Big Shots

When energy drinks hit American shores

Last decade, many industry insiders dismissed the category as a flash in the pan. Well, good news for shot marketers: shots look to be shaping up as every bit of a “fad” as their larger, enduring cousins – that is, not a fad at all.

Since 5-Hour Energy arrived on convenience store counters in 2004, the shot category has grown from a niche catering mostly to truck drivers to a product class so mainstream that 5-Hour Energy now sponsors a NASCAR team. One analyst estimated that the category nearly doubled its sales to $700 million this year, from about $370 million last year. All that cash has drawn so many entrepreneurs and beverage stalwarts to introduce new shots that one convenience store firm has given up trying to keep them all on the counter. The influx has brought new bottles, new sizes and new functions to the category, along with the expected raft of “me too” products. But even the copycats have performed well enough that many have returned to their suppliers for second and third production runs.

“My gut says that energy shots are here to stay,” said Carl Sperber, director of marketing for 5-Hour Energy. “At least, until the next great thing comes along.”

While the category has quickly developed into a force so large that any beverage retailer would be foolish to ignore it, it’s still in its early days. 5-Hour, the first energy shot, owns about 70 percent of the category. A second-place player with more than a few percent of the market has yet to develop, and many of the products entering the market are riffing as obviously on 5-Hour as some early energy drinks riffed on Red Bull. Where Red Bull inspired such imposters as Red Dragon, Red Rooster and Red Tiger, 5-Hour Energy has found itself pursued by 6-Hour Energy, Redline 7 Hour Energy and Mr. Energy 8-Hour Energy.

Not every product, though, has been a copycat. Newcomers and veteran beverage firms alike have introduced shots substantively different from 5-Hour. Harcos offered novelty by commissioned globular bottles that resemble the magic potions from fantasy-themed video games for their Energy Potion line. Impulse One took their shots into a larger format by rolling out their 4 oz. Headshot, which also departed from 5-Hour’s low-calorie formula by packing in 21 grams of sugar. Tea brands Steaz and Guayaki have taken an organic angle on shots, and AriZona, which has tried just about everything in beverages at least once, rolled out three different shots that prominently featured tea flavors. Monster and Red Bull have also entered the fray, bringing their well-known flavors to a small format, while Coca-Cola and PepsiCo released Full Throttle and Amp shots, respectively.

The buying public will decide which of those products will survive, and that may not bode well for the biggest companies entering the market. Established players have had a difficult time with emerging, dynamic categories in recent years. Coca-Cola made several attempts to create an in-house energy drink brand before changing tactics to partner with independent brands, first Rockstar, then Monster. PepsiCo had better luck with its AMP energy line, but even the one-time Mountain Dew sub-brand ranks fourth behind Red Bull, Monster, and its own new distribution partner, Rockstar. Similarly, both firms have demonstrated difficulty with the super-premium tea segment, with Coca-Cola ultimately buying interest in Honest Tea after Gold Peak failed to ignite. In shots, PepsiCo has pulled the plug on its AMP shot, and Coca-Cola’s Full Throttle shot, according to Nielsen data for the four weeks ending May 16, has stagnated with an unimpressive 0.9 percent of the category. However NOS Power Shot, produced by Coke Subsidiary Fuze, entered the market as a strong player – even if its sales have since tapered – and both big players now boast alliances with independent energy drink brands, which Sperber thinks are poised as strong competitors in the shot category.

“I have a feeling when the dust settles it’s going to be us and Hitman and Red Bull,” Sperber said.

His consistent refrain on the future of the category, though, is that another shot will not overtake 5-Hour unless it’s better. Many companies – Red Bull included – have proven that the first mover in a category enjoys a strong advantage. Sperber also noted that 5-Hour Energy is his company’s core business, while shots are a “sideline” for his better-funded competitors. That not only leaves Living Essentials with a more consistent focus, Sperber said, it also frees them from struggling with internal tensions generated by marketing both a 2-4 oz. shot and an 8-16 oz. energy drink.

As Sperber sees it, shots have a tricky relationship with beverages: they compete for the same dollars, but boast differing strengths. A shot, Sperber said, is good for delivering a specific function in a rapid fashion, but will never serve as a good platform for refreshment, rehydration or flavor – a particular failing highlighted in a recent New York Times article. Sperber said that not only did he never expect 5-Hour to be widely praised for its flavor, he didn’t want it to be. He doesn’t want people coming to the product for the wrong reasons. Additionally, some brands involved in both energy drinks and energy shots have put themselves “upside-down on price,” as Sperber put it. They’re offering an 8 to 16 oz. product in the cooler for around $2, while selling a gulp-sized shot, warm, for $3 next to the cash register.

“What they’re doing kind of goes against the American value proposition,” Sperber said.

But consumers have proved that they’re willing to pay more for a gulp than for a 16 oz. can. Consumer Edge Research founder Bill Pecoriello reported earlier this year that shots are taking share and usage occasions away from energy drinks. He evaluated data from Information Resources Inc., that covered the 12 weeks ending May 17, and found that shots grew by 84.5 percent year over year, while drinks slipped by 0.8 percent.

Either ignorant of that trend – or in an attempt to get ahead of it – energy drink brands have continued to pile into the shot category. Joey Allen, President of Allen Flavors, Inc. said his company works with a lot of energy drinks in 8 oz. cans “and just about everybody who was in that size is gravitating towards also having a shot.”

Allen said that, early on, he counted himself as one of the energy drinks naysayers who expected the category to have a “limited run,” but he said he won’t make the same prediction about shots. He said he sees a new competitor just about every day. He’s seen relaxation and anti-hangover shots, but most of it’s energy, and, he said, right now, half the projects in his lab have something to do with an energy drink or a shot. (For more on other shot functions, see sidebar.)

“We’ve gotten a lot of people come back for a lot more,” Allen said. “Everybody’s rushing to the market…The average turn around in a real beverage used to be at least six months to two years. With these things it’s like boom.”

Allen said his company can – and does – turn around complete energy shot products in as little as three months. The biggest challenge, he said, is finding a name that “isn’t already gobbled up by somebody.”

Bob Occhifinto, president of New Jersey-based co-packer NVE Pharmaceuticals, described a similar picture. In November, he said his company had doubled the number of energy shot brands it dealt with in each of the two previous years. Since then, his business has continued on an upward vector.

“There’s been no peak yet… Every week there’s new companies. It’s not stagnating at all,” he said.

To cope with that growth, NVE has installed a total of four energy shot-filling lines that fill the factory with a constant mix of rattles, rumbles and pneumatic hisses. The fourth line started churning out the diminutive packages in April, and Occhifinto said he’s currently satisfied with his company’s capacity. He doesn’t have any plans to add equipment in the immediate future, but is considering equipment to handle organic shots, as more competitors have considered using the organic badge since Steaz and Guayaki set the precedent.

Space Race

Until then, though, his factory will continue to churn out 30 million shots per month, contributing to an escalating space challenge at retail locations. What started with a cardboard box filled with shots has quickly become a mess of boxes stacked on and around the cash register, sometimes filled with mismatching product. To cope with that clutter, shot brands, including 5-Hour and NVE’s in-house brand Stacker 2: 6 Hour Power responded by offering branded counter racks to fit the shots in. Sperber calls it “community racking,” and said it’s “a little painful” to give a 5-Hour rack to a retailer that’s almost guaranteed to use it to hold a competitor’s product, but he said it’s a “goodwill thing.”

Even those racks may not be enough. Terry Johnson, director of marketing for the 40-store Uppy’s chain based in Chester, Va., recently told Convenience Store/Petroleum magazine that he decided to raise the shot segment’s profile by giving it a rack off the counter. Johnson created a six-shelf display, called it the “Energy Shot Headquarters,” and placed it near the cash register. So far, he said, the displays seem to be doing well, and they help him deal with the wild proliferation of energy shot brands arriving on the market.

“With the new brands coming out, we would have had all that sitting on the counter,” Johson told CSP “There’s just no place for all that stuff.”

Retailers’ difficulties with organizing the category may be exacerbated by the number of channels through which shots are shipped, and confusion on what, exactly, they are. Originally viewed as a sub-category of energy drinks, shots will not be listed with beverages at this October’s National Association of Convenience Stores Show. Following a suit filed by Living Essentials, NACS declared last November that it would categorize shots as health and beauty care products. Natural products, like PurBlu’s Potion Herbal Remedy, have used natural distributors like UNFI and Tree of Life. CEO and founder Ben Lewis said his company – better known for its GIVE line of charitable bottled waters and energy drinks – has also used candy and tobacco houses to move his shots. Other beverage companies have leveraged their existing relationships with DSD houses to distribute their products. Red Bull, according to Beverage Business Insights, went so far as to turn down chain wide authorization from 7-Eleven because it insisted on staying with its existing distributors. 5-Hour Energy, according to Sperber, mostly ships its product directly to stores, or works through a broker when chains prefer that method.

In the mean time, not much has changed about 5-Hour Energy. Since its debut five years ago, Living Essentials added an extra strength and a low-caffeine variety, as well as three new flavors. The brand also swapped out its generic white cap for a red cap with an embossed “energy guy” logo and a depressed top to ease the process of peeling off the product’s plastic safety seal.

The company’s big push, Sperber said, has been finding new outlets for 5-Hour – Living Essentials recently added placement at warehouse stores Sam’s Club, BJ’s and Costco – and monitoring the competition.

“We’re not smug and satisfied with our success,” he said. He added that the company will keep pushing the brand until it hits its limit. Then, he said, it will figure out what to do next.›› OTHER FUNCTIONS

While 5-Hour Energy continues to run strong by packaging caffeine, niacin and B-vitamins in small bottles, a handful of firms have used the 2-4 oz. screw-tops as a platform to deliver other functions.

The emerging anti-energy beverage trend, for example, quickly diversified into shots. Funktional Beverages, Inc., which launched its 16 oz. relaxation brand Purple Stuff last July, added a shot just three months later. Tim Lucas, the company’s chief marketing officer, said the shot is not only performing well, but has created more excitement than its parent product did. It’s also quickly catching up to the parent product’s sales, Lucas said.

Lucas said he sees room for other functions in shots. His firm recently released Red Stuff – a more traditionally energy shot – and Lucas said the company will continue to roll out more color-coded functions in the future.

But, where Funktional Beverages is introducing one product at a time, PurBlu Beverages (better known for its Give line of charitable bottled waters), has taken the shotgun approach. At the 2009 Natural Products Expo West, the company announced a six SKU line called Potion Herbal Remedy. The line includes both an energy shot (in this case called “Power”) and a relaxation shot (called “Calm”), but it also includes “Detox,” “Focus,” “Burn,” and “Immunity.”

The idea, according to company founder Ben Lewis, is to offer consumers exactly what function they need in an easy, small-volume format.

“I don’t really need much more energy on a day to day basis,” Lewis said. “but I need more focus. I’m the first to admit that…. Other people need other functionalities.”

Both Lucas and Lewis say that their shots don’t directly compete with 5-Hour Energy and, instead, bring new consumers into the category.

But Carl Sperber director of marketing for 5-Hour Energy said that energy is what Americans want.

“I think most Americans think it’s their birthright to be tense and uptight,” Sperber said, “and they don’t mind it.”

Even if other functional shots are a way to bring incremental sales into the category, Sperber said, 5-Hour will be sticking to energy for the near future.Harcos. Mana Energy Potion partnered with Ijji, makers of the Lunia video game, to bundle purchases of both real-world and in-game Mana Potions. The brand also released a new apple-cinnamon Health Energy Potion.

XO Energy Beverage Corp. XO’s 6 oz. energy drinks are now made in the U.S.A., are Kosher certified and have a 24-month shelf life.

Iron Horse Beverage LLC. Category 6 Huracan energy shot is now available in 15 states, with a West Coast introduction slated for the fourth quarter of 2009.

DD Beverage Co. DD Beverage Co. has introduced Beaver Buzz CORE Energy Shot as a 2 oz. line extension to its Beaver Buzz CORE Energy beverage. The shot comes packaged in a flask-shaped bottle.

Dayslim/Nightslim. DaySlim and NightSlim 5 hour appetite suppressant launched at the Bevnet LIVE conference in New York in May. Soon after, the company updated the product’s name, packaging and formulation to reduce its calorie load and distance its branding from 5-Hour Energy.

Xfuel. Xfuel announced its sponsorship of Team Foxy, the largest top-ranked female gamers’ organization.

Hansen Beverage Co. Monster Energy has expanded its Hitman Energy Shooter 3 oz. line to include two new additions, Sniper and LoBo.

Premium Energy, LLC. Premium Energy added Turbo Power Extreme Energy to its shot offerings. The company also added two professional fishermen, Bill Dance and Roland Martin, to its promotion team.

Power Trip Beverages. Power Trip Beverages recently expanded its energy shot offerings by adding two new flavors, Mango and Berry Punch. These new flavors join Extreme Citrus. Power Trip also increased the size of its shots to 2.5 ounces for the same price as the previous 2 oz. product.

Guayaki. Guayaki introduced a line of organic, mate-based energy shots packaged in glass bottles. The product debuted in Lemon, and Chocolate Raspberry varieties and more recently added Lime Tangerine.

Labrada Nutrition. Charge! SuperShot is now fortified with 2450 mg of fruit based anti-oxidants and B-vitamins, and still contains zero sugar.

On Go Energy. On Go has bolstered its marketing efforts by holding samplings, sponsoring events, and having by scoring placement in music videos by Katrina Carson and Woodward that will be aired on BET and FUSE.

NVE Pharmaceuticals. NVE rolled out a new “Extra Strength” version of Stacker 2: 6 Hour Power that retails for the same price as the original. Additionally, the company announced a 2 for $3.99 promotion for its original strength shots.

Wet Planet Beverages. Wet Planet Beverages recently expanded its Jolt Endurance Shot product line to include two flavors: Wild Grape and Berry Blast.

Folsom Distributing. Blutonium recently added CRAM BERRY shot to its line. It is a strong, tart, cranberry flavored shot with the Blutonium energy blend packaged in a wide mouth bottle.

Bayshore Specialties. Bayshore’s FUELcell “BULLET,” a 5 oz. single serve in a test-tube, launched in 7-Eleven Canada. FUELcell also launched its new portfolio into Jamaica, UK and the Bahamas. Other international markets are available for distribution.

RAGE Beverages Inc. RAGE SHOT entered the market in November 2008. RAGE Beverages Inc. launched the product by running 2 for $5 promotions in chain stores. Independent convenience stores were also offered a free box of RAGE SHOT with their order of five or more cases of RAGE 16 oz. energy drinks.

Peak Energy Distributing Ltd. Peak Energy Distributing introduced its new Peak 6 Hour Lemon Lime flavor, which joins the brand’s existing flavor, Very Berry. Peak Energy also debuted Canada’s first energy shot vending machine.

XS Energy Drink. This summer, XS Energy Drink entered the energy shot category with its 2 ½ oz. Citrus and Wild Berry shots.

The Healthy Beverage Company. Steaz launched Steaz Energy Shot, with 150 mg of plant-based caffeine. Steaz Energy Shot contains the same ingredients as Steaz 12 oz. Energy Drink, including organic, Fair Trade-Certified green tea.

Everlast Worldwide, Inc. Everlast introduced Everlast E-DRENALINE Energy Shots in January with a sampling and outdoor advertising campaign in Chicago. The company is conducting a broad, national advertising campaign in publications such as Men’s Health, Women’s Health, Men’s Fitness, Shape Magazine, and UFC Magazine, and sampled the product at UFC 100 in Las Vegas.

Zipfizz. Zipfizz has focused on its best selling Liquid Shot, Fruit Punch, which has been reformulated to improve the flavor. Zipfizz is sold at Costco, and has distribution through Odom corporation in the Northwest and in many other retail outlets throughout WA, OR and ID.

Modena Nutrition. Modena Nutrition has announced the availability of its 42 Gram Protein Bullet with Vitamin B in participating Smoothie King Nutritional Lifestyle Centers across the Country. Protein Bullet is infused with 2300% Vitamin B12 to aid in protein absorption and pre and post work-out energy levels.

Dynamic Nutritionals, Inc. On July 24, 2009 Cyclone Energy Shot kicked off a marketing and promotional campaign at the NASCAR Brickyard 400 in Indianapolis. Cyclone Energy Shot has partnered with Wayne Edwards (#48 truck) in the NASCAR Camping Truck series. Potions In Motion of Boca Raton, Florida has agreed to distribute Cyclone Energy Shot in select channels throughout the state of Florida.

Hype Energy Drink. Hype Energy Drink expanded its product line with the launch of the new Hype energy shots in US and Canada. This product is available in two non-carbonated flavors, MFP and Marionberry.

BSN. BSN launched the 4 oz. N.O.-XPLODE Power Shot. The two-serving shot is available in Fruit Punch and Blue Raz, N.O.-XPLODE POWER SHOT will carry the designation as the Official Nutritional Supplement Provider to the Ultimate Fighting Championship.

VPX. VPX promoted its REDLINE Power Rush shots this summer with a “Buy 2 for $5” promotion. The product now has distribution in all 50 states through DSD networks or Coremark, McLanes or Eby Brown.

Fuze. NOS appeared in EA’s Need For Speed: SHIFT video game, and hosted a week-long NOS Powershot lounge two blocks from the Electronic Entertainment Expo. The move was designed to position the NOS Powershot as the energy of choice for gamers.

Xyience. XYIENCE added the X Energy Shot, or X Shot, as a complement to its Xenergy beverage line. Available in CranRazz, the shot provides a combination of B3, B6, B12 and B5 vitamins and a propriety energy blend as effective as a 16 oz. Xenergy. XYIENCE recently renegotiated a multi-year energy drink sponsorship agreement with the Ultimate Fighting Championship. The X Shot is the UFC’s official energy shot.

Cellutions. Cellutions introduced its caffeine-free Modjo Life Natural Energy Shots. Modjo shots are backed by a national media campaign and are available at CVS.com, Circle K, SaveMart, Mapco and several 7-Eleven Franchise groups.

Promotional Energy Products. Promotional Energy Products introduced its Custom Energy Shots early this summer. The shot is sugar free and packs 150mg of caffeine. Visit CustomEnergyDrink.com or call (323) 604-1040 for ordering information.

Bigg Juice Industries Ltd. Big Juice recently introduced its Reload Energy Shots in see-through bottles. Reload is available in Clear Endurance, Energy and Extreme varieties. Each boasts a different ingredient mix. Reload is available in 36-unit and 16-unit counter displays.

Nitro2Go. Nitro2Go, Inc. debuted its two-serving, 4 oz. Mega Shot at a suggested retail of $2.99.

PurBlu Beverages, Inc. PurBlu Beverages, Inc. recently launched Potion Herbal Remedy in six functional varieties – Energy, Focus, Burn, Calm, Immunity, and Detox.

Fluid Motion Beverage Inc. Fluid Motion Beverage Inc. has expanded into Canada with their new 3 oz. Talon Blood Punch Sharp Shot. The product is in Mac’s Convenience Stores in Western Canada.

Zenedge, Inc. Zenedge is concentrating its branding efforts in the motocross world along with other extreme sports. Zenedge is also running commercials on TNT, MSNBC, CNBC, TBS, Bravo, Lifetime, and USA Network.

Imbibe. Imbibe added Wild Stallion shots to the Wild Stallion Energy Family.

In addition, Imbibe recently launched new extensions to its Kickstart line of functional shots. Kickstart Energy Shots are now joined by Hangover, Virility, Weight Loss and Joint relief.

AriZona Beverages. Lil’ Drug Store Products and AriZona Beverages have partnered to introduce the new AriZona RX Energy Fast Shot. The new AriZona RX Energy Fast Shots were unveiled and sampled at the National Association of Convenience Stores trade show in Chicago.

Drivin’ Energy Nutrition, LLC. Drivin’ Energy Nutrition debuted Go Juice Energy Blast and Truckers Luv It! Energy Shot last fall. Truckers Luv It! has been placed in TA Travel Centers, Flying J, Pilot Travel Centers, Love Travel Centers and many independent truck stops. Go Juice Energy Blast is in TA Travel Centers, Flying J and most McLane warehouses.

Living Essentials. Living Essentials will debut a new flavor for 5-Hour Energy, Grape, at the National Association of Convenience Stores show in October.

Red Bull GMBH. Red Bull entered the energy shot battle this summer, debuting Red Bull Energy Shot in cylindrical 2 oz. bottles shaped to resemble Red Bull cans. The shot comes in two varieties: Regular and Sugar-Free.

Yunker. Yunker was introduced to Japan in the late 1950s, and is scheduled to launch nation-wide in CVS this year with its Yunker Energy & Health shot.

US Beverage Manufacturing. US Beverage Manufacturing now offers private label 2 oz. energy shots. Choose from house brands Wild Buzz or Fuel or create your own. For more information visit us at www.usbeveragemanufacturing.com.

Cougar Energy Drink. Cougar Energy Drink introduced its 2 oz. shot scientifically engineered for women. Cougar will be expanding its distribution into Canada after partnering with several key distributors.

Shotz Nutrition, LLC. Shotz introduced its Hispanic line with flavors like Horchata Atómica, Mango Maniático and Fresa Impactante as well as Spanish language packaging.

BDI Marketing. BDI Marketing announced the release of its new .357 Super Magnum Energy Shot.

BDI Marketing announced the retail debut of its new mango-flavored triple strength 2 oz. shot, Xtreme Energy Rush.

BDI Marketing announced the release of its popular male sexual stimulant Top Gun in a 2 oz. liquid shot.

MET-Rx. MET-Rx recently introduced a television advertising campaign for its AMPED Up energy shots with commercials on ESPN.

Generator Labs, LLC. Rhino Mike’s Generator Energy Shots hit the market September 15. The shot, designed by a certified fitness trainer, is available in South Florida and online at www.drinkgenerator.com.