Opinion from global food and drink experts, Zenith Global
Header

What do smoothies and energy drinks have in common ?

They’re both non-alcoholic drinks. They’re relatively expensive. Portion sizes are often small. Both have benefits.

Yet smoothies are proudly natural, while energy drinks are rarely so. One is thick, the other thin. One is marketed because of taste, the other sometimes despite it. One is consumed earlier in the day, the other later.

Anything else ? Yes. Have you noticed the similarity in their market dynamics ? Energy drinks shot up when one brand led the way and most others copied it. As with Red Bull, so with Innocent. There have been an amazing number of me-toos as well as me-too-leapfrogs in countries where the brand leaders had yet to enter. Most fell, are falling or will fall by the wayside.

Brand leaders need competition, but above all competition that differentiates and takes the market forward. Hansen did that with Monster in the United States. The UK smoothie market has already floored a succession of heavyweights as well as lightweights.

Good luck to the genuine innovators, but beware the slipstream. Consumers want copyright not copycats.

So it’s happened. As predicted. Monster is now the top US energy drink brand by volume, with a 2007 all channel share of 28%. Red Bull is still way ahead by value, but its volume share is down to 27%.

There’s more activity from others too. Pepsi’s AMP and SoBe are on 9%; Coke’s Full Throttle, Fuze NOS, Tab Energy and Glacéau Vitamin Energy are at 10%; and Coke partner Rockstar has jumped to 19%.

Overall, the market gained 29% to more than 5,000 million servings. I am indebted to Beverage Digest for the figures.

All brand leaders need real competition to keep consumers interested and markets alive. The United States is beginning to produce some serious new energy.

There are many reasons for Red Bull’s success. One of them has been its unity of purpose in a single product, a single can, a single message. Its best extensions have stayed close to the core – a sugar free variant, a larger can, but still with the same design and the single message.

However generous one might be about the company’s occasional forays into other market sectors, they certainly distracted management and probably dented energy drinks growth. Carpe Diem, Lunaqua and Sabai have not exactly been crowning glories.

So, what should we make of Red Bull Simply Cola ?

To me, there are just too many contradictions. I like the idea of “natural” cola, but this is not a word that springs to mind for Red Bull. Cola is a big gulp, unsuited to a small can.

In the United States, Monster Energy is closing fast on Red Bull. 20 years ago Pepsi gained momentum when the other guy supposedly blinked. Is Red Bull blinking ? I hope not.

Nielsen’s ranking of 2007 winners and losers offers many insights.

  • Soft drinks is the largest category in UK grocery.
  • Cold drinks account for 17 of the top 100 brands and 5 of the top 15, led as ever by Coke.
  • 7 are carbonates including 2 energy drinks; 6 are fruit juices and drinks; 2 are waters; and 2 are dairy based.
  • Red Bull, Cravendale milk, Oasis and Capri-Sun sales all advanced by over 20% last year.
  • Innocent was the fastest growing, up 46% to £141 million, rising to no 33. It credits success to four key macro trends, well worth noting – health/wellbeing, indulgent/premium, convenience and ethical.

Red Bull celebrates its 20th anniversary this year. It has been an outstanding example of brand development and market leadership, creating a new premium opportunity and generating astonishing growth.

With 2006 sales of 2,600 million euros, its value could easily be over 10,000 million euros.

It has achieved this despite the challenge of very little real competition except in a limited number of countries.

Until now. A Californian brand called Monster could seize the retail crown in Red Bull’s largest market this year. Monster has learned from Red Bull’s successes such as edgy imagery and extreme sports sponsorship, but has also gone well beyond – most notably in double size cans at better value prices, but also with flavour and ingredient innovation.

The 2006 US retail volume figures show Red Bull charging ahead by 27%, but down 7 share points to a 30% share, against Hansen’s Monster and other brands roaring up by a fiery 88% and gaining 5 share points to a 27% share.

Hansen looks set to boost its overall business sales to well over US $1,000 million this year and has every chance of overtaking Red Bull.

Red Bull, meanwhile, has tightened its strategy, restructured its distribution and strengthened its team. So there will certainly be a locking of horns.

But nothing ever stands still in consumer marketing. As Red Bull defends its US stronghold, Monster has declared plans to expand internationally. Stimulating times.