Energy drinks exploded on to the market in the 1990s with dynamic brands that delivered an instant caffeine- and calorie-packed kick to weary road warriors, shift workers and nightclub ravers. The sector has since demonstrated plenty of stamina, expanding from service station staple to retail mainstream.
But awareness of levels of sugar and caffeine – including their effect on children – has seen changes in the product mix and drawn the attention of policy-makers. These changes include a sharp growth in lower- or sugar-free options and a burgeoning sub-category of healthy or natural energy drinks. The trend away from high sugar content is also affecting the complementary sports drink sector: products designed to help athletes rehydrate before and after exercise, which tend not to include caffeine. Suppliers including Lucozade have introduced lower- or zero-sugar alternatives to their core ranges.
Stories of hyperactive schoolchildren disrupting classrooms and experiencing headaches or sleep problems have led ministers to consider restricting the sale of high-caffeine energy drinks to children. A consultation launched last year came just months after the coming into effect of the Soft Drinks Industry Levy – designed to combat childhood obesity by restricting sugar content across all soft drinks, including energy products. What the government is proposing is a ban on sales to youngsters of energy drinks containing more than 150g of caffeine per litre. The initiative – initially applicable in England (although the devolved administrations in Scotland, Northern Ireland and Wales will likely follow) – does not specify an age at which the ban would take effect, but 16 and 18 have been mooted. It follows on from voluntary restrictions to which much of the industry has been adhering for some time.
Recipe reformulation
Last year, the Association of Convenience Stores (ACS) surveyed 1,210 of its members and discovered 53% were not selling energy drinks to under-16s. The ACS says that while “energy drinks are an important part of retailers’ soft drinks offer”, members should be “conscious of concerns in the community” from parents and schools and “develop policies based on their own business and the local circumstances in the communities they serve”. The trade body adds that if the government decides to introduce a legal age restriction, it will work with retailers to promote compliance in the sector. “Over half of convenience retailers have introduced policies to prevent sales of energy drinks to under-16s,” says ACS chief executive James Lowman. “But a legally enforced age restriction would provide retailers and consumers with absolute clarity.” Beyond the possibility of a ban on sales of energy drinks to children, increasing concerns among consumers in general about sugar and caffeine levels have been driving suppliers – including Barr Soft Drinks, maker of Rockstar, Coca-Cola European Partners (CCEP), which is behind the Monster brand, and Red Bull – to reformulate recipes and introduce products perceived as healthier. Generally, this has meant a push into alternative lines containing less sugar or sugar alternatives.
“Millennials are becoming more health-conscious, setting the trend across all soft drink sectors that we expect will continue in the next few years,” says CCEP’s senior trade communications manager Amy Burgess. “As more consumers look to make changes in their lifestyles to be healthier, sugar content has become a major factor in their choices, and they are continuously on the lookout for low-sugar options.”
Fruity flavours
These alternatives continue to grow, luring new customers to the sector as well as converts from high-sugar products. The zero-sugar Monster Energy Ultra range, which comes in six fruit varieties, has seen a “huge growth of more than £15m” in the past year, says Burgess. A new variant, Monster Ultra Blue, featuring a “crisp, citrus berry flavour”, is designed to “appeal to millennials looking for a sugar-free energy drink that tastes great”. Lucozade, which as well as being the leader in sports drinks competes in the energy category with Lucozade Energy, says the product contains less sugar than previously. “We have seen a long-term trend towards drinks with lower sugar as consumers become more and more interested in living healthier lifestyles,” says Matt Gouldsmith, channel director for wholesale. The imposition of the sugar levy and the importance of the health agenda has seen the market swing to sugar-free options in the past year. Low-calorie variants now make up more than 10% of the sports and energy category, according to Mark Bell, strategy and planning manager at Red Bull UK, which claims its Red Bull Sugarfree 250ml is the number one low-calorie sports and energy drink.
Adrian Troy, marketing director at Barr Soft Drinks, says that although sugar remains “an important component of energy delivery for the majority of consumers in the market”, a growing number are seeking out lower-calorie or even sugar-free options. He estimates this part of the energy market will be worth £200m within five years, more than twice its £90m value today. The company’s Rockstar Revolt – launched in 2016 in two 500ml varieties, Killer Citrus and Killer Cooler – is a zero-sugar energy drink that “does not compromise on look, taste or energy boost”. The brand extension “appeals to the growing number of consumers who want zero-sugar energy, but don’t want it to look, feel, perform or taste different to regular energy drinks,” says Troy.
Adult market
One adult-oriented brand that entered the market with solid low-sugar credentials from the start is Carabao. The company attributes its more than 50% year-on-year growth partly to the fact that the drink, which originates in Thailand, has attracted more health-conscious shoppers to the energy drinks sector who were previously deterred by its high-sugar, high-calorie reputation. It claims shoppers new to the category buy one in every two cans of Carabao. “When we entered the market almost three years ago, we noticed a trend towards low- or no-sugar in the energy drinks category,” the company says, adding that this shift in taste has continued. “Sugar and health concerns are a top reason why potential shoppers avoided the energy drink category and why occasional drinkers don’t purchase them more often.”
Health concerns, including an increasing awareness of caffeine levels, have also led to the rise of the “natural energy” sub-category. Although it is worth only £11.2m compared with an overall stimulants market of £461m, it is in “rapid growth”, says Trystan Farnworth, director of sustainability at Britvic, which is behind the Britvic Soft Drinks Review and the sub-category’s leading brand, Purdey’s. While better-for-you attributes are driving developments in the market, retailers should not forget the importance of flavours when it comes to the reasons consumers choose a particular energy drink, says Gouldsmith at Lucozade. The company launched its Apple Blast variant earlier this year after a limited trial in 2018 and it has already become the third most popular Lucozade Energy flavour among independents and symbols, Gouldsmith says.
Continuous innovation
According to Burgess at CCEP, taste remains one of the main factors consumers consider when buying energy drinks. The sector has seen increasing demand for “more flavour options”, with “flavour innovation” in energy drinks, such as CCEP’s new Monster Juiced range, “driving sales and enabling brands to reach new audiences”, she says. Monster Juiced, she maintains, has “helped us bring more variety to the market and helped retailers tap into demand for fruity flavours”. The juiced energy segment, says Burgess, is growing twice as fast as the total energy sector, with Monster Mango Loco – a blend of mango, guava and pineapple juice – the latest addition to the range.
According to Troy, Rockstar’s range of 11 flavours is “the biggest within energy drinks and a key motivator for shoppers to buy Rockstar, as it doesn’t define how an energy drink should taste”. Among core energy drinkers, the brand is considered a “better-tasting” energy drink, with “consumers really connecting with the broad range of flavours”, he claims.
According to Carabao, sugar substitutes “often struggle to deliver on taste, which is the number one reason consumers cite when choosing an energy drink”. The company says a lot of energy drinks are “syrupy or sickly-sweet, which consumers will increasingly begin to shun”. In comparison, Carabao is “lightly sparkling, low- or no-sugar, fruity and refreshing, just like the very best soft drinks”.
Red Bull points to the need for continuous innovation in the energy market, with drinks that deliver multi-vitamins, protein or a functional energy boost growing in popularity. “Taste and refreshment are always going to be key drivers in soft drinks,” says Bell. “Busier lifestyles and increasingly time-poor consumers, however, mean the market is looking for more all the time.” In the functional drinks segment, Lucozade says Lucozade Sport, which comes in orange and raspberry flavours among others, had its “biggest-ever year” in 2018. The brand is teaming up with boxer Anthony Joshua this year to launch a special edition variant called Fruit Punch, which comes with a gold cap to reflect Joshua’s Olympic and other sporting successes. The company also offers its Lucozade Sport Fitwater range, launched in 2017, a functional offering it says is helping retailers grow their bottled water sales and is now worth more than £3m in retail. Lucozade says the product contains four electrolytes that help replenish the body’s magnesium, contribute to electrolyte balance and reduce fatigue, as well as calcium to aid muscle function.
Chilled offer
When it comes to merchandising, CCEP’s Burgess says focusing on the chilled offering is essential, as so many shoppers in the category are looking to consume their drink immediately. If space is available, she says, secondary siting, on aisle ends, close to the entrance or next to the checkout, is a “great way to help boost sales by appealing to mission shoppers by highlighting the products they need”. She even suggests displaying energy drink brands such as Monster alongside the likes of burgers and buns and disposable barbecues. “Highlighting the display prominently can play a role in encouraging customers to plan a spontaneous barbecue when they’re shopping for dinner items, leading to incremental growth for retailers,” she says.
Vertical blocking
Red Bull’s merchandising advice includes allocating up to 70% of the soft drinks section to sports and energy brands “in line with the share of the category”, and making sure there is vertical blocking, because “shoppers only see products within a 1.3-metre breadth” and it “helps shoppers easily find the product they are looking for, improving their ease of shop”. Carabao suggests retailers consider its drink range as a “gateway brand”, siting it between mainstream energy brands and soft drinks, enticing consumers seeking the “taste and refreshment of a soft drink and the boost of an energy drink, but without the vast amounts of sugar that typically come with it”. It adds: “This is the perfect way to entice new shoppers who may not be interested in major energy drinks brands, while growing category penetration and encouraging trade-up.”
In an expanding category, trying to cover all bases can be the wrong tactic, believes Duncan Hill, managing director of store outfitting specialist HL Display. He says in a growing and varied sector that includes everything from powdered whey to specialist waters and everyday energy drinks, small outlets in particular need to “focus on products with a more mainstream appeal, rather than those aimed at serious fitness fanatics”.
That said, store-owners should be aware of what is coming down the line. “Retailers need to stay abreast of new trends, as this category is constantly evolving,” Hill says. “For instance, we are seeing an increased emphasis on PH levels within the water sub-category. Concerns over plastic packaging waste have also resulted in brands opting to change to more environmentally friendly packaging, so this can be another USP on top of a product’s health or sports performance related benefits.”
Merchandising options in the soft drinks category have traditionally been limited, he says, with “fixtures prone to becoming messy and disorganised”. New solutions on the market allow retailers to transform the look of their fixture and boost sales. “With many multiples now adopting such solutions, independents need to ensure their displays look as good as possible to remain competitive,” he adds.
By Juliet Morrison
