The Energy Drinks Industry

Global energy drink sales reached €44 billion in 2014 (about $49.9 billion), according to BeverageDaily.com, an online news service covering the food and beverage industry. That’s a 5% increase over 2013 sales. Energy drinks are part of the broader soft drink category, which includes carbonated beverages, fruit and vegetable juices, bottled water, sports drinks, beverage concentrates, ready-to-drink tea, and ready-to-drink coffee. Within this industry, consumers have been buying less soda and more energy drinks. Americans today are consuming about the same amount of soda as they were in 1986. Meanwhile, energy drink sales have been growing rapidly, according to the American Beverage Association, the trade association that represents America’s non-alcoholic beverage industry. The markets that will be most important for energy drink growth through 2017 are the United States, China and Brazil, according to market research firm Euromonitor International.

Here are the biggest companies in the energy drink industry and some emerging trends:

Red Bull

Energy drinks came to prominence in the United States in 1997 with Red Bull. This beverage is owned by the Austrian company Red Bull GmbH, whose introduction of the drink in 1987 in its home country marked the beginning of the global energy drink industry. Red Bull comes in 8.4-ounce cans in a handful of varieties: original, sugar-free (5 calories), Total Zero (no calories), and Editions (cranberry, blueberry, tropical, zero-calorie orange and zero-calorie cherry). The drinks’ main ingredients are caffeine, taurine, B vitamins, sucrose, glucose, and carbonated water.

Red Bull is sold in 167 countries and has recently experienced strong sales growth in India, Japan, Turkey, Scandinavia, Russia, and Brazil. It plans to focus on continued expansion in the United States, Western Europe, and the Far East. Red Bull’s advertising strategy relies heavily on event and extreme sports sponsorship, buzz marketing, and television ads.

Dietrich Mateschitz owns most of the company, and because it is privately held, limited financial information is available. The company says it sold 5.387 billion cans worldwide in 2013, a 3.1% increase over 2012. In the US market, the drink had sales of $3.433 million from July 2012 through June 2013, according to market research firm IRI, making Red Bull the leader in US energy drink sales. Forbes estimated the company’s market value at $20 billion last December.

Monster

California-based Monster Beverage Corp. (MNST), formerly Hansen Natural Corp., was founded in 1990 and began selling Monster Energy drinks in 2002 after unsuccessfully launching another drink to compete with Red Bull in 1997. Monster promotes itself as “way more than an energy drink . . . a lifestyle in a can.” It associates itself with “action sports, punk rock music, partying, hangin’ with the girls, and living life on the edge.” It comes in 16-ounce cans that have about the same price point as Red Bull’s 8.4-ounce cans. Monster drinks come in 36 varieties, ranging from its flagship Monster Energy drink to double-strength, coffee-flavored, fruit flavored, no calorie, protein-enhanced, and other varieties. The original Monster Energy’s main ingredients are carbonated water, sucrose, glucose, taurine, panax ginseng, L-Carnitine, caffeine, B vitamins, glucuronolactone, inositol, and guarana, though ingredients vary somewhat by flavor.

Monster is sold in 114 countries, and last August, Monster Beverage Corp. entered an agreement with the Coca-Cola Company that should close early this year. Coca-Cola will transfer its energy drinks — NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless — to Monster and purchase a 16.7% equity stake in the company for $2.15 billion. Monster will transfer its non-energy drinks — such as Hansen’s, Hubert’s, Peace Tea, and Blue Sky, which contributed to about 7% of its 2013 net sales — to Coca-Cola. Coca-Cola will also become Monster’s preferred distribution partner. Coca-Cola’s distribution network reaches more than 200 countries, which should help increase Monster’s sales internationally. The two companies have done business together since 2008 (Coca-Cola is also a key Monster distributor). Both companies’ share prices went up after the announcement.

With US sales of $3.147 million from July 2012 through June 2013, Monster Energy is a close second to Red Bull. Together, these two brands captured more than 80% of the US energy drink market in 2013. Once Monster acquires Coca-Cola’s portfolio of energy drinks, Monster could become the dominant player in the US market. However, while Red Bull’s lead in sales over Monster is small domestically, it is large internationally. According to Euromonitor International, in 2013, Red Bull had about 32% of the worldwide market, while Monster had about 14%. Similar to Red Bull, Monster’s market capitalization is nearly $20 billion. Monster’s stock has dramatically outperformed that of Coca-Cola Co. (KO), PepsiCo Inc. (PEP), Dr. Pepper Snapple Group (DPS), the Nasdaq, and the S&P 500(L20) over the last five years. (For more on this topic, read The Secret To PepsiCo’s Success Isn’t Soda.)

Rockstar

Rockstar International founder and owner Russ Weiner introduced Rockstar Energy in San Francisco in 2001. The company says it energy drinks are “designed for those who lead active lifestyles.” Rockstar comes in 8.4-ounce, 16-ounce, and 24-ounce cans, depending on the variety, and there are 27 varieties, ranging from Rockstar Original energy drink to zero carb (10 calorie) and zero calorie versions, recovery drinks, coffee flavors, and more. Rockstar’s main ingredients include carbonated water, sucrose, glucose, taurine, caffeine, L-Carnitine, milk thistle extract, ginkgo biloba leaf extract, guarana seed extract, and panax ginseng root extract. Rockstar is sold in convenience and grocery stores in more than 30 countries. Its advertising strategy includes affiliations with action sports, motor sports, live music, and models. Like Monster, Rockstar has the same $2 price point as Red Bull, but its cans are nearly twice the size.

Rockstar International is privately held. Weiner owns 85% of the company and his mother, Janet, owns 15%. She also serves as the company’s chief financial officer. Rockstar had $821 million in US sales in 2013 and approximately $670 million in revenue. It makes up about 10% of the US energy drink market. According to Forbes, Rockstar’s annual average sales growth has slowed dramatically in recent years, plummeting from 103% annually in the company’s first six years to just 8% annually since then.

Top Emerging Companies and Trends

The energy drink market is saturated, making it hard for small and new companies to compete. No companies appear to pose a serious threat to Red Bull, or Monster and Rockstar’s market dominance. If we factor in energy shots, 5-Hour Energy would rank ahead of Rockstar in energy beverage sales; its closest competitor, 6-Hour Power, would rank near the bottom of the list. Energy drink mixes like MIO Energy and Crystal Light Energy are not major players in the market, relatively speaking.

There may be room in the energy drink market for companies that differentiate themselves from the leading players’ brands, which look remarkably similar in their advertising, promotions, and sponsorships. Competitors face challenges such as distribution, obtaining shelf space, and generally offering something unique from the big three. (For related reading, see Taking Beverages to the Extreme.)

Monster and Rockstar, and less so Red Bull, are on top of the trends in the energy drink and broader soft drink industry and have widened their product offerings to compete with smaller players. For example, while Steaz Energy, the most popular organic energy drink, distinguishes itself by using certified organic and Fair Trade ingredients and being based on green tea, Rockstar has an organic offering, and Monster has one with green tea.

Another trend is energy drinks with additional ingredients that are supposed to enhance athletic performance and recovery. We might also start seeing more energy drinks with branched-chain amino acids (BCAAs), protein, n-acetyl-l-tyrosine, beetroot extract ,and creatine, according to BeverageDaily. Other relatively new varieties of existing energy drinks have selling points like no sugar, no carbs, no calories, and, counter-intuitively, no caffeine. There are also coffee flavors and non-carbonated flavors. Other marketing strategies include limited-edition drinks offered only in certain store chains and flavors tailored for different countries. 

Sample On-Trend Product Offerings from Leading Energy Drink Companies

Notes: This is not an exhaustive list of product offerings that fit the categories shown. There is also some overlap between categories. For example, zero calorie drinks also have zero carbs.

The Bottom Line

The energy drink industry has been growing profitably for years as other once-popular beverages have declined, and it appears on track to keep growing despite regulatory and health challenges. Two of the three leading companies are privately owned, which limits options for investors who want direct exposure to this category. However, stocks in companies such as Monster, along with ETFs focused on the food and beverage industry, offer the opportunity to participate in the energy drink industry’s future performance. (For further reading, see Parched For Profits? Try Beverage Stocks.)

Disclaimer: The author does not own shares of or have a financial interest in any company mentioned in this article.