A slideshow presentation summarizing a situation analysis of the energy drink market

1. Ben Carter Bridget Conrad Shannon Durkin Mike Daugherty

2. Beginnings of the Industry Started in the 1980’s with Jolt Cola In 1995 PepsiCo launched it’s cola brand, Josta 2001 was the inaugural year for brands as we know them today: 8 million in sales Wikipedia2008

3. Industry Characteristics The main point of purchase is at convenience stores Other stores are beginning to see increasing sales due to bulk purchase options, which are cheaper for the consumer Mintel, 2008

4. Growth Between 2003-2008 the sector has seen a 36 percent increase in growth Energy drink users are up 17 million since 2008 Mintel, 2008

5. Trends New business, hence no new trends Heaviest trend is in the public concern over the heavy usage of energy drinks by teenagers Mintel, 2008

6. Brands The business is mostly dominated by smaller companies Coke and Pepsi have not been able to over take (or even catch up to) the market leaders Shocking considering Coca-Cola and Pepsi’s strengths as companies Mintel, 2008

7. Leading Brands Red Bull Monster Rockstar PepsiCo’s Amp Coca-Cola

8. Age Demographics Adults 18-24 and 25-34 make up 57% of the energy drink market (Mintel, 2008) According to Mediamark (2008) there is a 29.7% penetration in the adults 18-34 market

9. Gender Demographics The number of female energy drink users grew by 74% between 2003-2008 (Mintel, 2008) The penetration in the market of women is 22.5% (Mediamark, 2008)

10. Ethnic Demographics Blacks and Hispanics accounted for 41% of total energy drink consumption in 2008 One out of two (47%) Hispanic teenagers will consume energy drinks Mintel, 2008

11. Sales Red Bull has a low market penetration among teens, despite a high preference for it, probably because of the high price Mintel, 2008

12. Usage Hispanics are most likely to use energy drinks to awake Energy drinks are most often used in the late afternoon, but 38% of users also drink in the morning Mintel, 2008

13. Usage Mintel, 2008

14. Buying Patterns and Frequency of Use From 2003-2008 energy drink consumption increased by 21% (that’s 10 full glasses/user) Hispanics and blacks are ethnically the most frequent users of energy drinks Mintel, 2008

15. Competition Primary Competition Secondary Competition Strengths Weakness

16. Competition Product Positioning Pricing Strategies Sales Force Promotions

17. Distribution Trends Strengths and Weaknesses Opportunities and Threats

18. Pricing Policies Mintel, 2008

19. Pricing Policies Since 2002, energy drinks prices have fallen 32% Why? Adoption of energy drinks in supermarkets and wholesale discount clubs Developing single serve multi-packs, and larger cans Mintel, 2008

20. Pricing Policies Even with the 32% pricing decrease energy drinks are still considered very pricey in the non-alcoholic beverage category. Rank 2nd in price behind Ready to Drink (RTD) coffees Number one obstacle in obtaining new-users Mintel, 2008

21. Pricing Policies Mintel, 2008

22. Communication & Promotions Strategy The energy drink industry has always been one heavily focused on the alternative audience Alternative, or extreme sports Red Bull racing, Dale Earnhardt #88 Amp Chevrolet, Monster Army (Mintel, 2008) Alternative lifestyles 7 Eleven stores featured Inked energy drink, specifically targeted to persons with tattoos New Zealand Herald, 2007

23. Communications & Promotions Strategy You won’t find energy drink companies producing spots for the super bowl The big competitors choose to steer clear of the “corporate” norms Prefer fast and original, a reflection of their key users Racy slogans and campaigns, and an association with extreme sport Mintel, 2008

24. Communication & Promotions Strategy Energy drinks are heavily centered and associated with the action and extreme sports industry Sponsor numerous extreme athletes, teams, and events Red Bull New Years Eve, No Limits- 12.31.2008

25. Communication & Promotions Strategy Rather choose a lighter approach, preferring edgy humor to explain their products benefits Red Bull: uses humor-generating animated sketches convey their promotional messages Amp: uses similar racy humor, in a effort to reach the “Everyday Man” College Student demographic 46-64 demographic Red Bull Commercial Mintel, 2008

26. Communication & Promotions Strategy Another key part aspect of energy drink promotions are the use of Guerilla and Grass Roots marketing. companies employ numerous street teams who trek all over the country, setting up shop at extreme sports venues, college campuses & spring break destinations.

27. Environmental and Social Factors A primary issue facing the energy drink industry is the concerns about health risks associated with the extremely high levels of caffeine found in them It is easily available to highly impressionable children, who are not educated about the potential dangers of energy drinks

28. Environmental and Social Factors Energy drinks give their “boost” from the extreme amounts of caffeine contained in them A standard Red Bull(8.4oz), for example, contains 80mg of caffeine, three times the amount of a 12 oz Classic Coca-Cola Others contain considerably higher levels

29. Environmental and Social Factors Extreme Caffeine Wired X505 24oz and Fixx 20oz, contain 505 and 500mg of caffeine respectively. That amounts to upwards of 250mg of caffeine per 12oz, compared to the 34.5mg per Classic Coke Consuming one can of either of these beverages equates to the equivalent of drinking 14 Coca-Colas, 12 Pepsis, or 9 Mountain Dews

30. Environmental and Social Factors In October, 2008, 100 scientists and physicians sent a letter to the FDA asking for additional regulation in the energy drink industry, on the basis that it puts its young consumers at risk of caffeine intoxication They requested that energy drinks list their caffeine contents on the can, set a limit to the amount of stimulant found in the drink, and require warning labels USA Today, 2008

31. Environmental and Social Factors Case in Point: Prince Edward Island, September, 2008 The island lifted a 25-year ban on canned beverages and found that without the ban young students began bringing energy drinks to school. Teachers reported problems with students becoming suddenly hyperactive, followed by a lethargic crash, commonly known as the caffeine high and crash. Banned at Souris Regional High Doctors and physicians share the opinions of the teachers and administrators Called for a restriction of sales at grocery stores to youths under the age of 18. They equate energy drinks to the likes of tobacco and cigarettes There is also concern that the long-term effects of energy drinks have not been thoroughly researched. The Toronto Sun, 2008

32. SWOT STRENGTH: Energy drinks provide a energy boost without the crash WEAKNESS: They are too expensive OPPORTUNITY: Juice flavored energy drinks would appeal to both Hispanic users, and morning users THREAT: Heavy and irresponsible use by teenagers may lead to laws restricting their sales to anyone under 18

33. Questions?