AA PRODUCT PRODUCT OF OF CSP CSP INFORMATION INFORMATION GROUP GROUP A plethora of new products is bring- ing energy to the beverage category INSIDE Off and Running The runaway popularity of new energy drinks has retailers scrambling to pick the winners A Veritable Stream of Profits Sales growth for bottled water may be slowing in some retail channels, but not in c-stores Reshuffling the Deck Diets, flavors are stealing share from full-calorie carbon- ated beverages PAGE 1 of 12 CSPDigital editions are published by CSP Information Group, Inc. Contents To download previous CSPDigitals, visit: http://www.cspdigitals.com 4 Off and Running ADVERTISERS For information on CSP Information Of one thing in the beverage business Group, call 630-574-5075 To view an advertiser’s page, there can be no doubt about, it’s that the click any of the company names below: alternative/energy segment is in full bull- For technical support with market mode. And the convenience chan- CSPDigital editions, call: nel has been the primary driver. Cadbury Schweppes Americas Beverages 212-647-0396 ext. 5 Page 3 8 A Veritable Stream of Profits To advertise in CSPDigital editions, Nestle Waters North America contact Jim Bursch at: Although no longer posting the growth Page 7 630-574-5075 ext. 224 figures that catapulted it to the position Email: [email protected] of No. 2 consumed beverage in the U.S., CSP Information Group, Inc. bottled water remains a strong conve- Page 11 nience product with considerable upside. For more information about our 10 Reshuffling the Deck advertisers, visit our Advertisers Index - Page 11 If you’ve received this edition of Despite a steady change in consump- CSPDigital during your busy workday, tion patterns, carbonated soft drinks as use the link below to place a reminder in a category continue to perform well in your calendar to read it at a more conve- the convenience channel versus other nient time (works with Outlook, Eudora classes of trade. and most other PC and Macintosh desk- top calendars). Tell Us What You Think We value your feedback. Please click below to provide us instant feedback on this edition of CSPDigital FEEDBACK A PRODUCT OF CSP INFORMATION GROUP PAGE 2 of 12 PAGE 3 of 12 strenuous workouts, alternative/energy drinks are all about quick bursts of energy. While all alternative/energy drinks contain caffeine, most today also include a variety of exotic ingre- dients including glucose (i.e. sugar), taurine, inositol, guarana, ginseng and vitamins B6 and B12. Retailers are pleased with the cat- egory because of its profit potential: Most leading brands retail for $1.99 per 8.8-ounce slimcan, and specially designed suction-cup racks that attach right to cold doors free up cold shelf f one thing there can be no According to ACNielsen data, retail The adoption of energy drinks by space for other products. Several new doubt: Alternative/energy dollars are up 56.5 percent in the c- “Generation Y” – the skateboard, dirt- products have been introduced in Odrinks represent a bull market. store channel over last year, while unit bike, snowboard, X-Games set – as a larger SKUs – primarily 16-ounce cans That the leader of the charge is the volume is up 49.3 percent. drink they can call their own; – but at the same profitable $1.99 longtime No. 1 brand Red Bull, which The popular use of energy/alterna- price point. launched the energy drink category The increase has been driven by tive beverages as mixers for alcoholic in the United States, is fitting. And several factors, including: drinks, both in nightclubs and at home “Energy drinks have had the high- while Red Bull’s position as the market parties. est average retail price (1.5 times the leader remains unchallenged, many An “on-the-go” American consumer average for all packaged beverages), other brands are enjoying healthy looking for quick bursts of energy Unlike sports drinks and isotonics, penny profit (1.8 times the average) sales in this age of prosperity for the throughout the day; which are all about recovery from and gross margin (40-plus percent),” alternative drink category. says David Bishop, director of Bar- ALTERNATIVE/ENERGY DRINK SALES rington, Ill.-based Willard Bishop Con- According to ACNielsen data, the TOTAL U.S. - FOOD, DRUG, CONVENIENCE, MASS (EXCLUDING WAL-MART) sulting. alternative/energy drinks market increased from $1.15 billion in the 52 Weeks 52 Weeks By far, most energy/alternative combined off-premise channels (food, Ending 04/17/04 Ending 04/16/05 drinks are lightly carbonated, though drug, convenience, mass, excluding some are non-carbonated. According Wal-Mart data) for the 52-week period Carbonated $1,096,569,371 $1,733,737,842 to ACNielsen data, the carbonated ending 4/17/04 to $1.79 billion for the segment accounted for 96.6 percent Non-Carbonated 52 weeks ending 4/16/05. That repre- $59,918,814 $60,656,873 of all-channel category sales (food, sents an overall gain of 56 percent. TOTAL drug, convenience, mass, excluding ALTERNATIVE/ENERGY DRINKS $1,156,488,185 $1,794,394,715 Wal-Mart data) for the 52-week period The convenience channel has been Source: ACNielsen ending 4/23/05. the primary driver of that growth. PAGE 4 of 12 Last One In’s a Rotten Egg “Everybody has an energy drink to The fact that most major beverage companies – as well as a host of sell, so we look very hard at every- minor companies – have offerings in the category are a testament to the thing presented to us.” continuing potential that energy drinks have for future growth. As witnessed — Jon Bratta by the most recent NACS Show in am/pm Las Vegas, quite literally everybody and their brother is trying to jockey for some coveted position in cold vaults. gy category), how does one decide location on the shelf, but the door which brands make the planogram? holders are still used to highlight either While market leader Red Bull may be certain price-promoted products and/ a “smaller” company in terms of overall “Everybody has an energy drink to or to build awareness and trial for new revenue, Pepsi has three brands in the sell, so we look very hard at every- products in the door.” category (Amp from Mountain Dew, thing presented to us,” explains Jon SoBe Adrenaline Rush and SoBe No Bratta, national beverage lead for BP But not everyone is sold on the Fear), while Snapple (i.e., Cadbury Plc.’s am/pm chain. “What is the mar- merchandising effectiveness of door Schweppes Beverages Americas) has keting plan? How is it different? Is it a racks. its Elements line. Hansen’s, the New line extension of an existing successful Age company from California best brand? The successful companies are known for its natural sodas and fruit doing certain things that help insure beverages, is heavily vested in the their initial and continued success. We category with several brands, includ- probably turn down 85 percent of what ing Hansen’s Energy, Monster and we see because many of these brands Lost. Other New Age players include just have no plan.” AriZona, Fuze and Jones Soda. Even brewing giant Anheuser-Busch has One way that Red Bull was able to ventured into the category with 180. break through the clutter was with the Not to be neglected, the hip-hop innovative door rack that allowed its scene is well represented in the cat- then-unique 8.8-ounce slimcan SKUs egory with rappers Nelly (Pimp Juice) to be merchandised in the cold vault and Fat Joe (Stinger) fronting energy without encroaching on anyone else’s brands, and hip-hop impresario Rus- existing territory. sell Simmons (DefCon Records) behind the DefCon 3 brand. “The tactic served its purpose, which The first: Red Bull essentially in- was to create merchandising space vented the current alternative energy With so many brands and so little where none had previously existed,” drink segment with its unique prod- space (even though many c-stores are explains Bishop. “Since then, energy uct and distinctive packaging. now devoting entire doors to the ener- drinks have found a more permanent PAGE 5 of 12 ENERGIZING GROWTH ENERGY DRINK UNIT VOLUME AND DOLLAR VOLUME ARE by looking at Red Bull, which lost Generation Next GROWING SUBSTANTIALLY IN CONVENIENCE STORES market share last year (from just over Perhaps the future of the category can 50 percent to just below 50 percent), be seen in a new product introduction all the while increasing its own sales from Pepsi’s Mountain Dew franchise. Dollar Volume Percent Change vs. Year Ago by over 40 percent. Perhaps with this MDX, which Pepsi first advertised DOLLAR VOLUME in mind, Coca-Cola, which had very during the World Series but launched limited success in its initial foray into nationally in November as an “energy 52 Weeks 52 Weeks 52 Weeks 52 Weeks the category with KMX, has launched soda,” contains a veritable power pack Ending Ending Ending Ending a new brand in 2005 – aptly named of energy-inducing ingredients, includ- 04/24/04 04/23/05 04/24/04 04/23/05 Full Throttle – in hopes of grabbing a ing ginseng, guarana, taurine and Carbonated $473,266,348 $748,127,203 n/a 58.1% larger slice of what should soon be a D-Ribose (a five-carbon sugar). $2 billion pie. “Mountain Dew helped create the Non-Carbonated $20,435,053 $24,521,601 n/a 20.0% An Immediate Success energy category, and MDX is the next Total According to ACNielsen figures pro- logical step in our evolution,” explains 56.5% Alternative Beverage $493,701,401 $772,648,804 n/a vided by Coca-Cola North America, Katie Lacey, vice president marketing, Full Throttle had achieved a 78 per- carbonated soft drinks for Pepsi-Cola cent penetration rate among all con- North America.