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Energy drinks stay in demand despite health concerns

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New growth categories

Consumers are gradually moving away from dominant soda drinks to alternative beverages like energy drinks, sports drinks, non-carbonated ready-to-drink iced teas, juices, fruit beverages, and coffee drinks.

Beverage Marketing Corporation estimates that the US wholesale sales for the alternative beverage category increased by 5.1% to $38.8 billion in 2014, compared to 2013. Energy drinks comprise a key growth category, in addition to ready-to-drink coffee and bottled water.

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Energy drinks growth prospects

According to Beverage Marketing Corporation, US volumes for energy drinks experienced a 6.3% increase in the first half of 2014. This growth is in contrast to carbonated soft drink (or CSD) volumes, which declined by 1%. Soda makers like Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple (DPS) have been under pressure due to shifts in consumer preferences toward new beverage categories, as well as concerns about the negative effects of sugary drinks.

The growth rate of energy drinks has been impacted by negative publicity arising from litigation regarding alleged deaths associated with these drinks. Energy drinks contain high quantities of caffeine, which can cause insomnia, high blood pressure, seizures, anxiety, and extreme irritability when consumed in excess or by young people. There is increasing pressure on companies manufacturing energy drinks, such as Monster Beverage (MNST) and Red Bull, to stop marketing these drinks to the under-18 demographic.

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However, energy drinks continue to be popular among consumers—especially young people—who are attracted to the packaging, branding, and association of these drinks with adventure sports. Data provided by Euromonitor estimates that the global energy drink industry grew from $3.8 billion in 1999 to $27.5 billion in 2013, and many companies are now focusing on this category. Amway, the world’s leading direct selling company, acquired the XS Energy brand in February 2015.

Monster Beverage’s new products

In 2014, Monster Beverage launched several new products:

  • Punch Monster Baller’s Blend
  • Punch Monster Mad Dog
  • Monster Energy Valentino Rossi
  • Monster Energy Ultra Black
  • Monster Energy Unleaded
  • Monster Energy Ultra Sunrise

Some of these products contain zero calories and zero sugar. Planned product launches in 2015 include Monster Energy Ultra Citron and Monster Rehab Peach Tea + Energy. The Consumer Staples Select Sector SPDR Fund (XLP) has 1.27% of its assets exposed to Monster Beverage.

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