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Supermarkets are in the midst of an energy surge.
Food and dietary supplements formulated for those wanting a physical and mental lift are in high demand, growing pervasive across food/drink and nonfood categories. That momentum isn’t about to let up soon, according to retailers and analysts at Chicago-based Euromonitor International.
“Beverage manufacturers realize what kind of cash cow the energy drink segment really is. They are all scrambling to get in it,” says Jonas Feliciano, Euromonitor’s beverage analyst.
In mass-market channels, including c-stores, energy drinks were up 3.9 percent to $10.1 billion for the 52-week period ending March 23, 2014, says Chicago-based Information Resources Inc. (IRI). Supermarkets generated a little more than $1 billion of that volume, up 1.7 percent in dollars and 5 percent in units.
Globally, those numbers soared to $27.5 billion in 2013, according to Euromonitor figures.
Energy drinks “are in demand, and it seems to be young adults through college age, 14 through 25, interested in energy drinks/shots,” notes Joy Kemp, healthy living director at Dorothy Lane Market, in Dayton, Ohio.
The growth enjoyed by energy drinks carries over to double-digit growth in the bar and dietary supplement segments. Energy bars rose 13.6 percent to $2.4 billion in mass-market channels tracked by IRI for the reporting period, while food sales were up 15 percent to $965 million.
Sales of dietary supplements marketed as “energy support” rose 10.2 percent to $1.6 billion in natural supermarkets and conventional food and multi outlets for the 52 weeks ending March 23, 2014, according to SPINS, in Schaumburg, Ill.
While manufacturers scramble to formulate new boosters to satisfy demand for a fast-acting pick-me-up or slow and sustained energy, retailers can struggle at times with product placements and category classifications.
Two years ago, when Kraft Foods Inc. (now Mondelēz International) introduced its belVita Breakfast Biscuits, a new category formulated to provide “nutritious sustained energy,” it decided to sell the item in the cookie and cracker aisle rather than on the cereal shelf, where one might expect to find a breakfast substitute.
Energy drinks are mostly found in the soda aisle, even though some may be labeled dietary supplements. Some have migrated into bottled water, tea, juice and dairy aisles. In 2012, Coca-Cola introduced Power Core, marketed as a high-protein sports recovery drink.
Energy products that cross categories and multifunctional lines add to the product placement confusion. A lot depends upon product positioning and packaging, as well as brand strength and the retailers’ positioning and target shoppers, say Euromonitor analysts.
Some questions to be asked: If it’s labeled a dietary supplement, should it be shelved on conventional food aisles? Are products energy boosters or meal replacements? Are they better positioned in the HBC department rather than in conventional grocery?
It will be placed where the product gets the most lift and where consumers are most likely to look to purchase it, answers Feliciano, adding that energy manufacturers are testing various locations within the store.
Chris Schmidt, consumer health analyst at Euromonitor, says it can be especially difficult if a grocery store doesn’t have a healthy-food section. Nutritional energy bars can be healthy, indulgent and a meal replacement, he points out.
“It’s a bar, so should you put it with candy bars in the checkout aisle, or put it in the healthy food section?” muses Schmidt. He suggests that retailers examine how their stores are laid out, what type of shoppers they’re targeting and their shoppers’ idea of which foods go together.
A Whole Foods Market in Chicago cited by Schmidt has a separate aisle of bars and drinks, but it also has a stand-up section near baked goods. “There, they are positioning bars as a healthy alternative to an indulgent treat,” he notes. “It’s more guilt-free than a doughnut.”
At a Big Y Supermarket in Connecticut, a corrugated display of Larabars were recently spotted in the fresh produce department, next to bananas. And at Phoenix-based Sprouts Farmers Market stores, an energy bar destination aisle sits in grocery, but is close to vitamins and supplements.
“There is a fair amount of crossover between the two categories as consumers experiment beyond energy bars to energy shots,” acknowledges Diana Lucas, Sprouts’ VP, vitamins/HBA.
“While many of today’s energy shots are caffeinated, we are seeing growing interest in herbal shots, which helps people who may be initially interested in energy bars to get more comfortable with natural shots and supplements,” she adds.
Change in Designation
As adverse health reports have swirled around the high caffeine content and other ingredients in drinks and shots, some energy drink brands, such as Monster and Rockstar, have switched their labels from dietary supplement to conventional beverage.
With a switch in designation, the manufacturers play by different rules and are no longer required to report adverse health events to the U.S. Food and Drug Administration as they would have to do if marketed as dietary supplements.
Earlier this year, the FDA issued final guidance to better distinguish between a liquid dietary supplement and a beverage to bring clarity to product designation. It was in anticipation of this move that the energy manufacturers decided to change product designation, explains Euromonitor’s Schmidt.
“The big reason, I believe, they shifted was because the FDA was working on draft guidance of how to label products,” he says. “Manufacturers realized the winds were shifting toward anything positioned as a drink [being] labeled as a drink even if it’s got added supplements.”
Even though regulators have been keeping a close eye on the safety of highly caffeinated energy drinks, safety concerns haven’t stemmed consumer demand. “Energy supplements are a simple progression from coffee; so long as we are a sleep-deprived nation, the demand will remain,” says Kemp of Dorothy Lane Market.
Growing More Natural
The trend is for what are perceived to be healthier, more natural ingredients such as green coffee beans, vitamin B and ginseng, analysts note. Schmidt calls it “greenwashing” by manufacturers. Consumers are buying into the idea that green coffee beans and green tea are better for you, he says.
Demand is also moving beyond functionality to taste and flavors, lifestyle, occasions, and sustained energy. Look for protein to become a bigger element in the energy sector for sustained energy and endurance.
Meanwhile, energy bars are in the midst of a “premiumization” with flavor profiles, according to Schmidt. Brands are adopting “free-from” claims (gluten-free, dairy-free, non-GMO) on their labels.
Energy products have grown from extreme sports to mainstream sustenance. “Consumers are becoming more aware [of] and concerned with what goes into their food and supplements,” observes Kemp. “Paired with the heightened awareness of the dangers of mainstream energy drinks, we may see a greater demand for natural alternatives.”
“We anticipate the demand for energy supplements continuing to grow, but shifting more toward raw foods and superfoods, as opposed to people looking for a quick caffeine spike,” notes Sprouts’ Lucas. “The category is broadening. Customers are requesting formulas with spirulina, for example, or chlorella, as they become more educated about the benefits of natural ingredients.”