Discount sales a bad sign for energy drinks

Economic commentators frequently point to thriving dollar store sales as a symptom of a suffering economy, and the surging supply chain that carries energy drinks to those stores may suggest coming bad news for producers of caffeine-laden beverages.

Jon Auspitz, president of Wham Food and Beverage Company, said his company buys food and beverage products nearing their expiration dates at fire-sale prices, and then sells them to charities or discount stores.

“Basically, when they have nowhere to turn, when they were going to have to pay to destroy their product, they have us pay them for the product and get it out of their place and fill a hungry belly somewhere,” Auspitz said.

He only deals with large orders, he said – at least a truckload – and in the current economy, his company has performed well.

“Our customer base has grown,” Auspitz said. “If anything, the challenge can be supply.”

But, he said, that’s not true with energy drinks. There’s almost more supply than he can deal with – and not just from small startups that shutter their offices.

“There’s more energy out there than anyone can handle,” he said. “I don’t have to tell you how many brands there are. It’s crazy.”

For business reasons, Auspitz declined to name any of the beverage companies that he works with, but said some of the big energy drinks brands “just have way too much [product.]”

“We’re talking hundreds of thousands of cases,” he said.

While the energy drink market continues to grow – up 13.5 percent September 2008 according to Information Resources Inc. – that growth has slowed significantly. IRI reported that the category expanded at more than double that rate – 34.4 percent – in the 12 months ending on July 15, 2007.

While those numbers and Auspitz’s experience suggest that energy drink firms haven’t calibrated their production to match moderating demand, he offered advice to companies that suddenly find themselves with more product than they know what to do with.

“Really, what you should do is go exhaust any avenues you have, and if you can’t move it, give us a call back,” he said. “You have to do the best you can for yourself. With us, you will lose.”