Summary
Much of the profitable growth in beverages over the past decade has been in energy drinks. The economics of the category have been especially rewarding for public stocks (HANS) and for some of the major beverage distribution businesses (PBG, CCE, AB).
Analysis
Now growth in the core refreshment energy is very low (around 3% this year), there is a lot of pressure on the shots category where the big players (Monster, Red Bull and Rockstar) are late to the category dominated by 5 Hour Energy (yes, the same one you see on late night TV).
This battle is made more intense because this is a battle fought in the extremely limited real estate right at the 7 Eleven cash register.
Less space + smaller packages = tougher branding environment.
So the battle is on: Can 5 Hour retain its leadership position?
Will the brand power of Monster and Red Bull grow shots but negatively cannibalize their core offerings?
Energy drinks have maintained their margins, but will energy shots? There are more brands, and the segment is less established
Will there be another energy fragmentation (Hydrive energy chews etc)?
And finally, will energy shot growth be as profitable as the core energy business for HANS, CCE, PBG etc.
This year shots will be close to $1B in retail sales, another segment that gas moved out of GNC and into C stores.
Interesting times ahead!
