Home » Articles, Global, North America, Soft Drinks » Innovations in Energy Drinks Part 2: Blurring the Lines


July 30, 2012

Innovations in Energy Drinks Part 2: Blurring the Lines

IMG_0800Analyst Insight by Jonas Feliciano, Beverages Analyst

With energy drink manufacturers innovating in flavours, caloric count and natural ingredients becomes differentiators in positioning.

As explored in Part 1, several energy drink manufacturers have developed new flavours to stem the declining growth in the US. While the new flavours add variety and inject the industry with much needed innovation, the functionality and positioning of the products will become as important as the taste, especially as new players enter the market. The current line of hydration/energy drinks from Monster and Rockstar give consumers a refreshing beverage option, often with much fewer calories than both full flavoured carbonates, RTD teas, and other energy drinks. However, there is also a segment of consumers still wary of the perception that energy drinks are particularly unhealthy, despite these changes in formulation. As such, a market for “natural” energy drinks has also emerged. Regardless, as the category lines between soft drinks continue to blur, the functionality of beverages continues to be a key factor in consumer choice.

The Frankenstein of soft drinks

The new era of hydration/energy drinks is a calculated construction of market research and consumer trends. Carbonates have been in steep decline due to obesity concerns. Even beverages with perceived health benefits, such as fruit and vegetable juices and sports drinks, saw decline in growth due to high calorie considerations. As such, many consumers were turning toward non-carbonated soft drinks such as RTD teas and bottled water due to health perceptions. But, as evidenced by the growth of energy drinks, American consumers have also come to expect functionality with their beverage consumption outside of mere thirst quenching.

Accordingly, successful products are those that are able to combine low/no calories with added functionality. Enter the new Rehab and Recovery drinks from Monster and Rockstar, respectively. Although not the first energy drinks manufacturers to offer a non-carbonated variety, the fact that it was coming from the 2nd and 3rd largest US brands will be important to extending consumer awareness. While both are essentially hydration/energy hybrids, the beverages have similarities and differences worth noting.

Soft Drink Category Size and Growth

 

2011 Off-trade Volume

2006-11 Absolute Growth

2006-11 CAGR

Energy Drinks 

1,386.2 mn litres

976.8 mn litres

13.3%

Sports Drinks 

4,590.5 mn litres

642.8 mn litres

1.4%

RTD Tea 

2,296.9 mn litres

339.6 mn litres

10.5%

Functional Bottled Water 

2,270.5 mn litres

1,203.6 mn litres

16.3%

Fruit/Vegetable Juice 

9,225.4 mn litres

-484.4 mn litres

-1.1%

Carbonates 

36,369.6 mn litres -3,382.2 mn litres -1.8%

Monster Energy has Monster Rehab and Rockstar has its Recovery line. Both tout hydration benefits as each are fortified with electrolytes, and both are non-carbonated to give them more of a sports drink feel. Most interesting, none of these energy/hydration hybrids are offered in the traditional “Red Bull” energy drink flavour. The Rehab line features flavours such as “Tea + Lemonade + Energy”, “Rojo Tea + Energy”, “Green Tea + Energy”, “Protean + Energy” (tea flavoured with 15g of protein), “Tea + Orangeade + Energy”. And Rockstar has Lemonade, Orange, and Grape flavours as part of its Rockstar Recovery line.

Rockstar's Recovery line contains 3% juice, uses a combination of B-vitamins, taurine, ginseng, and milk thistle to provide energy, and also contains a blend of natural and artificial sweeteners so that each can contains only 20 calories and 1 gram of carbohydrates. Similarly, Monster's Rehab drinks have only 20 calories and six grams of sugars and carbohydrates as it is sweetened with a blend of sucralose and Ace K. Energy ingredients include B-vitamins, taurine, ginseng, and milk thistle, but also have guarana. In a nod to the growing RTD tea category, each rehab line is some sort of tea blend – whether it is green tea, black tea with lemonade, or even Monster's “Rojo Tea + Energy” flavour. Even the popular “Orangeade” flavour contains black tea extract.

The features of these beverages read like a check list of consumer trends. Each beverage contains around 10 calories per 8 fluid ounces (compared to 100-140 calories per 8 fluid ounces in the regular Monster and Rockstar energy drinks) make them a “diet' beverage without using the moniker that supposedly repels male consumers. The drinks have a sports drink aspect with added electrolytes, but also the added vitamins/herbal blends to make them a functional beverage. The flavours offered make them more akin to juice drinks or RTD teas as opposed to the traditional energy drink flavour popularised by Red Bull. The Monster Rehab drinks even contain concentrated coconut water, which has become the latest beverage fad amongst consumers. As such, they provide the functionality sought by many consumers in the energy drink era, but with an eye toward health concerns that become more prevalent as the consumer base ages. But, overall, these energy/hydration hybrids represent an almost entirely different energy drink than when the category first emerged. The success of these products speaks both to the consumer segment seeking functionality, but also to the versatility of energy drinks to, in essence, be a blank slate for new trends – paired with brands that already appeal to trend seeking consumers.

Many consumers still distrust energy names

Despite this amalgamation of trends, some consumers are still wary of traditionally branded energy drinks. Aside from the negative connotations felt from a decade of marketing the drinks as bold and out of the mainstream due to high caffeine content and blends of various extracts, the inclusion of artificial sweeteners to lower calories only propagated the perception of an unnatural construct. Without an entire facelift, some consumers will continue to be wary of drinking from large black cans with names such as Monster, Rockstar, Full Throttle, Cocaine, etc., etc., even if the beverage claims to be made with real juice and contain herbal blends. Monster Energy has attempted such a facelift, using its Hansen brand to develop a natural energy drink that combines its traditional blend of taurine, ginseng, L-carnitine and b-vitamins with sucrose to create its Blue Sky Blue Energy drink. However, the fact that each can packs 240 calories may leave several consumers wanting.

But as explored in the Euromonitor article “Natural Ingredients for the Next Generation of Energy Drinks”, several manufacturers have emerged with beverages that contain no artificial sweeteners and still maintain lowered calorie counts by using stevia and sugar cane. Furthermore, extracts from green tea, ginseng, guarana and fresh green coffee beans are providing a more “natural” energy boost. One of those manufacturers, Starbucks, is in a tremendous position to leverage their ubiquitous brand name with this new type of energy drink.

Starbucks Refreshers are 12 ounce “sparkling green coffee energy” beverages and are available in Orange Melon and Raspberry Pomegranate flavours. Despite being manufactured by the coffee giant and containing “natural energy from green coffee extract”, the beverage has no taste of coffee – using the extract to replicate the same amount of caffeine as a grande Americano available in their cafés. Similar to energy drinks the product contains b vitamins and ginseng. However, it has neither artificial sweeteners nor high fructose corn syrup. Instead, the beverage is sweetened by 25% fruit juice from concentrate and stevia leaf extract, keeping it at 60 calories per 12 ounce can. Similarly, Nestle has partnered with smoothie chain Jamba Juice to create “Jamba All Natural Energy Drinks” which contain 90 calories per 8.4 fluid ounces.

Regardless, the face of soft drinks is continuing to change to reflect this consumer demand. Unlike cola carbonates, which are shoehorned into a specific flavour profile due to generations of consumption of essentially the same recipes, the relative nascence of energy drinks lends itself to flavour experimentation. Combined this with an audience predisposed to functional beverages and it is no wonder that this particular category is forecast for growth. New innovations will also prevent the category from maturing. Energy drinks have specifically been aggressive in capitalising on new trends as they are particularly adaptable in their formulations and thus able to straddle a wide range of consumer fads. However, hyper aggressive branding has made some consumers wary of embracing these products. Accordingly, there is potential for new brands to differentiate themselves for consumers seeking new names. But while the outside label can help determine if a consumer gives the product a try, the actual beverage on the inside must conform to the consumer's demand in both flavour and function.


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