Less than 18 months after it debuted in the U.S. market, The Coca-Cola Company announced today it will discontinue its Coca-Cola Energy line in North America.
Launched in January 2020, Coca-Cola Energy was available in original cola and cherry flavors with full calorie and zero sugar variants. Each 12 oz. slim can contains 114 mg of caffeine, guarana and B vitamins.
In a statement to BevNET, the company said the line had failed to gain traction in the market and made a decision to focus on higher performing innovations such as sparkling water AHA and Coca-Cola with Coffee, the latter also being a highly caffeinated twist on traditional Coca-Cola.
“As we emerge stronger from the pandemic, our strategy is focused on scaling big bets across a streamlined portfolio and experimenting in an intelligent and disciplined manner,” the company said. “An important component to this strategy is the consistent and constant evaluation of what’s performing and what’s not.”
According to Nielsen, energy drink dollar sales for Coke fell 31.6% to $94.7 million in the two-week period ending April 24 and were down 53.6% in the 12-week period. Volume sales dropped 7.6% in the two-weeks and 35.9% in the 12-weeks.
Coca-Cola Energy had a highly anticipated and troublesome path to market. In 2018, the company entered arbitration with Monster Energy Corp. when the latter claimed that the product violated a distribution agreement which prevented Coke from launching any products that would directly compete with Monster, with an exception for products released under the Coca-Cola brand. The American Arbitration Association ruled in favor of Coke in June 2019.
Although Coke owns a 16.7% stake in Monster and distributes the brand nationwide, the decision to discontinue Coca-Cola Energy leaves the soda giant without a wholly owned brand in the $14.9 billion U.S. energy drinks category. The move comes as PepsiCo has ramped up its energy drink portfolio in the past year, including the acquisition of Rockstar Energy, signing an exclusive distribution agreement with Bang and rolling out new energy-positioned innovations on its MTN Dew brand, including MTN Dew Rise which launched in March in collaboration with LeBron James.
In its Q1 “Beverage Bytes” survey of convenience retailers last month, Goldman Sachs Equity Research reported that retailers believed Coca-Cola Energy “isn’t resonating with consumers” and noted that few expected momentum to pick up despite reports that the line was to be reformulated this year. Many retailers, the report noted, had already removed the brand from their sets.
One flaw retailers noted was the decision to use a 12 oz. slim can rather than a 16 oz. tallboy, which they said was more beneficial to gaining a foothold in the category.
“Some retailers noted that [Coke’s] decision to use a smaller slim can for Coke Energy made it a less attractive alternative to [Coke’s] more traditional CSD offerings — especially when considering that Coke Energy is typically priced at a significant premium on a per ounce basis,” the report stated.
Analysts view the decision as a likely positive development for Monster as well as rising energy brands such as CELSIUS. Credit Suisse noted that Coca-Cola Energy was “a part of the bear thesis” for Monster among stock traders and its removal from the market will likely benefit the company’s stock price. As well, the firm noted the announcement “shows [the] staying power of brands in a growing category where both Coke & Pepsi have struggled for decades.”
The announcement comes one day after CELSIUS’ Q1 earnings report showed the brand gaining steam as a serious competitor in the U.S. energy category. Credit Suisse noted that the company’s 78% revenue growth and strong ecommerce performance showed “clear signs” that demand for energy drinks is accelerating.