penetration than other categories and should be offered alongside soft drinks and waters.”

While competing with the bigger, established brands does pose a challenge, there are still a lot of growing opportunities in the energy drink space, says Sheriff.

“We’re continuing to watch and follow the beverage space in countries like America where there are numerous growing trends.”

In the end, it all comes down to consumer demand, adds Trinder.

“The energy drink sector is driven by consumer choice and demand, and more and more of these consumers are demanding healthy, better for you drinks,” says Trinder.

“If retailers don’t have the product the consumer wants, they’re going to find it somewhere else. At the end of the day, it’s all about the customer, so categories like energy drinks need to keep innovating and exploring new products and ranges to ensure we are giving the customer exactly what they want.”

This article was originally written by Lizzie Hunter for the February/March issue of Convenience and Impulse Retailing magazine.

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