Energy Drinks Driving RTD Beverage Sector

ROCKVILLE, Md.The debate over the pros and cons of energy drinks has garnered a lot of attention over the past few years especially in light of recent laws banning the sale of alcoholic energy drinks and studies linking consumption of the drinks and risky behavior among young adults. In light of the debate, energy drinks have provided a needed shot in the arm to beverage market.

According to Packaged Facts Functional and Natural Ready-to-Drink Beverages in the U.S." report, sales of energy drinksalong with the performance of ready-to-drink (RTD) teas and sports drinkshelped the functional and natural RTD beverage market grow to $23 billion in 2010, up from $19 billion in 2006.

While many critics have accused energy drink makers of using deceptive marketing tactics to encourage salesespecially to youththe report noted energy drinks offer consumers a distinctive benefit that they want and need and are at times delivering it with ingredients other than common caffeine and sugar.

"Energy drinks have been the focus of much industry discussion in recent years. That's partly because of the controversy surrounding energy drink formulations as a result of the bad boy image deliberately and very profitably cultivated by Red Bull, and then by me-too energy drink marketers in its wake in an effort to capture the attention of a youthful target market that is moving into prime consumption years," said Don Montuori, publisher of Packaged Facts. "Mostly, however, the attention to the energy drink segment is because of the sales growth energy drinks and energy shots continue to deliver."

In a recent Detroit Free Press article that examined the lure of energy drinks, John Sicher, editor and publisher of Beverage Digest, said energy drinks are the fastest-growing segment of the beverage industry, with sales rising about 9 percent by volume in 2010 and growing at the same pace this year.

The article examined the nutritional aspects of consuming energy drinks as well as some of the downsides including overindulgence and mixing with alcohol. It also pointed out that ounce for ounce, most energy drinks may be no worse for health than strong coffee; however, many who choose energy drinks consume them like soda pop.

During the height of the recession between 2008 and 2009, the three functional and natural RTD beverage categories covered by the report-energy drinks, sports drinks, and functional waters; ready-to-drink tea and coffee; and yogurt drinks and smoothies-flat-lined in sales growth, keeping with an overall slump in the beverage market due to the stagnant economy and reduced consumer spending. Nevertheless, by 2010 energy drinks/shots, sports drinks, RTD teas, and fruit/vegetable smoothies all showed renewed dynamism, signaling the onset of a new cycle of sales growth for the market. All had gains of at least 5 percent, with energy drinks/shots experiencing the highest gain at 10 percent. Sports drinks and RTD teas finished with gains of 8 percent and 7 percent respectively. Fruit/vegetable smoothies had gains of 5 percent.