-By D. Gail Fleenor

There appears to be no end to the new brands and types of energy drinks and shots that continue to vie for shelf space and consumer dollars. Teens and overworked adults have been grabbing these pick-me-ups on an ever-increasing basis since the products debuted in the United States in 1997. While the market for energy drinks may have slowed some over the past year due to the recession and health concerns, sales still have plenty of get-up-and-go.

A Lively Category

In 2008, energy drink sales hit $4.7 billion in the convenience store, food, drug and mass merchandiser channels, excluding Wal-Mart, according to Chicago-based research firm Mintel. Between 2004 and 2009, sales rose 197 percent (prices adjusted for inflation). Mintel forecasts energy drink sales to increase 54 percent (prices adjusted for inflation) from 2009 to 2014.

Red Bull, Hansen Natural, Rockstar International, PepsiCo and Coca-Cola Co. account for about 93 percent of energy drink FDMx sales. The category is consolidating, however; Rockstar signed a distribution deal with PepsiCo this year, while Coca-Cola took over distribution of Monster Energy in late 2008.

Energy shots, still relatively new to the market, showed strong growth in 2008 despite the recession. Sales of shots doubled from 2007 to 2008, to reach $67 million in FDMx, according to Mintel. As big-name brands like Red Bull enter the shots segment, the research firm forecasts increased growth. Some analysts question, however, whether this growth will cannibalize drink sales.

Currently, over 50 percent of energy drink sales occur in convenience stores, which is where the largest group of users — young males — generally shop. Demographics of energy drink consumers are changing, however. "The consumer base has broadened a lot," says John Sichler, editor/publisher, Beverage Digest. "Originally, young adults were using energy drinks as mixers at bars. Now, adult office workers are grabbing the drinks for afternoon pick-me-ups, as are adult drivers on long trips."

Mintel reports that 48 percent of energy drinks are purchased in supermarkets and that many grocery stores are offering a wide selection of the drinks, including specially priced multi-packs of leading brands. At Redner's Markets, Inc., the most popular energy drinks are Red Bull, Monster Energy and Amp, according to Eric B. White, consumer communications specialist for the Reading, Pa.-based chain. Redner's currently operates 38 Warehouse Markets and 13 Quick Shoppes throughout eastern Pennsylvania, Maryland and Delaware. White says the grocer has not seen a change in sales in the category during the recession.

Redner's aggressively merchandises energy drinks during sales promotions, White notes. Merchandising tactics include the installation of some smaller Red Bull refrigerated cases at checkout. "In some of our stores, we have placed full-sized, single-sale cases at our front end specifically for beverages. In these cases, we will feature all SKUs of energy drinks and shots."

Since energy drinks rank among the most expensive nonalcoholic beverages, the economy has hit the category hard. Sales growth slowed to 11 percent in 2008, according to Mintel, following average growth of 46 percent during 2004-'07. "I think the recession has caused consumers to trade down, by buying fewer premium-priced beverages such as energy drinks," notes Sichler. "We have seen the category slow considerably. The first half of this year, it was flat."

Energy to Go

When energy drinks pioneer Red Bull hit the market in 1997, the category took off in the United States. Today, Red Bull is continuing to focus on its core brand but offering new forms such as Red Bull Energy Shots, regular and sugar-free, which debuted in the United States this past summer. "From Red Bull's perspective, consumer research and trade feedback confirm that the energy shots category has been waiting for a trusted premium brand like Red Bull to enter," says Patrice Radden, spokeswoman for the Santa Monica, Calif.-based U.S. division of Red Bull.

Red Bull also launched a new 16-ounce "super sleek" can (in original and sugar-free varieties). "The new shape is similar in profile to our iconic 8.4- and 12-ounce 'slim' cans, and replaces the 16.9-ounce Red Bull Energy and Red Bull sugar-free can," Radden notes.

Monster Energy is the No. 2 energy drink brand, after Red Bull, in sales. In response to the recession, "Monster has been more aggressive than typical with its pricing at retail as a result of the economic slowdown," says Geoff Bremmer, Monster brand manager at Corona, Calif.-based Hansen Natural Corp.

Monster recently teamed up with DUB, the publisher of a magazine about custom-car culture, to offer the Monster Energy DUB edition. The new drink's packaging includes logos for both companies and a top resembling an oil can cap. Promotions for the grape-flavored drink include a national Monster Energy DUB Show tour with custom cars, hip-hop performances and video games.

Monster and another partner, video game publisher Activision, are working together on what Bremmer says will be "the biggest entertainment launch in history, Call of Duty Modern Warfare 2." The promotion features a limited-edition MW2 Monster Assault can and an on-pack promotion on specially marked Monster Energy four-packs. "Monster is … giving away over 30,000 prizes, from the game itself to maps used in the game."

Some companies have chosen to concentrate their focus on shots. "I don't know about the rest of the energy drink market, but we've been spared the effects of the recession," says Carl Sperber, communications director for Farmington Hills, Mich.-headquartered Living Essentials, maker of 5-Hour Energy shots. "Sales of 5-Hour Energy have continued to rise month to month. In fact, sales of 5-Hour Energy are up 240 percent over a year ago in the grocery channel. Sales are way up in the convenience and drug channels, too." Sperber adds that 5-Hour Energy has over 70 percent of energy shot sales.

The energy shot consumer differs demographically from the energy drink customer, Sperber says. "The 5-Hour Energy shot customer has always been older than those of canned energy drink companies. Our marketing efforts are totally different from those of our canned competitors. We didn't give our product an edgy name, nor do we project a rebellious, nonconformist image." This approach has attracted an older audience underserved by energy drink makers, he says.

Upcoming products from the company include four-packs and two new flavors of 5-Hour Energy's original formula.

What's on Tap

In spite of the recession, energy drinks and shots have enjoyed a long period of category growth. One dark spot on the horizon, however, is news reports expressing health concerns about energy drinks and shots. These reports have scared some users, Mintel says. The research company expects that premium prices and health concerns will keep energy drinks from expanding their consumer base. Monster Energy's Bremmer notes most news stories focus on caffeine and sugar content as health concerns in energy drinks. "These reports omit the fact that the caffeine content in Monster is half the amount found in coffeehouse drip coffee on an ounce-per-ounce basis," he says. "The sugar content in products like Monster is the same ounce per ounce as cola, except we use a better sugar — glucose and sucrose. We also offer low-calorie products." News reports also omit Monster's 100 percent RDA of vitamins B2, B3, B6 and B12, Bremmer observes.

Health concerns about energy beverages should center on energy drinks (not shots), according to Sperber. "Canned energy drinks are loaded with sugar and calories," he says, noting that some energy drinks also carry one or more herbal stimulants and a "fair amount of caffeine." On the other hand, 5-Hour Energy contains no sugar or herbal supplements, Sperber says, and as much caffeine "as a cup of the leading premium coffee."

To grab more sales, how can supermarkets compete with convenience stores for energy drink consumers? Grocers can grow energy drink sales, according to Bremmer, by providing cold single-serve cans in convenient locations like checklane merchandisers and the deli. Sperber concurs. "Grocers can do two things to compete with convenience stores in selling energy shots," Sperber says. "First, sell single-serving sizes at the register. Our best grocery accounts encourage trial by displaying the product right at the front end. Second, offer money-saving multi-packs that will attract the everyday energy shot drinker."

Industry insiders believe that, eventually, intense competition will pare the energy drink and shot market down to just six to 10 big brands.