Energy drinks

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The energy drink market is growing at a phenomenal rate - but, according to a recent survey, almost half of pubs do not stock them. Isn't it time you...

The energy drink market is growing at a phenomenal rate - but, according to a recent survey, almost half of pubs do not stock them. Isn't it time you added them to your drinks mix?

Most of the drinks you sell over the bar are competing in what the marketing whiz-kids like to call a "mature market". What that really means is that the number of people who drink lager, for example, is more or less constant, with the arrival of eager new lager drinkers turning 18 balanced by those shuffling off to the Great Bar Stool in the Sky.

In a mature market, the only way for one brand to make any real headway is at the expense of another. That's why the brand owners collectively spend tens of millions of pounds each year trying to convince lager drinkers of the merits of their particular brand. For every winner there has to be a loser - in the mid 1990s lagers such as Castlemaine XXXX, Skol, and Labatt's Canadian were top 20 on-trade brands in the Publican's annual Brands Report. Over the years, they have lost that standing while brands such as Carling, Kronenbourg 1664 and Stella Artois have substantially grown in sales.

In some cases, entire drinks categories grow at the expense of others. When alcopops became hugely successful a few years ago, sales of bottled cider dropped dramatically at the same time. An example of long-term changes in consumer drinking habits has been the growth in popularity of wine over the past two decades, which has seen a corresponding decline in beer volumes.

When developing a new drinks category, what you're really looking for is something that generates incremental sales - in other words, a drink that adds to the total sales of your pub rather than simply replaces one drink with another. It's a claim that's often made by suppliers of energy drinks, who point to growth running into thousands of per cent over the past five years for these soft drinks.

While you should probably take the most extreme claims with a pinch of salt, remembering that if vodka and Red Bull had never become popular, all those people drinking it on a Friday night would almost certainly have been drinking something else, there's no doubt that the rise of the energy drinks category has been phenomenal.

Growing competition

For the past few years, this has really been a category of one, with Red Bull dominating the market. Originally developed in Austria, Red Bull was launched in the UK in 1995.

Established energy brands, notably Lucozade, were originally marketed as a tonic for those in need of a pick-me-up, and more recently marketed as a booster for sportsmen. Red Bull, on the other hand, is a "functional" energy drink. These are typically caffeine-based and contain other ingredients, such as taurine in the case of Red Bull, which are said to enhance vitality in some way.

According to a report by drinks analyst Zenith, which has closely tracked the growth of the category, sales of functional energy drinks almost doubled in 2000 after trebling in 1999.

Richard Hall, chairman of Zenith, said: "This is not a passing fad. These drinks are the thin end of a new wedge that is reshaping consumer behaviour. People want products that not only look good and taste good, but also do good."

In the on-trade of course, these benefits are slightly more dubious since most energy drinks are sold as a mixer with vodka or other spirits. On-trade sales of energy drinks rose by 58 per cent to more than £340million last year.

The Publican's Market Report 2001, a survey of 1,000 licensees, showed that Red Bull is still driving the category in pubs (see below). Although Red Bull does not see itself as a competitor to Coke and Pepsi in the refreshment drink market, it would be naive to think that the brand's success, selling a total of 260 million cans in the UK last year, would not attract attention from the big players wanting a slice of the action.

In 2000 alone there were an estimated 40 new energy drinks launched onto the market. The most significant of these were from the UK's leading soft drink companies, with Britvic and Coca-Cola respectively launching Carbon and Burn. The Market Report shows that these brands, particularly Britvic's Carbon, which has had more time to establish itself, are now starting to make inroads in the pub market. Coca-Cola is also said to be close to a deal to distribute Red Devil, a more established energy brand.

Red Devil would sit alongside Burn since energy drinks are all flavoured differently and so can be targeted at different consumers. Carbon, for example, has been formulated to mix well with white or dark rum.

Safety concerns

There have been concerns raised about the health effects of energy drinks after Sweden's National Food Administration investigated claims that two people, both thought to be in good health, died after drinking Red Bull with vodka, while a third died having drunk several cans following a strenuous gym session. Red Bull has denied any link, insisting that the deaths are unrelated to the drink. The British Food Standards Agency has ruled out plans for a similar inquiry here, although Dr Wendy Doyle of the British Dietetic Association has queried the effects of mixing energy drinks with alcohol.

She said: "People who drink energy drinks with alcohol get a double whammy. Both caffeine and alcohol have a dehydrating effect and due to the link with extreme sports and fast-paced lifestyles, people often think they can drink it to replace lost fluids and that's not the case."

Last year, a report by Loughborough University suggested that energy drinks might actually save lives by preventing drivers falling asleep at the wheel.

On-trade opportunity

Despite their success, the Publican's Market Report findings suggest that there is still room for growth for energy drinks in the pubs sector. Earlier this year, research by drinks analyst Zenith indicated that 59 per cent of pubs did not stock energy drinks.

The up-to-date Market Report survey of 1,000 licensees suggests that this figure has fallen to 46 per cent of pubs, although different outlets were surveyed. While leased, tenanted and freehold pubs are unlikely to ever achieve the same level of sales as YPV and club venues, you won't know what additional trade may be out there until you add energy drinks to the sales mix.

Pubs which stock the following energy drink brands:

Red Bull

Owner-run freehouse

49 per cent

Managed freehouse

62 per cent

Leasehold

59 per cent

Tenanted

50 per cent

Managed

78 per cent

Carbon

Owner-run freehouse

3 per cent

Managed freehouse

5 per cent

Leasehold

3 per cent

Tenanted

4 per cent

Managed

1 per cent

The survey also showed that one per cent of pubs now stock Burn, the energy drink from Coca-Cola. Given that this brand was had a very low-key launch in selected bars earlier this year, and has only recently become more widely available, the brand looks to be a contender for a growing market share.

Related topics: Soft & Hot Drinks

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