Toby Hill assesses the sports & energy drinks products that will enable you to make the biggest possible profit from the category.
It is hard to overstate just how important energy drinks are for independent store owners. This part of the category is the biggest-selling soft-drink segment for independents, currently representing over £400m worth of sales in the channel.
It is also a category that is growing ever-more varied and more crowded. From Rockstar’s range of 11 adventurous flavours to Britvic’s caffeine-free, vitamin-fuelled Purdey’s line, manufacturers are working hard to cater to a diverse range of demographic tastes.
This evolution has been further complicated by various health scares related to the sector, from concerns around sugar and obesity, to Waitrose’s recent decision to ban sales of energy drinks to under-16s. In response, manufacturers have developed an ever-expanding array of sugar-free options. Even on standard lines, brands such as Boost have worked to halve their sugar content in advance of the so-called ‘sugar tax’, which takes effect in April.
Therefore, you can play a valuable role in helping your independent retail customers navigate this vital category.
One trend dominates both shopping habits and product innovation in the energy drinks category at present: sugar-free. As the sector braces itself for the Soft Drinks Industry Levy, and obesity health scares fill the news, consumers are responding by turning their backs on sugar.
“The low-calorie big-can energy market is currently worth over £40m and growing at 29%,” says Adrian Troy, marketing director at AG Barr. The firm has met this demand with its zero-sugar Rockstar Revolt product, available in two flavours, and which has amassed nearly £4m of sales since launching in January 2016.
Coca-Cola European Partners (CCEP) has seen similar success with Monster Energy Ultra, another 500ml energy drink, which saw sales grow by 112% in 2017. This growth was aided by the launch of Monster Energy Ultra Citron, which capitalised on the popularity of citrus-flavoured zero-sugar energy drinks.
Similarly, sales of Lucozade Zero, a product which was launched in 2016, are currently growing at around 16% year-on-year.
The massive success of sugar-free is explained by Rich Fisher, category development manager at Red Bull. “Within the sports & energy category, health is in the top three barriers to purchase for the shopper, along with price and taste,” he says. “Diet SKUs are helping to overcome this barrier.”
Beating these barriers is not just about going fully sugar-free, however. Manufacturers are taking a variety of approaches to tackling obesity concerns, in an effort to minimise the impact of the sugar tax, and matching broader trends towards healthy consumption.
Independents-only brand Boost has reformulated all its energy-drink SKUs to halve the sugar content, reducing it to 4.9g per 100g, thereby ensuring they are exempt from the sugar tax. The firm has also committed to all future new flavours and variants being entirely free of sugar.
Elsewhere in the category, Britvic has relaunched its fruit-based energy drink Purdey’s. The product, which is free from caffeine, artificial colours, flavourings, sweeteners & preservatives, has successfully capitalised on health concerns around energy drinks, particularly when consumed by younger drinkers – a trend which recently led Waitrose to ban their sale to under-16s.
This is a move that has already been implemented by some independent retailers. “People are increasingly worried about the long-term health impact of their choice of drinks, with six out of 10 consumers believing energy drinks are bad for their health,” says Britvic’s convenience and impulse commercial director, Trystan Farnworth. “Purdey’s offers a soft-drink that appeals to health-conscious consumers looking for an energy boost from vitamins as opposed to caffeine, making it a cleaner alternative to the established energy drinks brands on offer.”
Currently available in a 330ml bottle, Britvic is looking to catalyse further growth with a new 250ml Purdey’s can.
While sugar and health concerns are fuelling much of the innovation in the energy drinks category, there are other noteworthy developments, too. In 2017, CCEP launched a new non-carbonated product into its energy portfolio, Monster Hydro. Hydro is available in three flavours: Tropical Thunder, Mean Green and Manic Melon.
“Glucose-powered and featuring Monster Energy’s unique branding, Hydro is available as a 550ml resealable wide-mouth bottle,” says Amy Burgess, trade communications manager at CCEP. “The launch was supported by nationwide sampling and digital campaigns to target a core audience of predominantly 25- to 45-year-old males.”
Selling through sports
Energy drinks first took root in gyms and sports stores. Today, the sports drinks segment is booming again, as trends towards healthy lifestyles lead more people to hit the roads in running kit, or ‘pump iron’ in their local gym.
Merchandising energy drinks on the basis of sports can bring additional benefits. Much of the marketing of the biggest brands orbits around computer games, women, and extreme sports. It is targeted primarily towards young men, feeding off their desire to be prepared for all eventualities. But this runs the risk of alienating other consumers.
By focusing on the sporting end of the energy drinks category, therefore, wholesalers can help bring some balance back to a retailers’ range. This sub-category is dominated by Lucozade Sport, which makes up half of all sales, translating to over £1,000 a year per store.
“A good range in-depot should therefore include multiple SKUs from the Lucozade Sport range, including Lucozade Sport Low Cal variants,” says Scott Meredith, UK sales director at Lucozade Ribena Suntory. “Last year, we also launched an exclusive new Lemon & Lime flavour for Lucozade Sport, only available via wholesale to the independent channel.”
As we have seen, innovation continues apace in the fast-moving energy drinks sector, worth a total of more than £1bn. But driving sales is not just about what is inside the packaging, but also the format it is being sold in, as well the way it is merchandised in-depot.
Multipacks are one example: “Sales of energy drinks for future consumption are also on the increase as people stock up for the week ahead,” says CCEP’s Burgess. Stocking 4x500ml packs of Monster Energy or Monster Energy Ultra White will enable retailers to meet these needs, she notes. Alternatively, CCEP has also launched a 553ml Mega Monster in a resealable can, in response to consumer feedback showing demand for a pack that could be opened and then kept with them on the go.
Finally, in order to take full advantage of the significant revenue opportunities offered by this crowded category, wholesalers need to present it clearly and accessibly in-depot. “Depots should take a category approach and avoid promoting all products at the same time,” says Al Gunn, sales director at Boost. “Products and promotions should be clearly signposted and ideally positioned front-of-depot or on tower-ends, with staff proactively upselling. This way, depots can maximise seasonal opportunities, but avoid promotional clutter. Less is more.”
“It is usually the cheaper lines that sell in my store, such as the Best-one own-brand energy drink. Rockstar pricemarked at 99p also sells well. Red Bull used to be a good seller but it seems less popular now. People have started to expect to pay less, and there is also a trend towards buying bigger cans.”
Surekha Patel, Best-one, Bexhill-on-Sea, East Sussex
“About three years ago I decided to stop selling cheaper energy drinks and only stock premium lines, such as Monster and Red Bull. There were two reasons for this. Firstly, I did not want to sell energy drinks to children, and they mainly bought the cheaper lines. Secondly, I made very little money on those lines anyway – margins are much better on premium energy drinks.”
“Sales of sugar-free variants have been growing rapidly, with Relentless Ultra selling particularly well – they market it as tasting as good as sugar, and people respond to that. Our biggest seller, though, is Boost, which always has some line on promotion. People chase the offer on energy drinks – they will switch from a 250ml can to a 1l bottle from one day to the next.”
Best-one Global Food and Wine
“We are a small village in the Lake District and we mainly sell energy drinks to walkers and cyclists. We stock Lucozade and Booker’s own-brand Happy Shopper energy drink and we find these kind of shoppers will grab a bottle of water from the top shelf and then an energy drink from the shelf below before setting out.”
The Village Shop
Category development manager, Red Bull
Space: Stock the most efficient range to drive the greatest value, aligning category space with share of sales to maximise turnover.
Vertical blocking: Shoppers only see products within a 1.3m breadth. Vertical blocking helps shoppers easily find the product they are looking for, improving their ease of shop.
Focus on top five brands: 50-60% of soft drinks space should be allocated to the top five brands. Ensure 60-70% of space for sports and energy brands, in line with share of the category.
Sugar-free: Due to the impending sugar levy and increased demand for healthier options, it is vital that wholesalers stock a range of low- and sugar-free options.