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Key Takeaways
- Energy drinks once had a niche audience. They’ve overcome stigmas and are now a $24 billion business, according to NielsenIQ.
- The segment’s success has companies adding caffeine to everything from hot sauce to gummy bears.
Products that promise you pep are popping up all over.
On social media, influencers promote oral energy sprays. Target stocks coffee-infused workout bars, while Amazon sells Fruit Slaps, a caffeinated smoothie. We’re in a “caffeine renaissance,” according to Duane Stanford, editor and publisher of industry publication Beverage Digest, inspired in large part by energy drinks’ success.
Energy drinks helped Americans acclimate to getting caffeine outside of coffee and tea, where it occurs naturally, and soda. Early brands cultivated niche followings. Manufacturers then spent years assuring Americans that the drinks weren’t as extreme as they seemed as they pursued a more pedestrian audience, Stanford said—and the message resonated.
Today, energy drinks are a nearly $24 billion business, according to market research firm NielsenIQ. They’re the second most consumed supplement—after multivitamins—among teens and younger adults. The success has inspired restaurants to add energy drinks, and manufacturers to add caffeine to everything from hot sauce to gummy bears.
“People are no longer just happy to have [caffeine] in one or two types of applications or products,” Stanford said. “They want it in a lot of different formats.”
Why This News Matters to You
Food and beverage companies routinely tweak products, roll out new flavors or “innovate” items in an attempt to generate hype and sales. These sorts of recipe changes helped energy drinks evolve from a niche business to one that’s almost ubiquitous. And now the segment may also be attracting value shoppers looking for a less expensive jolt, some experts say.
Americans weren’t always jazzed about energy drinks. Early marketing for the segment often featured extreme sports and masculine motifs, which gave people the idea that energy drinks were for gamers, adrenaline junkies and partiers, Stanford said. Higher-caffeine sodas like Jolt were largely seen as curiosities.
A 2006 ad for Full Throttle showed a branded car drawing a parade of bikers, boxers and no-longer-mild-mannered husbands, concluding with the tagline, “Let your man out.” Classic energy drink ads have aged into fodder for Youtube spoofs, with videos hyping “rawberry” and “shockolate” options.”
Before the advent of sugar-free energy drinks, some saw the beverage as “extreme,” sugar-logged junk, according to Stanford. Brands like Bang started positioning themself as a tool for weight lifters, who were drawn to blends with less sugar and new flavors. Others, including Celsius, took off while marketing sugar-free drinks as part of a fit lifestyle.
Energy drink packaging for a while used icons that showed how its caffeine content compared to a standard cup of joe, Stanford said. The information made consumers feel knowledgeable, and eventually, comfortable with the product, he said.
Americans have also taken a liking to chilled sources of caffeine through cold brew and iced coffee. Consumers most gravitated to soda for flavor and refreshment, rather than caffeine, Stanford said, with Mountain Dew among the outliers. Today, energy drinks are siphoning business from packaged coffee products, as well as sports drinks and tea, NielsenIQ said.
Companies From McDonald’s to Dunkin’ Are Getting Into Energy
Energy drink companies are enjoying growth during a time that’s been tough for some consumer goods companies. Monster Beverage (MNST) sales increased nearly 9% year-over-year in the U.S. and Canada last quarter, company leaders said on a conference call. The number of Celsius cans purchased at domestic retail spots rose 6% year-over-year in the second quarter, parent company Celsius Holdings (CELH) said on a conference call.
Demand for the drinks is significant enough to stand out at big-box stores. New energy drinks, as well as prebiotic sodas, have fueled a bump in beverage sales at Target (TGT), Chief Commercial Officer Rick Gomez said on a conference call in August. Energy drinks were also cited as a source of strength at Casey’s General Stores (CASY) during a September conference call.
Other companies are trying to capture some of the hype. Major coffee chains have added energy drinks, including Starbucks’ (SBUX), Dunkin’ Donuts and Dutch Bros (BROS). Wendy’s (WEN) launched cherry limeade and pineapple citrus energy drinks this summer, and McDonald’s (MCD) is testing beverages that contain Red Bull.
Some consumers may be shifting to energy drinks to save money. Bottled coffee, tea and soda prices have risen faster than energy drink prices, Celsius CFO Jarrod Langhans said. That’s put energy drinks and alternatives in a similar price range, and helped drive sales, he said.
“The price point is helping,” Langhans said, according to The Wall Street Journal.
