Gerry’s Insights: The Category That Keeps on Giving

I once had an editor who banned the use in our newsroom of the word “ever,” in the sense of “the biggest ever” or “the most ever” or “the richest ever.” “It’s the biggest, or the most, or the richest,” he reasoned. “Why do we need ‘ever’? Isn’t that obvious?” There actually was a counterargument to be made, but he was a decent guy prone to a single brainstorm a year, and if this was it for that year, who was going to quibble? So “ever” exited our lexicon forever, or at least as long as I was there, which was several more years.

I thought of that edict as I started writing this column about the best beverage category – ever. That would have to be energy drinks. And in innovation terms, by now it’s been the best category for what seems to be ever and ever. We’re heading onto 25 years since Red Bull established its beachhead in the U.S. and Monster and Rockstar followed it in, and the category remains an extraordinary bastion of growth, margin and creativity. Really, how many other categories could you ever say that about after their early growth stage? Are there any? And yet, it’s anything but stagnant. There are trends and brands bubbling up that won’t allow the big incumbents to get complacent. Even as I write this, Monster Beverage is readying its first plant-based entry, True North, targeting the REI outdoorsy crowd. The word “Monster” appears nowhere on the packaging.

The category has some intrinsic factors that give it an edge. It’s a functional category in which the function is entirely clear and obvious, and the effect just about immediate. Most other functional categories, from collagen to CBD, require some leap of faith on the user’s part. Not energy. You either get jacked or you don’t. It also targets a demo – young guys lurking in c-stores – that’s most likely to give the purveyors a pass on issues like sugar and weird active ingredients and artificial flavors. And it was a class of product that beer wholesalers – the first distribution channel to embrace the drinks – could easily comprehend. It didn’t require them to visit alien parts of the store, or yoga studios or independent coffee shops. Just c-stores, a core channel for beer. They did great selling Red Bull in bars and clubs, too.

Of course, a lot of the credit goes beyond a receptive environment to the creators of the brands themselves. Besides the drinks themselves, they created whole new avenues of marketing. Red Bull’s oddball TV ads would have to be the least influential part of the mix, alongside its brilliant activations of alt-sports athletes and Felix Baumgartner (the daredevil who parachuted from outer space) and the broad cultural sweep of its in-house media machine. By now Monster’s fearsome “claw” motif has been tattooed on thousands of bodies and its moves into sports like drifting and video gaming reached users in a way that paid TV ads wouldn’t.

Other new categories, like iced tea and bottled water, similarly started with a burst of creative energy but descended quickly into a morass of innovation inertia and discount pricing. What was different about this one? As I’ve noted before in this space, a crucial difference would have to be that, until very recently, all the key conventional energy players have remained independent. In saying this, I’m not disparaging the big beverage companies, because they’ve been astute enough to recognize their limitations and establish partnerships with brands like Monster, Rockstar and Bang that would allow them continued independence in marketing, innovation and pricing.

Key brands maintain very different strategies. Red Bull rides a minimal amount of innovation to consistently strong, double-digit growth rates, for an extraordinary degree of efficiency. Coming from a European base where DSD doesn’t exist in the same way as here, Red Bull seems to be pursuing some manifest destiny of self-distribution in every major metro, a view I find narrow and short-sighted. So far, though, it’s hard to argue it’s failing, and the focus that garnered certainly stood the brand in good stead during the pandemic. Monster Beverage throws a lot more new stuff at the wall for a slightly lower growth rate but it still has to rate as a vibrantly healthy brand. While it’s weathered occasional strains with its partner Coca-Cola, it’s ridden the red system to a remarkable presence overseas, and Coke’s domestic refranchising has put the brand in the hands of a new breed of more energetic, alert bottler. And just as Pepsi’s ally Rockstar seemed to be losing its fastball, along came Bang Energy, injecting a new burst of energy as it inaugurated that segment we call performance or fitness energy, incorporating ingredients from the supplement aisle like creatine and branch-chain amino acids.

Still, there’s no room for complacency. A large share of the incumbents’ sales still reside in those convenience stores, to younger male consumers. What about the rest of us? After a lot of false signals in the past, there are signs now that the category is broadening its reach, even if it’s not necessarily Red Bull, Monster, Rockstar or Bang that are connecting with these other consumers. After a decade and a half in the wilderness, Celsius seems to have found its rhythm as a female-leaning fitness drink and Congo’s Alani Nu is showing signs of breaking out with a similar demo. Though Bang Energy has been weathering a troubled marriage to its new distribution partner Pepsi, other performance brands like C4 are growing fast. I would imagine that the inner councils of Red Bull and Monster are full of discussions about whether those brands are connecting as well with entry-level consumers or risking becoming “your father’s brand.” Meanwhile, the very edginess that so brilliantly brought them this far is becoming a liability in a cancel culture where any missteps are instantly amplified on social media.

Meanwhile, other segments continue to make incursions into energy, potentially with more success than in the past. One of the latest breakout brands, Body Armor sports drinks, has launched an energy extension, as has a previous breakout brand, Bai. And while ready-to-drink coffees haven’t yet ignited, they continue to pose a threat to energy, with their inherently more natural formulations, artisanal stories and links to rich café culture. Throw in plant-based plays like Guayaki, Yerbae and Runa, and it’s possible the segment we call energy may be entering its most fertile period – ever.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.