Energy Drinks Slowed by Economy

Though still a star of the packaged beverages category, energy drinks are seeing rapidly slowing sales growth as energy shots take off and newer products shake up the cooler, according to industry players.Sales of alternative beverages, a segment dominated by energy drinks, grew an average 12 percent per c-store last year (11.1 percent channel-wide), which is still healthy, but a far cry from the nearly 29-percent sales jump the subcategory posted in 2007, according to the Convenience Store News 2009 Industry Report.Mintel modified its category forecast, projecting a scant 1.5-percent growth for 2009, compared to the 13.3-percent growth it had originally forecast last year, according to Krista Faron, an analyst with the research and consulting firm based in Chicago.While energy drinks are still outperforming most beverage segments, Gerry Khermouch, editor of Beverage Business Insights, noted sales have been hurt by reliance on economically hard-hit demographic groups, such as construction workers and truck drivers.At ampm, Phil Smallwood, senior category manager, packaged beverages, agreed with this assessment, and said less discretionary income means heavy users are slowing down on purchase frequency and migrating to less expensive alternatives to pick-me-up solutions, such as soft drinks. "Also consuming some of the energy growth is the maturing energy shot business," he noted. Meanwhile, sales of energy drinks are up "a few percentage points" at Jacksons Food Stores, as unit sales growth in stores acquired in March 2008 and later refurbished and reset, have offset energy drink sales losses at older stores, according to Rich Faw, beverage category manager for the for the 160-plus-store chain based in Meridian, Idaho."Every year the product universe becomes more and more diverse," Faw said, noting total beverage sales continue to grow at Jacksons Food Stores, but "the pie is cut up into smaller and smaller pieces. Customers have so many choices. I don't know how to categorize some drinks now. There are relaxation drinks, vitamin-charged energy drinks without caffeine, all-natural energy drinks, vitamin waters and all-natural sports drinks."Also, sales of energy shots are growing by "huge numbers, more than making up for any sales declines in energy drinks," Faw noted.While Red Bull is still the dominant market leader, energy drinks remain an incredibly fragmented category and consumers are overwhelmed with choices, Faron said. "Based on the fragmentation of the market and consistently active new product activity, we know that this is a category that encourages experimentation." Still, Faw isn't excited about bringing in "just another energy drink" he said. "The business is still Monster, Red Bull and Rock Star. The rest make up a very small portion of the business and not contributing all that much."Nielsen Business Media

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Energy Drinks Slowed by Economy

Barbara Grondin Francella

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Barbara Grondin Francella