As someone who’s spent quite a few years watching once-promising “new-age” categories like iced tea and bottled water devolve into price-driven, innovation-starved commodities as they’ve gone mainstream, the energy segment has been nothing less than a marvel. To my eyes, the main reason that has been the case has been that the most vital category leaders like Red Bull, Monster and Celsius have continued to operate independently, free of the constraints and inertia of the so-called strategics. True, some of them have aligned themselves with global beverage giants, as Monster has with Coca-Cola, Celsius has with PepsiCo, C4 has with Keurig Dr Pepper and Ghost has with Anheuser-Busch.
But crucially, they operate independently, making their own decisions on innovation, marketing and pricing. Yes, they need to align their strategies with those of their strategic partners, with the tradeoffs and frustrations that doubtless entails on both sides. But it makes for a healthy creative tension that keeps both sides honest, not the stultifying stasis that would occur were they to be absorbed into the corporate maws of those bureaucracies.
So the segment keeps motoring forward, evolving new sub-categories, such as naturally formulated “clean energy” players and focus-enhancing entries, while maintaining its premium pricing. Is that golden era coming to an end? That’s been the fear lately among some industry watchers who’ve seen overall growth stall in recent months. Among the publicly traded players, Monster Beverage shares have subsided by 20% from their spring peak, albeit still at double the pre-pandemic valuation, and Celsius Holdings has crashed by about half since its spring peak, even though its year-and-a-half old alliance with Pepsi is going as well as could reasonably be expected.
(And utterly brilliantly in comparison to the disaster that was the Pepsi/Bang alliance.) Recent scanner data reveals an undeniable slowing in category growth, with both volume and dollar sales growth in slightly negative territory lately. Still, in the crucial convenience-and-gas channel that still accounts for the lion’s share of energy drink sales, buyers seem undaunted.
For my part, I think some comedown from the earlier frothy valuations of the public players likely was warranted. And in any case, many of the concerns about the category’s health are overblown. For starters, we’re not seeing anything that reads like panicked price cuts or deep promos.
Though these are premium items that might seem to be a reach for some stretched American consumers, we shouldn’t forget that they’re an affordable luxury, and their caffeine is an addictive ingredient. Indeed, it looks like Monster is going ahead with a modest price increase. That’s not the action of decision-makers who fear their category is about to tank.
Further, what’s going to usurp those occasions? It’s not as though the corporate giants suddenly have got their own mojo going in energy. PepsiCo’s internal brands, including its acquired Rockstar brand, continue to sag. By now, Coca-Cola, KDP and Anheuser-Busch have entirely outsourced their energy strategies to their partner brands.
It’s not as though other categories seem to be encroaching on energy drink occasions, either, though there was a time I actually thought that might happen. That was back when the first wave of cold-brewed coffees arrived. That initial wave, recall, included many entries without cream or sugar, meaning they were sugar- and fat-free, and often had great stories behind them in terms of their sourcing, their beans and their process.
That led me to wonder whether they might prove an alternative for younger consumers who weren’t heading into the Red Bull and Monster franchises with the same alacrity as prior generations. But the cold-coffee category moved in a different direction, toward indulgent offerings with cream and sugar and toward multiserve offerings targeting at-home rather than on-the-go users. Even the established energy/coffee hybrids, Starbucks Doubleshot and Java Monster, have been trending down.
And I couldn’t help but notice that fast-growing coffee chains like Dutch Bros offer an entirely separate tier of energy beverages, rather than relying on coffee-based beverages to scratch that itch, which suggests that those remain different segments and occasions. Even coffee giants Starbucks and Dunkin are entering the energy fray lately, offering further recognition that energy moves as a different dynamic than coffee. Meanwhile, unaligned brands like Congo’s Alani Nu continue to grow briskly.
And one can’t help but be dazzled by the array of new entrants that are lending both dynamism to the category and an alternative play to beer wholesalers who’ve seen mainstay brands like Monster, Rockstar, Bang, Celsius and C4 head into the soda networks. Some are following the path of C4 and Ghost and emerging from the supplement space, like Redcon1, helmed by an able ex-Bang exec. Some, like Bucked Up, Gorilla Mind and Lucky, seem pretty unique.
Others are forays from brands playing in other segments, from Odyssey (originally a mushroom coffee) to Super Coffee (a Bulletproof-like functional coffee). As always in beverages, it’s hard to predict the winners and losers. Prime Hydration’s energy extension is looking like a loser.
The Molson Coors horse in the race, Zoa, hasn’t shown the bounce one hopes for after a total restage, though its corporate partner continues to double down. Ditto Lance Collins’ A Shoc, nestled within the KDP portfolio alongside C4. Well-crafted entries like Rowdy Energy, with Nascar driver Kyle Busch as the frontman, have called it quits.
So even in a non-alcoholic beverage business where churn is a fact of life, the comings and goings in energy seem supercharged. With a lift from beer wholesalers who need new winners to offset their flat beer and hard seltzer portfolios, who knows which of these might emerge as the next big winner? Like many of my oldest friends in beverages, I’ve been humbled enough by its unpredictability to lose the confidence to project who. But energy seems like a category that remains exceedingly robust to me.
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