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U.S. Energy Drink Industry Report
Reaching Uncapitalized Markets
Winter 2022
Presented by Morgan Presson
Industry Overview
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Energy drinks claim to increase energy while enhancing mental
alertness and physical performance by providing consumers
with 70 to 250 milligrams of caffeine per container.
Energy Drink Industry BackgroundKey Industry Statistics
Market Share Distribution
Red Bull
44%
Monster
33.4%
PepsiCo.
9.2%
Other
16.4%
Market Size (2020)
$9.4 billion
Annual Growth Rate (2015-2020)
+2.7%
Average Profit Margin
14.1%
Annual Growth Rate (2020-2025)
+1.4%
Market Concentration
High
Industry Lifecycle
Growth, approaching maturity
Total Businesses
83
Identified Threats
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Legislation and Bans on CaffeineExternal Competition
▸ Coffee is the central source of caffeine in the
U.S.
▸ The coffee industry is projected to continue
to grow at 0.9% annually
▸ Caffeine consumption increases with age,
although the energy drink industry only
maintains young consumers
▸ The FDA only has laws on caffeine in soda
beverages
▸ Energy drinks are marketed as dietary
supplements
▸ Rising hospitalizations from misuse of
caffeine and excessive caffeine consumption
▸ The U.K. banned the sale of energy drinks to
children under the age of 16 in 2019
▸ The U.S. has no current information on
potential regulations or bans, although this
would drastically alter the industry
Reaching New Consumers
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x
Expanding Targeted
Consumers
Curated social
media campaigns
Targeted product
launches
Sponsored
Events
Platforms with
unreached
demographics
Posts
marketed
towards new
demographics
Older taste
profiles
Subtle,
professiona
l packaging
Events with
new
targeted
consumers
as
attendees
Tasting at
sponsored
events
Reaching New Consumers
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▸
Energy drinks are currently only marketed towards younger demographics
▸
Current marketing has been successful with these consumers
▸
Expand marketing more heavily into other social media platforms based on target
demographics
▸
Use current social media algorithms to place advertisements on posts already
marketed towards these consumers
Expanding Targeted
Consumers
Curated social
media campaigns
Targeted product
launches
Sponsored
Events
Platforms with
unreached
demographics
Posts
marketed
towards new
demographics
Older taste
profiles
Subtle,
professional
packaging
Events with
new
targeted
consumers
as
attendees
Tasting at
sponsored
events
Reaching New Consumers
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▸
Current energy drinks appeal to children, young adults, and athletes
▸
Bold flavors and bright packaging can be seen as unprofessional
▸
New products that account for older taste profiles
▸
Subtle, professional packaging that adults and professionals feel comfortable bringing to
everyday events and not only the gym
Expanding Targeted
Consumers
Curated social
media campaigns
Targeted product
launches
Sponsored
Events
Platforms with
unreached
demographics
Posts
marketed
towards new
demographics
Older taste
profiles
Subtle,
professional
packaging
Events with
new
targeted
consumers
as
attendees
Tasting at
sponsored
events
Reaching New Consumers
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▸
Energy drinks brands have had success with marketing through sponsorships
▸
Most sponsorships are currently through athletic events (Red Bull)
▸
Expand sponsorships into new events with different consumer profiles
▸
Concerts, corporate events, fashion shows, etc.
▸
Allow attendees to sample or leave with a product
Expanding Targeted
Consumers
Curated social
media campaigns
Targeted product
launches
Sponsored
Events
Platforms with
unreached
demographics
Posts
marketed
towards new
demographics
Older taste
profiles
Subtle,
professiona
l packaging
Events with
new
targeted
consumers
as
attendees
Tasting at
sponsored
events
U.S. Energy Drink Industry
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The Oregon Consulting Group
Further Stimulating Energy Drink Growth
Background
While coffee has powered Americans for the last 400 years, their source of
caffeination has recently shifted with the millennial preference towards energy drinks
rather than a cup of joe. Energy drinks claim to increase energy while enhancing mental
alertness and physical performance by providing consumers with 70 to 250 milligrams
of caffeine per container, allowing Americans to work harder and longer than their
noncaffeinated counterparts (U.S. Department of Health and Human Services, 2018).
With coffee only providing roughly 100 mg and soda roughly 35 mg of caffeine per 12
ounce serving (U.S. Department of Health and Human Services, 2018), the unmatched
caffeine content in energy drinks has stimulated industry growth to $9.4B in revenue in
2020 (Holcomb, 2021).
Despite significant growth, the energy drink industry has maintained a high
market share concentration with 86.6% of the market being consumed by three major
players. Smaller companies have attempted to outcompete their larger counterparts, yet
Red Bull, Monster, and PepsiCo. have steadily maintained 44%, 33.4%, and 9.2% of
the market, respectively (Holcomb, 2021). Red Bull dominates the industry with their 8.4
oz cans in an array of flavors and varieties, including sugar free and total zero
(Fontinelle, 2021). Red Bull's leading competitor, Monster, markets a handful of various
energy drink names in addition to the Monster drink itself, including NOS, Full Throttle,
Burn, and Predator (Thomson, 2021). Monster’s strategic partnership with Coca-Cola
company in 2015 has provided both a distribution advantage and decreased competitive
pressure, as Monster and Coca-Cola entered into an agreement to avoid competition
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The Oregon Consulting Group
with one another’s brands (Pysh, 2017). In third place, far behind both Red Bull and
Monster, PepsiCo. claims nearly half of the remaining market. PepsiCo. continues to
grow as it starts to acquire additional energy drink names, including Rockstar, AMP
energy, Bang, and Mountain Dew Kickstart (Fontinelle, 2021). Despite the domination
by these companies, approaching maturity and recent events pose a threat to the
industry as a whole.
Recent Market Trends
Prior to 2020, which was marked by global shutdown in the wake of COVID-19,
the energy drink market grew exponentially. With rising incomes, increased American
interest in sports activities, and urbanization, the industry was able to capitalize on
these marketing outlets (Research and Markets, 2021). Red Bull, for example, has
utilized a sports-based marketing strategy (Bush, 2021). By sponsoring large athletic
teams in a wide range of sports, from football to surfing to Formula 1 teams, the brand
has effectively become associated with athletics and athletes. Additionally, as people
have moved into larger cities with the rise of urbanization, convenience stores,
supermarkets, and online markets have become more readily available. The increased
availability of energy drinks in these outlets coupled by rising per capita disposable
income has helped to drive impulse purchases, and therefore the demand for
discretionary packaged beverages such as energy drinks (Holcomb, 2021). These
trends have led to low market volatility and high profit margins, up to 14.1% of revenue
in 2020, which have been of great benefit to major players (Holcomb, 2021). Despite
these advantages, the market still grinded to a halt with the abrupt challenges presented
with COVID-19.
U.S. Energy Drink Industry
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The Oregon Consulting Group
Just as the industry began approaching its peak, COVID-19 struck, and the world
was sent into lockdown. As athletics and other activities were restricted in the heat of
the pandemic, which made up a large sector of the industry’s consumers, sales quickly
took a turn (United States Energy Drink Market: 2021-26). As Americans were confined
to their houses in 2020, consumer spending declined a steep 7.3% (Holcomb, 2021).
Additionally, industries shut down production for the health and safety of their workers,
creating low inventory. With both decreased demand and low inventory, the energy
drink industry recorded a 2.2% decrease in revenue over the course of 2020 (Holcomb,
2021).
Risk Factors in Maturity
As the world continues to experience and recover from the impacts of COVID-19,
the energy drink industry is expected to continue to experience growth, yet at a slower
rate than before the pandemic. The industry has a projected CAGR of 1.4% between
2020 and 2025 and is forecast to reach a revenue of $10.1B in 2025 (Holcomb, 2021).
While the United States slowly emerges from lockdown, stimulating sales once again,
the energy drink industry emerges alongside the rapidly developing coffee industry and
growing concern regarding the health and safety of caffeine.
U.S. Energy Drink Industry
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The Oregon Consulting Group
Caffeine Competition
While caffeinated beverage
consumption increases with age, from 43% of
children under the age of five to nearly 100%
of those older than 65 (Verster, 2017), the
energy drink industry only successfully
maintains teens aged 12-17, men aged
18-34, and the nightlife crowd as regular
consumers (U.S. Department of Health and Human Services, 2018). The industry has
exploded in these select markets previously, although it has struggled to expand into
other sectors of consumers. Further, regardless of age, coffee is the central source of
caffeine in the U.S. (Verster, 2017). With per capita coffee consumption anticipated to
grow at 0.9% annually over the next five years (Ross, 2020), the energy drink industry
will likely feel the effects of coffee industry growth.
Caffeine Bans and Legislation
In recent years, the United States has experienced a trend towards an organic
diet, creating increasing concern surrounding energy drink consumption (Holcomb,
2021). U.S. health and safety committees have also recognized these concerns and are
currently in the process of enacting legislation to place regulations on the sale of
caffeine (Pysh, 2017). While caffeine is currently nationally recognized as safe for use in
soda beverages only up to 200 parts per million (roughly 71 mg per 12 oz serving)
(Pysh, 2017), energy drinks have historically been marketed as part of the dietary
supplement category. By marketing under dietary supplements, energy drink containers
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The Oregon Consulting Group
have no requirement to be labeled with their caffeine content or to cap the caffeine
content at 200 ppm (C.M.T., 2021). However, the Food and Drug Administration has
slowly begun placing stricter regulations on caffeinated goods. While the United States
currently has overly relaxed laws regarding the sale of caffeine, the U.K. took action to
ban sales of energy drinks to children under the age of 16 in 2019 (Aurthur, 2019).
Currently, the FDA has not made any official decisions surrounding the sale of
caffeinated non-Cola goods in the U.S., although they have numerous options as to
enacting regulations or education surrounding caffeine. Given that Europe tends to have
stricter regulations surrounding food production than the United States, it is safe to
assume that any ban or regulation on caffeine sales will be more relaxed than the ban
enacted in the U.K. in 2019.
Expanding into Uncapitalized Markets
While the growth of the coffee industry and potential caffeine regulation appear to
be very different issues for the energy drink industry, expansion of the industry into
uncapitalized markets would be a natural solution to both challenges. Energy drinks
have been marketed heavily towards young consumers through targeted advertising,
although they have not reached into other demographics. After college graduation,
many adults no longer have time or interest to participate in athletics or nightlife, making
energy drink consumption appear unprofessional or unnecessary. However, target
marketing towards older consumers, including busy mothers, the corporate workforce,
and retirees with declining energy, will help to diversify the industry. Specifically, moving
marketing more heavily into different social media platforms will help to grasp the
attention of these underreached classes. While only 8% of people over 65 use
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Instagram, 35% of the same age group use Facebook and 58% use YouTube (The
2021 Social Media Users Demographics Guide, 2021). By shifting advertising towards
these mediums, and specifically onto posts and videos targeted towards working
generations, the industry can expand their market share.
Further, as U.S. consumers exhibit a preference for coffee over energy drinks,
the energy drink industry should use these taste preferences when launching new
products. While adolescents prefer the bold, fruity tastes and bright containers often
present in current energy drinks such as Bang energy, older generations often prefer
more mild tastes and subtle packaging. As some flavors, such as ginger and mint,
attract older consumers over adolescents, integrating these taste preferences into new
products will help to diversify the energy drink consumer profile (Michail, 2016). Further,
although children and millennials are often attracted to the bold, bright containers of
current energy drinks, this packaging may often be associated with immaturity and
adolescence, given the energy drink industry’s current consumer profile. A business
executive would not feel comfortable in a meeting with C-suite professionals holding a
bright red can of Rockstar energy but would naturally hold a paper coffee cup. By
launching products with more subtle containers and neutral colors that consumers can
naturally bring to work, a get together, or to a child’s playdate, similar to a cup of coffee,
the industry can draw the attention of more diverse consumers and pull from the coffee
industry’s consumers.
Finally, the energy drink industry should sponsor events made for these new
targeted age demographics. As Red Bull has clearly displayed through its athlete
sponsorships which attract athletic consumers, further expanding into concerts,
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corporate business events, or even fashion events would help to translate this success
into other populations. These sponsorships would also give energy drink companies an
opportunity to provide attendees with a sample of their product, allowing consumers in
attendance to depart the event with an entirely new understanding of the company.
Given that regulations on caffeine sales will likely impact older age groups far less than
adolescents and children, moving into these markets will help to minimize the effects of
any actions by the FDA as well as creating an edge on external competition from the
coffee industry.
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Works Cited
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energy-drinks-to-U16s#
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Fontinelle, A. (2021, September 28). The Energy Drinks Industry. Investopedia.
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