TORONTO — Cott Corp. is waving a red flag in front of Austria’s Red Bull GmbH, trying to grab a piece of Canada’s emerging energy drink market — a niche industry with enormous growth potential, observers say.
“In Canada, energy drinks aren’t really here yet . . . it’s an open market,” says John Sheppard, chief executive officer of Toronto-based Cott.
Canadians only got a taste of energy drinks last summer, after Health Canada created new regulations surrounding natural health products. Before the changes, products that made health claims had to be sold as either a food or a drug, which made it difficult for companies like Red Bull and Cott to sell drinks. (Red Bull says its product “gives you energy and vitalizes the mind, improving concentration and reaction time.”)
Red Bull created the energy drink market, launching its eponymous high-caffeine, high-sugar beverage in 1987. Today, it is the dominant brand worldwide, selling 1.9 billion cans in 120 countries last year. It is especially popular in Britain and the United States.
In addition to sugar and caffeine, energy drinks are also loaded with controversy.
According to regulatory guidelines, the cans must bear warnings that no more than 500 millilitres of the product be consumed in one day, it should not be mixed with alcohol, or consumed by children or pregnant women.
A spokeswoman for Health Canada said the agency is reviewing four complaints from people who have had adverse reactions to Red Bull that included dizziness, vomiting and abdominal pain.
France, Denmark, Norway and Sweden have banned energy drinks after they were linked to several deaths.
Still, Rob Tulloch, who follows the Canadian beverage industry for Chicago market research firm Euromonitor International, says the drinks have never been so popular.
“They have this excitement,” he explains, noting that the products are a hit among students, young party-goers wanting to stay up all night, as well as extreme sports athletes requiring quick energy boosts. They are also catching on with “overworked cubicle drones” who need a pick-me-up in the middle of the day.
Data show energy drink sales in this country totalled $6-million in 2004, a tiny fraction of the $8-billion spent on non-alcoholic beverages but double the $3-million spent on the products in 2003, when only a few independent players sold the drinks below the radar of government regulators.
In the United States, where they have been available for more than a decade, consumers spent nearly $1-billion (U.S.) on energy drinks last year. Mr. Tulloch forecasts that the Canadian market has the potential to surge to 10 per cent of U.S. sales, or about $100-million annually.
Cott — the world’s largest manufacturer of private-label soft drinks — is trying to gobble up a chunk of that market, manufacturing two products that are similar in taste and appearance to Red Bull: Red Rave and Red Rain.
Red Rave is made exclusively for Costco Wholesale Canada Ltd., while Red Rain is available to its other retail clients. Loblaw Cos. Ltd. is among those carrying the Red Rain line.
Wal-Mart Canada Corp., which already sells Red Bull and another brand affiliated with World Wrestling Entertainment, is considering selling the drink.
Andrew Pollock, Cott’s vice-president of marketing, said that while management has been aware of the segment for a while, it was the company’s retail clients that pushed Cott into the energy drink market.
“The major accounts said, ‘Hey look, these regulations have changed and we see an opportunity here. We see energy drinks as a very profitable piece of business and growing piece of business. Can you help us out?’ ” Mr. Pollock explains.
Sales of Red Rave have been “very good” since Costco began carrying the line last month, according to Marc-André Bally, a buyer for the company.
What’s more, Mr. Bally sees the number of high-caffeine drinks in Canada rising in the very near future, pointing to recent launches of beers with guarana — a South American plant that’s a natural source of caffeine — by Molson Coors Brewing Co. and InBev SA’s Labatt.
Last week, Montreal’s G.I. Energy Drinks Corp. unveiled a low-calorie beverage called Guru Lite — apparently targeting the health-conscious energy seeker.
Meanwhile, a spokeswoman for the Canadian arm of Coca-Cola Co. said brass are evaluating the potential in this country for its high-energy drink, Full Throttle. Rival Pepsico Inc., which sells SoBe and Mountain Dew AMP energy drinks in the United States, could not be reached for comment.
“The market seems to be going that way. . . . It’s the tip of the iceberg and the market is growing significantly,” Mr. Bally says.