Too Extreme?

It’s Hard To Handle Hardcore Energy

In nearly every respect, it was a rosy year for energy drinks. Salesfi remained high, the category continued to expand, and a parade offi new drinks and hybrids found their way to market.

Despite their youth, energy drinks have become as mainstream a partfi of the beverage economy as any other product. Rockstar sales reps holdfi tastings in corporate cafeterias; Monster is marketing a coffee/energyfi hybrid; Pimp Juice is hyping its antioxidant content. Projections showfi the category could hit $10 billion by 2010.

Things should continue to go well. If, that is, consumers can stay outfi of the emergency room. Because last year brought some of the worstfi headlines the category has seen to date. A pair of well-documented healthfi scares – and a product named for an addictive street drug – brought afi deeper, panicked level of scrutiny to the manufacture and marketingfi of energy drinks. At a time when Americans’ concerns about caffeinefi consumption are growing and functional beverages and foods are undergoingfi government review, it may be that the future of the energy drinkfi category is hazier than it appears.

What’s causing the negative attention? In the past year, it’s been a triofi of energy drinks whose pumped-up caffeine content (more than 30 mgfi per fluid ounce – between three and four times that of a typical energyfi drink) has led some industry members to assess them as a new segmentfi – Extreme. Two of the products, Spike Shooter and Redline, are madefi by nutritional supplement companies. Both caused national headlinesfi when, after drinking them, consumers were hospitalized with symptomsfi resembling caffeine overdoses. A third drink, Cocaine, caused a tempestfi in a slim can due to its inflammatory name.

As a result, the image of energy drinks – always more motocrossfi than merry-go-round – has sustained some damage. And the possibilityfi of another acute reaction – or another wave of bad press – is causingfi some industry observers to look with concern at the extreme end offi the energy spectrum.

“We talk about it a lot,” said James Foster, who runs thefi Web site, which tracks caffeine in beveragesfi and has become a resource for consumers and thefi media. “All there needs is one bad accident to happen, justfi one event where someone gets damaged, and the whole categoryfi is going to come under scrutiny in a negative way.”

Regulation, Inside and Out

This spring, a group of beverage marketing executivesfi gathered in the offices of the American Beverage Associationfi (ABA), the first members of a new committee onfi energy drinks. Caffeine concerns were of paramount importance,fi according to Kevin Keane, the ABA’s Vice Presidentfi of Communications.

“It’s a growing category, and we need to be smarter withfi those issues,” Keane said, adding that caffeine “was the bigfi thing we were dealing with.”

The end result of the meeting was a recommendation that ABAfi members begin disclosing caffeine content voluntarily, which echoedfi choices by the Coca-Cola Co. and PepsiCo to start divulging the caffeinefi content of their products.

The recommendation wasn’t made with any of the extremefi products in mind – none of their manufacturers arefi ABA members. But the ABA has a long history of fightingfi back against regulation, taking on criticism of the use offi High-Fructose Corn Syrup and sodas in schools with equalfi aplomb. That the group recommended caffeine disclosurefi for its energy drink making members so quickly indicatesfi its awareness of the potential for a public relations debacle.

“Our industry sent a message, in the way they approvedfi this voluntary labeling and put the issue front and center,”fi Keane said.

As for extreme products, he added, the jury is still out.

“It’s something that people are aware of, but concernfi hasn’t reached a high level yet,” he said. “The consumers arefi making their judgment with regard to them. It’s such a newfi category, it’s still growing, and everyone’s seeing how thingsfi are going to progress. And you don’t want to overreact tofi things, either. I mean, it’s an energy drink.”Spiking the Headlines

Keane’s right: Most energy drink consumers are aware that caffeine (andfi analogous products like guarana and yerba mate) is their “energy source.”fi It’s also quite likely that a group of Doherty High School students in Coloradofi Springs, Colo. were aware of the high levels of caffeinefi in Spike Shooter when they started buying it at a nearbyfi 7-Eleven, particularly since there’s a pretty big warning labelfi across the top along with (just like Redline) a recommendationfi that first-time consumers try a half-can to start.

Nevertheless, after drinking Spike Shooter, a pair of thefi students were taken to the hospital – one, infamously, leftfi school in a wheelchair. Many more complained of alarmingfi reactions like vomiting and heart palpitations. The falloutfi for the company was immediate, as the media, includingfi CNN, descended on the school and began looking at energyfi drinks with a more jaundiced eye.

Surprisingly, since the story broke, rather than scaringfi consumers off, Spike Shooter’s sales seem to have increased.

“We’ve had some pretty unbelievable experiences alreadyfi with the media, and we know any little thing can become afi major ordeal,” said Greg Guss, Spike Shooter’s Vice Presidentfi of Marketing. “We’re doing whatever we can to avoidfi that. When we do sampling, we card anyone who isn’t Beyond that, we can’t prevent people from abusing thefi product.”

Spike Shooter is manufactured by Biotest, a nutritionalfi supplement manufacturer whose products typically sellfi in GNC or Vitamin Shoppe. The RTD product was introducedfi in those channels, but last year began a periodfi of rapid growth through convenience stores. Recently,fi Spike Shooter was approved by Haralambos Beverage Co.,fi a major Southern California distributor, and, despite thefi incident in Colorado Springs, it is apparently on trackfi to wrangle more shelf space in 7-Eleven, as well. Not thatfi there aren’t concerns.

“We’re going very, very slowly,” said Raj Singh, the beverage buyer forfi 7-Eleven’s 840-store Central Region. “In Colorado, there are some storesfi selling $40 or $50 worth of products a day. We’re not going to be very aggressive,fi but we don’t want to miss that opportunity.”

Singh confirmed that the product is spreading in hisfi Colorado stores, and that, starting in Las Vegas, 7-Eleven isfi looking into the possibility of carrying Spike Shooter on anfi even wider basis. But he is still leery.

“We have a little bit of concern,” he said. “There are thefi stories that all of the caffeine seems to make the kids hyper.”

Hyper is one thing. But emergency room visits are a biggerfi problem, according to Foster. He believes that mostfi consumers – and media – won’t make the distinction betweenfi hardcore products and regular energy drinks if anotherfi incident takes place.

“If they’re marketed the same way, they’ll all be tarredfi with the same brush,” Parker said. “It’ll affect the whole category,fi surely. You don’t want hysterical media coming out.”

Playing to Hysterics

Hysteria was certainly on software developer Jamey Kirby’sfi mind when he decided to make an extreme energy drink of his His tech background made him want to name his product “Downloadfi Energy,” but when that was already registered elsewhere, he decided tofi go for broke.

He called it “Cocaine.”

“The more you think about it, it’s the ultimate name for an energyfi drink,” Kirby said. “Because it’s rebellious and irreverent,fi the core market for energy drinks would go crazy about We figured it would be a great name, and a lot of peoplefi would buy the drink. It was a limited demographic, but wefi figured the market would make up its mind.”

Kirby said the market response was huge – he estimatesfi he shipped 200,000 cases and had 50,000 more ordered infi the first weeks that the product received publicity. But thefi tide of public opinion quickly turned.

“We were prepared to get beat up,” he said. “And we gotfi free publicity – I don’t think we spent more than $15,000fi on advertising. But we never, ever expected the backlash.”

Politicians and parents demanded Cocaine be removedfi from shelves, and the company recalled its remaining cans, twice re-labeling them. Now, Kirby is selling “No Name Energy” (write infi your own name!) domestically while he markets Cocaine in Europe.The backlash over Cocaine was a much bigger concern than caffeine tofi mainstream beverage marketers, according to Keane.

“We don’t hear from members about the risks of caffeine so much as somefi of the marketing practices,” he said. “People know what they’re buying whenfi they buy energy drinks. But it’s some of the names that seem to cross the linefi of acceptability with the consumer. Cocaine obviously didn’t work.”

Still, it’s not as if mainstream energy drinks don’t already push thefi edge of taste as it is. Most energy drinks, in fact, carry tough-sounding orfi obscene names, and many also carry hyperbolic warnings of their The image that helped the category grow, Keane admits, might havefi created a situation where it is hard to separate the areas of real concernfi from the hype.

“As with all of the products, a lot of it is marketing,” he said.

According to Foster, problems arise when, in a forest of extremesoundingfi drinks, the ones that actually have extra potency don’t seem tofi be any different from those that don’t. While Cocaine challenged peoplefi with its name, there wasn’t much discussion of its potency as compared tofi other drinks – even though it was one of the strongest around. Similarly,fi Spike Shooter and Redline are expected by their manufacturers to be merchandisedfi in the energy drink cooler, right next to Red Bull, despite thefi difference in kick.

Redline, for example, has chemicals added that add a fat-burning, “thermogenicfi shiver” effect to its potent level of caffeine. With its rounded topfi and an appearance that makes it look a little less like a traditional energyfi drink, it might seem geared to a different niche.

But not according to Redline’s CEO, Jack Owoc, who noted, whenfi interviewed by electronic mail, that the best place for mainstream retailersfi to sell his products is “in coolers and on shelves (end caps would be better!)fi next to other energy drinks.”

Spike Shooter also attempts to identify itself as both a product thatfi is specifically designed to help athletes work out better, and as a mainstreamfi energy drink, as well.

“We design a lot of products for elite level athletes,” Guss said. “Nofi one wants to drink 24 ounces of something before an elite level (Ultimate Fighting Champion) Randy Couture wouldn’t do thatfi before he works out.”

“But,” Guss added, “It’s also a great mixer. The reason we created Spikefi is that we believe traditional energy drinks didn’t deliver on their If you want to call Spike ‘hardcore,’ we’ll call it hardcore, but this is whatfi energy drinks should have been all along.”

It’s that split personality – how many elite level athletes prep for theirfi workouts at 7-Eleven? – that might undermine the entire category.

“You can provide all the warnings you want, but it comes down again tofi a marketing issue,” Foster said. “If these things are marketed as a standardfi energy drink, they’re going to have a problem. 14-year-olds, they’ll justfi scarf them down.”

Over-Caffeinated Complaining?

Given caffeine’s established place in American culture, concerns about excessivefi caffeine in any drink can sound overblown. It’s not as if consumersfi are strangers to the product: worldwide, there are more than 13,000fi Starbuck’s franchises doling out their own, particularly high-test brand offi coffee. Starbucks can reach 23 mg per fluid ounce.

As one mainstream energy drink executive puts it, he’s sick of “thefi mother who’s saying that she’d never let her son or daughter drink somethingfi like [an extreme energy drink] when she’s on her third latte.”

And despite publicity surrounding bad reactions to the high levelsfi of caffeine in energy drinks, it takes a near-undrinkable amount to causefi a fatality. In the vast majority of well-publicized but non-fatal caffeinefi overdoses nationwide (six incidents in California related directly to Redline’sfi RTD product notwithstanding), the culprits were caffeine pills,fi rather than beverages.

But extreme products are influential, and there’s something of an armsfi race going on. One mainstream brand, Wired Energy aims its X344 andfi X505, with 178 mg of caffeine per 8 oz. serving, at serious caffeine Meanwhile, BooKoo, a fast-growing brand, has a line of 5.75 oz. “energyfi shots” with about 120 mg of concentrated caffeine. Even Coke now ownsfi NOS, which packs 173 mg of caffeine into an 11 oz. bottle.

It has the potential to become a larger issue because, prior to the morefi extreme products, energy drinks’ caffeine content never really matchedfi their sales rhetoric. Until now.

For a long time, even if they aren’t particularly “amped” with extra caffeine,fi the vast majority of energy drink brands tried to appear that way,fi in name and image, almost universally daring their consumers to “slam”fi them. That attitude helped the category growth.

But in a marketing environment like that, with a Monster or a Kronikfi or a Full Throttle in your sights, it’s easy to see why going hardcore, regardlessfi of the potential pitfalls is tempting for manufacturers.

“We were following the trend in the energy drink business,” saysfi Kirby, from the offices of Cocaine energy. “There were edgy drinks, therefi were already drug names, so we said, ‘Hey, let’s take it all the wayfi to the top.’”