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Ben Carter Bridget Conrad Shannon Durkin Mike Daugherty

Xtreme Energy

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A slideshow presentation summarizing a situation analysis of the energy drink market

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Page 1: Xtreme Energy

Ben CarterBridget ConradShannon DurkinMike Daugherty

Page 2: Xtreme Energy

Beginnings of the Industry

Started in the 1980’s with Jolt Cola In 1995 PepsiCo launched it’s cola brand,

Josta

2001 was the inaugural year for brands as we know them today: 8 million in sales

Wikipedia 2008

Page 3: Xtreme Energy

Industry Characteristics

The main point of purchase is at convenience stores

Other stores are beginning to see increasing sales due to bulk purchase options, which are cheaper for the consumer

Mintel, 2008

Page 4: Xtreme Energy

Growth

Between 2003-2008 the sector has seen a 36 percent increase in growth

Energy drink users are up 17 million since 2008

Mintel, 2008

Page 5: Xtreme Energy

Trends

New business, hence no new trends

Heaviest trend is in the public concern over the heavy usage of energy drinks by teenagers

Mintel, 2008

Page 6: Xtreme Energy

Brands

The business is mostly dominated by smaller companies

Coke and Pepsi have not been able to over take (or even catch up to) the market leaders Shocking

considering Coca-Cola and Pepsi’s strengths as companies Mintel,

2008

Page 7: Xtreme Energy

Leading Brands

Red Bull Monster Rockstar PepsiCo’s Amp Coca-Cola

Page 8: Xtreme Energy

Age Demographics

Adults 18-24 and 25-34 make up 57% of the energy drink market (Mintel, 2008)

According to Mediamark (2008) there is a 29.7% penetration in the adults 18-34 market

Page 9: Xtreme Energy

Gender Demographics

The number of female energy drink users grew by 74% between 2003-2008 (Mintel, 2008)

The penetration in the market of women is 22.5% (Mediamark, 2008)

Market Penetration among Mothers

Children under 12 months

24.3%

Children 12-23 months 24.9%

Children under 2 years

24.1%

Page 10: Xtreme Energy

Ethnic Demographics

Blacks and Hispanics accounted for 41% of total energy drink consumption in 2008

One out of two (47%) Hispanic teenagers will consume energy drinks

Mintel, 2008

Page 11: Xtreme Energy

Sales

Red Bull has a low market penetration among teens, despite a high preference for it, probably because of the high price

Mintel, 2008

Page 12: Xtreme Energy

Usage

Hispanics are most likely to use energy drinks to awake

Energy drinks are most often used in the late afternoon, but 38% of users also drink in the morning

Mintel, 2008

Page 13: Xtreme Energy

Usage

18-24 25-34 35-440

10

20

30

40

50

60

70

80

90

Energy BoostTo Stay AwakeRefreshment

Mintel, 2008

Page 14: Xtreme Energy

Buying Patterns and Frequency of Use

From 2003-2008 energy drink consumption increased by 21% (that’s 10 full glasses/user)

Hispanics and blacks are ethnically the most frequent users of energy drinks

Mintel, 2008

Page 15: Xtreme Energy

Competition

Primary Competition

Secondary Competition

Strengths

Weakness

Page 16: Xtreme Energy

Competition

Product Positioning

Pricing Strategies

Sales Force

Promotions

Page 17: Xtreme Energy

Distribution

Trends Strengths and

Weaknesses Opportunities and

Threats

Page 18: Xtreme Energy

Pricing Policies

Everyday retail prices for select energy drink brands, June 2009

Red Bull 8.4oz $2.00

Red Bull 16oz $3.69

Monster 16oz $2.49

Mega Monster 24oz $3.49

Rockstar 16oz $2.49

AMP 16oz $2.29

Mintel, 2008

Page 19: Xtreme Energy

Pricing Policies

Since 2002, energy drinks prices have fallen 32%

Why? Adoption of energy

drinks in supermarkets and wholesale discount clubs

Developing single serve multi-packs, and larger cans

Mintel, 2008

Page 20: Xtreme Energy

Pricing Policies

Even with the 32% pricing decrease energy drinks are still considered very pricey in the non-alcoholic beverage category.

Rank 2nd in price behind Ready to Drink (RTD) coffees

Number one obstacle in obtaining new-users

Mintel, 2008

Page 21: Xtreme Energy

Pricing Policies

Prices for select non- alcoholic beverages, 2007

Beverage Price/Gallon Price per 16oz

RTD Coffees $22.25 $2.66

Energy Drinks $18.15 $2.27

Fruit Juice $5.06 $.63

Sport Drinks $4.22 $.53

Bottled & Can Teas $4.13 $.52

Carbonated Drinks $2.88 $.36

Bottled Water $2.17 $.27

Mintel, 2008

Page 22: Xtreme Energy

Communication & Promotions Strategy

The energy drink industry has always been one heavily focused on the alternative audience Alternative, or extreme sports

Red Bull racing, Dale Earnhardt #88 Amp Chevrolet, Monster Army(Mintel, 2008)

Alternative lifestyles 7 Eleven stores featured Inked

energy drink, specifically targeted to persons with tattoos

New Zealand Herald, 2007

Page 23: Xtreme Energy

Communications & Promotions Strategy

You won’t find energy drink companies producing spots for the super bowl

The big competitors choose to steer clear of the “corporate” norms

Prefer fast and original, a reflection of their key users Racy slogans and campaigns, and an

association with extreme sport

Mintel, 2008

Page 24: Xtreme Energy

Communication & Promotions Strategy

Energy drinks are heavily centered and associated with the action and extreme sports industry

Sponsor numerous extreme athletes, teams, and events

Red Bull New Years Eve, No Limits- 12.31.2008

Page 25: Xtreme Energy

Communication & Promotions Strategy

Rather choose a lighter approach, preferring edgy humor to explain their products benefits Red Bull: uses humor-

generating animated sketches convey their promotional messages

Amp: uses similar racy humor, in a effort to reach the “Everyday Man”

Advertising_and_Promotion_-_Clip_1.wmv

College Student demographic

46-64 demographicRed Bull Commercial

Mintel, 2008

Page 26: Xtreme Energy

Communication & Promotions Strategy

Another key part aspect of energy drink promotions are the use of Guerilla and Grass Roots marketing.

companies employ numerous street teams who trek all over the country, setting up shop at extreme sports venues, college campuses & spring break destinations.

Page 27: Xtreme Energy

Environmental and Social Factors

A primary issue facing the energy drink industry is the concerns about health risks associated with the extremely high levels of caffeine found in them

It is easily available to highly impressionable children, who are not educated about the potential dangers of energy drinks

Page 28: Xtreme Energy

Environmental and Social Factors

Energy drinks give their “boost” from the extreme amounts of caffeine contained in them

A standard Red Bull(8.4oz), for example, contains 80mg of caffeine, three times the amount of a 12 oz Classic Coca-Cola

Others contain considerably higher levels

Page 29: Xtreme Energy

Environmental and Social Factors

Consuming one can of either of these beverages equates to the equivalent of drinking 14 Coca-Colas, 12 Pepsis, or 9 Mountain Dews

Extreme Caffeine

Wired X505 24oz and Fixx 20oz, contain 505 and 500mg of caffeine respectively. That amounts to upwards of 250mg of

caffeine per 12oz, compared to the 34.5mg per Classic Coke

Page 30: Xtreme Energy

Environmental and Social Factors

In October, 2008, 100 scientists and physicians sent a letter to the FDA asking for additional regulation in the energy drink industry, on the basis that it puts its young consumers at risk of caffeine intoxication

They requested that energy drinks list their caffeine contents on the can, set a limit to the amount of stimulant found in the drink, and require warning labels

USA Today, 2008

Page 31: Xtreme Energy

Environmental and Social Factors

Case in Point: Prince Edward Island, September, 2008

The island lifted a 25-year ban on canned beverages and found that without the ban young students began bringing energy drinks to school. Teachers reported problems with students becoming suddenly hyperactive, followed by a lethargic crash, commonly known as the caffeine high and crash.

Banned at Souris Regional High

Doctors and physicians share the opinions of the teachers and administrators Called for a restriction of sales at grocery stores to youths under

the age of 18. They equate energy drinks to the likes of tobacco and cigarettes

There is also concern that the long-term effects of energy drinks have not been thoroughly researched.

The Toronto Sun, 2008

Page 32: Xtreme Energy

SWOTSTRENGTH: Energy drinks provide a energy boost

without the crash

WEAKNESS: They are too expensive

OPPORTUNITY: Juice flavored energy drinks would appeal to both Hispanic users, and morning users

THREAT: Heavy and irresponsible use by teenagers may lead to laws restricting their sales to anyone under 18

Page 33: Xtreme Energy

Questions?