With Red Bull Creator's Death, Where Do Energy Drinks Go From Here?
Mar 20th 2012 11:30AM
Updated Mar 20th 2012 3:52PM
Even the most avid Red Bull sippers probably don't consider Chaleo Yoovidhya to be a household name.
The third richest man in Thailand stayed out of the limelight, avoiding making any public appearances for the past 30 years. However, back in 1962, Yoovidhya created a drink boosted by caffeine, vitamins, sugar, and other energy-boosting ingredients.
Krating Daeng -- or Red Bull in English -- was a hit in Thailand with truckers, construction workers, and other laborers who needed to remain alert during the day.
An Austrian toothpaste salesman by the name of Dietrich Mateschitz was enamored of the beverage two decades later, striking a deal with Yoovidhya where the two would have 49% stakes in the company. Mateschitz went on to shift the marketing and flavor to appeal to Western tastes, and Red Bull went from powering Thai laborers to energizing extreme sports participants through Europe and the United States.
Why bring up Yoovidhya? Well, the Thai billionaire who created a product you probably know all too well died over the weekend.
Now based in Austria, Red Bull sold 4.6 billion cans of its energy drink last year, 11% more than it did the year before. But this isn't just Red Bull's world.
Monster Beverage (NAS: MNST) -- the California-based company behind the country's second most popular energy drink -- is growing even faster. Net sales soared 31% to $1.7 billion for Monster last year, and earnings grew even faster.
The energy drink market is unique. Coca-Cola (NYS: KO) and PepsiCo (NYS: PEP) -- the world's two largest beverage companies -- have tried to topple the niche's two top dogs with little success. Pepsi's AMP Energy and Coca-Cola's Full Throttle aren't exactly slouches, but they haven't been able to win consumer taste buds the way Red Bull and Monster have over the years.
The fact that both Red Bull and Monster saw their sales grow in the double digits last year proves that this is still a growth industry. However, energy seekers are finding new ways to get through the day.
Other energy boosts
Energy drinks are competing against a spike in coffee sales and the explosion of energy shots.
5-Hour Energy pioneered the niche in 2004 with its taurine-spiked beverages sold in 2-ounce containers. The energy shot's name is also its marketing hook, promising five hours of energy as folks get groggy or sleepy.
The copycats are everywhere these days. It's easy to find energy drink and energy shot knockoffs at most supermarkets, drugstores, and convenience stores.
SodaStream has been selling its home-based beverage system for ages, but the Israeli company finally made a big stateside push two years ago.
The system is being marketed primarily for its ability to turn water from the tap into carbonated fizz, but one of the better selling flavors is an energy drink that contains vitamins, caffeine, and other pepped-up ingredients. The allure of SodaStream's solution is that it's always accessible. It's also a lot cheaper.
"Why pay up to $2 for an energy drink from the store when you can make it yourself, in seconds, starting at less than 20 cents per serving," SodaStream's website proposes.
An even newer player to the energy scene is MiO.
Kraft's line of MiO Liquid Water Enhancers hit the market a couple of years ago as a way for flavored-water fans to add some taste bud pizzazz to their drinking water. Kraft is now actively marketing MiO Energy, squeezable containers that enhance water with fruit flavors as well as caffeine and B vitamins.
An energy drink in every glass
The arrival of SodaStream energy syrups and MiO Energy are making energy drinks both more accessible and quite a bit cheaper than the canned concoctions.
This is the kind of oversupply climate that may lead some to believe that your next can of Monster or Red Bull is about to get substantially cheaper, but think again. Green Mountain Coffee Roasters did to coffee what SodaStream is doing to beverages. It's making a popular premium beverage easier and cheaper to make personally. You haven't seen your neighborhood barista marking down java prices, right?
More often than not, expanding a product category to lower price points to attract a wider audience simply educates the public. Jamba smoothie sales have spiked in popularity since McDonald's began blending them up at discounted prices.
The same thing is happening to the energy drink market. The folks looking for a vitamin-backed energy boost are growing in number -- and they're not going to sleep anytime soon.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Green Mountain and Jamba. The Motley Fool owns shares of Coca-Cola and PepsiCo. Motley Fool newsletter services have recommended buying shares of PepsiCo, Monster Beverage, SodaStream International, Coca-Cola, and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters and a diagonal call position in PepsiCo.
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