Its sugar, water and caffiene (and it only has the caffiene of two Cokes, or one coffee). I don't get it. And the downer that is alcohol negates the upper that is caffiene. It appears to be all marketing bullsit. Someone is making a fortune selling this stuff.
NY Times: April 4, 2004
Revitalizing Drinks Are Also Pepping Up Sales
By SHERRI DAY
ODKA mixers. Hangover remedies. Serious jolts of caffeine. However they are used, so-called energy drinks have quickly become the elixirs of choice for teenagers and young adults too hip for espressos, colas and fancy teas.
The drinks - which consist mostly of sugar, water and caffeine, but also a variety of vitamins, herbs and supposedly energy-enhancing extracts - have overtaken bottled water as the fastest-growing segment of the beverage industry. Beverage companies are rushing into this $1 billion market to grab share from Red Bull, the pioneer in the field, whose drinks went on sale in the United States seven years ago. And they need no other lure than young consumers' willingness to buy 8-ounce cans of energy drinks for at least two times the cost of a 12-ounce cola. By some volume measures, the multiple is even higher. "In convenience stores, a case of Red Bull sells for about six times the amount of a case of Coke or Pepsi," said John D. Sicher, the editor and publisher of Beverage Digest, a trade publication. "The margins are somewhere between excellent and obscene."
In the last three years, hundreds of energy drinks have flooded store shelves, bearing names that range from the exotic, like Piranha (from EAS International, a nutrition and supplements company), to the morally questionable, like Pimp Juice (from Fillmore Street Brewery in Overland, Mo.). Though Red Bull, an Austrian company, controls about 50 percent of the United States market, its share shrank by 3.7 percentage points in the year ending last April, according to Beverage Digest.
"They need to step on it," said Tom Pirko, the president of Bevmark, a beverage industry consulting firm in Santa Barbara, Calif. "I would spend a lot more money fast, and it's a good investment." Executives at Red Bull said their chief executive, Dietrich Mateschitz, was unavailable for an interview until autumn. In a statement, the company said that it had no plans for drastic changes.
"The strategy of Red Bull has not changed in any significant respect in 15 years, and certainly not due to the launch of well over a hundred me-too products, most of which have already disappeared from the market again," it said. "Losing relative shares in a more competitive, dynamically expanding market while increasing absolute volume is a perfectly natural process."
The company says its worldwide sales rose 10 percent last year, and it claims that it still has a global market share of 70 to 90 percent.
Red Bull sells only two products - its original energy drink and a sugar-free version, introduced last year. It uses a minimum of national television advertising, focusing its marketing on sponsorships of extreme-sports events and athletes, and lobbying bars, clubs and other retail outlets to sell its products.
WHAT has made Red Bull and other energy drinks so popular among their target market -18- to 25-year-old men - is the drinks' caffeine-enhanced buzz, analysts say. An 8-ounce serving typically has about 80 milligrams of caffeine, about the same as a cup of coffee and more than twice as much as a 12-ounce can of Pepsi or Coke.
In addition, Red Bull is enhanced with the sugar glucuronolactone, which is found in grain and red wine. It also contains taurine, an amino acid that grew into an urban legend as party-goers described it as an energy-enhancing compound extracted from bulls' testicles. Taurine actually occurs naturally in human muscle and is also found in scallops, fish, poultry and infant formula.
Many of the drinks also contain vitamins and herbs like guaraná, ginseng and ginkgo, to which marketers attribute various health and wellness claims. Red Bull, for example, says its drinks improve performance - especially during times of increased strain or stress - bolster concentration, improve reaction speed and stimulate metabolism. Some food experts argue that the additives offer little in the way of tangible benefits.
"Manufacturers cash in on that whole idea of functional foods, of creating different foods and beverages with supposedly special benefits, usually involving health, and then charging extra for them," said David Schardt, a senior nutritionist at the Center for Science in the Public Interest. When consumers "pay a lot of money for these energy drinks, they're probably expecting more than what you'd get from a strong cup of coffee," he added.
Federal regulators have been examining energy drinks to ensure that they are labeled properly and meet the claims they make.
Energy drinks, including Red Bull, have been banned by several European countries - including Denmark, Norway, Sweden and France - because of their high levels of caffeine. Marketers say they are not worried about the prospect of government regulation in the United States, because the caffeine levels and herbal supplements they use are found in other unregulated products.
"Now consumers are so savvy about what ginseng and guaraná are, these ingredients aren't as foreign and as strange as they were once seen," said Kristine Hinck, a spokeswoman for PepsiCo's SoBe line of beverages, which includes energy drinks.
In the United States, Red Bull first became popular in Santa Cruz, Calif., health clubs, analysts said. The company focused its early marketing on extreme-sports enthusiasts, who gulped it down in hopes of enhancing their performance. As the company slowly built a nationwide distribution network, Red Bull also became hip in bars and clubs, where young revelers mixed the drink with vodka or used it, they claimed, to accelerate the recovery from hangovers. Analysts attribute the transition from health clubs to bars to aggressive marketing by the company, but Red Bull says consumers themselves demanded the drink.
With bars charging as much as $7 to $8 for an 8-ounce Red Bull that cost $1.99 at the grocery store, competitors began offering to undercut those prices. Red Bull filed lawsuits last year against four clubs and bars, contending that it had caught them substituting cheaper beverages when customers ordered Red Bull. The suits have been settled on undisclosed terms.
THE challenges to Red Bull come from companies big and small. Coca-Cola and PepsiCo entered the market in 2001; Red Bull, Coke's KMX and Pepsi's Amp and SoBe lines accounted for 90 percent of all energy drink sales in 2002, according to Mintel Consumer Intelligence, a market research firm. Anheuser-Busch also jumped into the fray in 2001, with its citrus-flavored 180.
Lately, smaller companies have flooded convenience-store shelves with less expensive products. For example, Rockstar, a company based in Las Vegas, introduced an energy drink in 16-ounce cans in 2001. Its promotes it as "twice the size of Red Bull for the same price."
"I saw that everyone else had basically copied Red Bull with small-size cans," said Russell Weiner, the chief executive of Rockstar. "I said we'll take over. I had such faith. I knew that if I wanted it, other people did, too."
Fuze Beverage also markets its Omega Energy Drink in a 16-ounce version. There are also so-called urban energy drinks, which trade on the celebrity of their namesakes, like Liquid Ice, named after the rapper Ice-T, and Russell Simmons's DefCon 3.
For many of the upstarts, the most difficult challenge is getting their products into supermarkets and convenience stores, where 60 percent of all energy drinks are sold, according to Mintel Consumer Intelligence. Red Bull has built a strong network of independent distributors, and Coke and Pepsi can use their bottling networks to reach customers.
It is across store counters, not bars, that marketers hope to reach their next wave of customers - mothers, harried office workers and the health-conscious.
"We think energy drinks are the new coffee," said Scott Moffitt, the vice president for marketing at SoBe. "It delivers the pick-me-up that coffee does. But it tastes better, and it's better for you. It has a better image, and it's more portable. You can't throw a cup of coffee in your backpack."
