Where Do Energy Drinks Rank in the Nonalcoholic Beverage Market?



Strong volumes

Just like carbonated soft drinks, energy drinks have been heavily criticized for their harmful effects. But energy drink volumes in the US market keep growing fast—unlike declining soda volumes. According to Beverage Marketing Corporation, energy drink volumes in the United States rose 6.4% in 2014.

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Monster versus Bull

The two major players in the energy drink market are Monster Energy (MNST) and the Austria-based Red Bull. Based on Nielsen data up to December 26, 2015, the Monster Energy brand held a 36.6% share of the US energy drink market in terms of unit sales. Next came Red Bull with a 28.4% market share. Rockstar held a 10.9 % market share. In terms of dollar share in all measured channels, Monster Energy had 35.1% and was slightly ahead of Red Bull’s 35% share. Other brands include PepsiCo’s (PEP) AMP energy drink brand. Dr Pepper Snapple (DPS), significantly, lacks a strong energy drink brand.

Roadblocks to growth

Energy drinks are nonalcoholic beverages that aim to provide instant energy through the combination of sugar, caffeine, and other substances highly present in these drinks. On top of the disadvantages of high sugar content, higher caffeine amounts can result in insomnia, high blood pressure, increased anxiety, and other harmful effects. Some jurisdictions have limited package sizes while some have restricted the amount of caffeine present in energy drinks. For instance, effective January 1, 2013, Canadian regulations limited the amount of caffeine in any single-serving can or bottle to less than 180 milligrams. To address these regulations, Monster Beverage adjusted its caffeine levels in some of its Monster Energy products sold in Canada. The PowerShares DWA Momentum ETF (PDP) has 1.1% exposure to Monster Beverage.

Key drivers

Monster Beverage is innovating new products with less sugar and caffeine. For instance, in 2015, the company introduced Monster Energy Ultra Citron, a carbonated energy drink that contains no calories or sugar. Low- or no-calorie options are also becoming available in other beverage categories. We’ll discuss this development in Section 8 of this report.

Monster Beverage has also benefitted from the addition of Coca-Cola’s (KO) energy drink brands to its portfolio. As part of a strategic deal between Monster Beverage and Coca-Cola, Monster Beverage transferred its non-energy brands to Coca-Cola. The deal closed in June 2015. It involved Coca-Cola purchasing a 16.7% stake in Monster Beverage and Coca-Cola becoming the preferred global distribution partner for Monster Beverage. Coca-Cola’s extensive distribution network is likely to help Monster Beverage compete with Red Bull, a strong international player.


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