The energy drink industry has grown to $8 billion dollars on the backs of companies like Red Bull, Monster (NASDAQ:MNST), and Rockstar, which own a combined 77 percent of the market. Pepsi (NYSE:PEP) and Coca-Cola (NYSE:KO) have players on the field with Pepsi’s Amp and Coke’s Full Throttle, but the two soft drink giants only claim a combined 12 percent of the market.
Don’t Miss: Here’s Disney’s New Expansion Strategy.
There’s no reason to expect the industry is drying up, but with products which are sometimes classified as diet supplements rather than beverages, and often unhealthy amounts of sugar and caffeine, other companies are approaching consumer’s need for energy differently.
New Companies are Harnessing a Major Trend
Green Mountain Coffee Roasters (NASDAQ:GMCR) has had a pretty rough year to date. Hitting a high of $69.75 a share in February, they closed on September 5 at $23.83. Trying to breathe life into their K-Cup products and tap into some of that $8 billion, Green Mountain is launching a series of “Wellness Brewed” beverages.
The drinks offer many of the same perks, tons of vitamins which boost energy and focus, but Green Mountain is emphasizing the health benefits of their line. Their products are designed around fruits and natural antioxidants instead of taurine and caffeine. The blends are also supposed to taste good, in contrast to traditional energy drinks which generally make no effort to appeal to taste buds.
Green Mountain isn’t the only company to notice a trend towards healthier alternatives to energy drinks. Starbucks (NASDAQ:SBUX) has rolled out a line of natural energy drinks as well. The drinks also emphasize their taste and the health benefits of their ingredients, such as green coffee bean extract. Starbucks suffered at the beginning of August, but has seen steady growth since. Alternative energy drinks are also becoming more appealing to consumers in a tight economy as coffee prices are expected to rise going into 2013, and Starbucks seems to be making the right call in diversifying its products.
Laura Kempster, a senior market analyst for Leatherhead Food Research, said in a statement: “2012 looks set to be one in which ongoing trends will be stretched to their full potential, particularly as consumer concerns about health and wellness have prevailed and continue to be high on the agenda.”
Coca-Cola purchased Glacéau, which makes Vitaminwater and Smartwater, in 2007. The acquisition put Coca-Cola into the energy and health beverage game with a bang. Vitaminwater comes with some big-name endorsements like Curtis Jackson, a.k.a. 50 Cent, who was given a minority share as part of a marketing deal. Even after some controversy surrounding Vitaminwater’s nutritional claims, they remain a major player.
Consumers want healthier products, and companies are listening. The traditional energy drink market may split it two as it grows, with Red Bull and Monster on one side, and Starbucks, GMR and Vitaminwater on the other.
Wall St. Cheat Sheet newsletter subscribers know how important we value “T = Trends Support the Industry in which the Company Operates”. Uncover new stocks riding the wave of strong trends – click here to get our newest CHEAT SHEET stock picks now.