The functional food and drink sector has become a massive market, yet it’s still relatively new compared to more established FMCG categories. And as the market has grown, it’s started to fragment into different types of products bars, gums and bagged snacks with an array of benefits which can sometimes make it hard for retailers to get their heads round. Perhaps the biggest segment, and the most accessible for both consumers and retailers, is soft drinks, where energy drinks have gone from virtually nowhere to become a dominant force within the space of just a couple of decades.
IRI figures in the 2018 Britvic Soft Drinks Report puts the market that it defines as stimulant drinks at £402.9m in convenience in 2017, up by 8.4% in value and 7.8% by volume over the previous year (IRI).
Red Bull is the number two soft drinks brand behind Coca-Cola overall, with Coca-Cola European Partners’ Monster energy drink at number five. It is one of the fastest growing brands in the soft drinks market along with Barr Soft Drinks’ Rockstar.
The IRI figures put Red Bull’s convenience market value at £170.9m and the brand claims the number one spot for an individual pack type in soft drinks for its 25cl can, after outgrowing Coca-Cola’s 50cl bottles in 2017.
Across the year stimulant soft drinks were up 8.9% in value in petrol multiples, and grew 11.2% by volume, against total convenience soft drinks growth of just 2.3%.
Broken down further, energy drinks were the main drivers of growth with sports drinks down 5.8% and glucose drinks 14% off the pace against the previous year.
In petrol multiples in the year to April 22, energy drinks accounted for 36% of all soft drink sales (IRI). Forecourts over-trade in declining glucose stimulants which means they shouldn’t be written off, representing 37% of sales against 30% for total convenience.
But the Britvic report says there has been some switching out of that category in the past year to water, water-plus products and carbonates.
Radnor Hills is one mineral water brand that’s been seeking to open up the water-plus sector with its new Radnor Plus Energy range. It comes in Lemon & Lime and Cranberry & Raspberry flavours and contains guarana and ginseng which combine together to provide a "natural caffeine kick". Each 50cl bottle contains 12g of whey protein, 70mg of caffeine and has just 30 calories.
The drinks are intended to provide a refreshing protein source during or after workouts or between meals, says the company. Managing director William Watkins says: "We are lucky enough to have an unlimited source of pure spring water available to us, so it made perfect sense for us to explore what else we could add to our water to benefit our customers."
Water-plus brands are just one example of a new breed of products that also includes the likes of cold-filtered coffee and protein shakes that are seeing the functional drinks sector fragment as consumers look for different products to suit different moods or occasions.
Adrian Troy, marketing director at Rockstar supplier Barr Soft Drinks, says: "Energy now plays a number of different roles in a shopper’s life: a kickstart in the morning, or a pick me up during the day, before working out or going for a night out."
Despite the market fragmentation, Mark Bell, strategy and planning manager at Red Bull UK, says big brands are crucial to ongoing success in the category as a whole for forecourts.
"Soft drink consumers, and indeed energy drink consumers, are willing to pay more for a premium brand that delivers added value," Bell says.
"NPD and trends such as low-calorie certainly have a place and will continue to grow but core still remains crucial to category success." Bell says Red Bull has seen annual growth of 27.6% for its 35.5cl cans, 7.1% for its Sugar Free 25cl can and 5.4% for its 47.3cl pack (IRI year, to January 20). Along with the main Red Bull energy 25cl can he regards this as a "core four" group of must-stock products.
But Britvic has been shifting its focus in the category away from high octane metaphorically speaking energy drinks containing taurine and caffeine towards healthier options, most notably with a revival of support for its longstanding Purdey’s, originally marketed as a generic adult soft drink brand when it first appeared in the 1980s.
In late 2017, it was launched into 25cl cans and has been backed by a £3m marketing campaign, targeting health-conscious consumers on the go, particularly those looking for an energy boost.
Trystan Farnworth, Britvic’s commercial director for convenience and impulse, says: "Energy is already the number one segment within immediate refreshment worth £464m in value and 54% bigger than cola (Nielsen, impulse, year to May 12) and the need for energy in soft drinks is important and continuing to grow. Drinking for energy has been the fastest growing reason for consuming a soft drink over the past five years.
"However, traditional energy drinks are being picked up less to satisfy this growing need for energy and are losing relevance as consumers opt for other soft drinks to meet this need.
"With a rise in healthy eating, as well as a desire for sustained energy solutions, Purdey’s offers a soft drink that tastes great and appeals to health-conscious consumers looking for an energy boost from vitamins as opposed to added sugar or taurine, making it a healthier alternative to the established energy drinks brands on offer. With its juice content, added vitamin and botanical extracts, Purdey’s is free from caffeine, artificial colours, flavourings, sweeteners and preservatives. It is also exempt from the sugar levy."
Concerns over sugar and the decision by some multiples to restrict sales of taurine/caffeine energy drinks to minors have opened the door for healthier options, says Farnworth.
"Natural energy is bringing in new buyers and incremental sales to the energy category," he says.
"Consumers needing a pick-me-up have, for a long time, favoured the quick-fix high-energy solution.
"However, lately we’ve seen them increasingly reject the many existing products in the category because they are dissatisfied with a short-term boost followed by a crash in energy.
"Energy drinks feature in only one in 12 occasions where soft drinks are consumed for energy, and rejection levels are high, with penetration the third lowest in soft drinks at 11%.
"People are also increasingly worried about the long-term health impact of their choice of drinks, with six out of 10 believing energy drinks are bad for their health."
Grenade is another brand looking to move into the parts that energy drinks don’t reach.
It is making great strides with its range of protein shakes (see box) and has just relaunched its Killa Coffee, moving it from cans to 33cl bottles.
"It recognises that huge explosion of coffee culture," says head of marketing Rob Flanagan.
"We understand from talking to consumers that that’s the pack that works for them in that type of product and it allows us to make a better quality product. It’s also brought some consistency with our Carb Killa range."
But what we might now call, for want of a better phrase, traditional energy drinks, even though they’ve only been around for three decades or so, are still big business for retailers and Barr Soft Drinks’ Rockstar is one of the fastest growing brands.
The brand is supported through tie-ups with music events, gaming and motorsports and promotes its 50cl cans with 99p price-marked packs (PMPs)throughout the year.
Marketing director Adrian Troy claims that "big can" energy accounts for 72% of sales in forecourts and is growing at 7%, in contrast to glucose energy, taking 20% of total forecourt sales and declining by 15%, and sports drinks, on 8% of the sales and down 6%.
"Energy drinks are a must-stock for forecourts catering to the requirements of drivers looking to maintain concentration levels on long journeys," says Troy. "Value has never been more important to shoppers than in the last five years but it is not just about price. Shoppers are looking for ways to spend less without compromising on quality and PMPs clearly represent value.They reassure shoppers that they are not being over-charged and can be a driver of store choice."
Troy points out that 50cl flavoured energy drinks grew 15% in convenience in the year to April 22 and that over 54% of large can energy drink sales come from flavours (IRI).
There are 13 flavours in the Rockstar range and its biggest sellers are Punched Guava and Xdurance. "Shoppers choose energy drinks for three reasons: taste, functionality and lifestyle," says Troy. "The flavours that shoppers can buy in energy keep them excited."
Amy Burgess, trade communications manager at Coca-Cola European Partners, says Monster Energy sales were up 26% in the year to March, according to Nielsen figures. She says: "The reason for this is threefold: our investment in NPD including low and zero sugar variants, a core range which continues to grow, and compelling marketing campaigns and impactful sponsorship, all of which are proven to be effective in engaging our adult fan base."
A recent launch is Monster Hydro, a still energy drinks range that comes in a resealable wide-mouth bottle.
"This launch represented a step change for the Monster brand and the range has been steadily growing since last summer," says Burgess.
"We identified refreshment energy as one of the most important areas of growth for the energy drinks sector. We aim to reinvigorate the refreshment energy segment in the same way we have with stimulant energy.
"We’ve continued to activate partnerships with complementary brands that appeal to gaming and motorsports fans, both core audiences for Monster. With these partnerships we utilise the Monster brand as a platform to offer consumers money-can’t-buy prizes and experiences, providing opportunities for retailers to maximise on energy sales."
It has also added Monster Mango Loco to its Monster Juiced range and expanded its Monster Punch range with Pipeline, a blend of passionfruit, pineapple and guava flavours.
"Made with 16% real fruit juice, this and our other product innovations have added much-needed variety to the previously limited flavour options available in the energy sector," adds Burgess. "Taste is one of the main factors consumers consider when purchasing energy drinks and there has been an increasing demand for more flavour options in the sector."
Meanwhile, the Boost energy drink range has its biggest ever marketing campaign this summer, with TV advertising and partnerships with MTV, Heat magazine and men’s online lifestyle magazine Joe, and an on-pack promotion on its price-marked 25cl packs of Original Energy. There are also two trade promotions offering ’12-for-10’ bottles in wholesale this year.
"To help retailers maximise on this opportunity we’re providing pos and creating lots of excitement in depots," says Boost Drinks managing director, Simon Gray. The company has launched Boost Protein as an "on-trend" product that’s only available in independents. It comes in Chocolate and Strawberry flavours in 31cl bottles as either a £1.29 PMP or non-PMP.
"Protein is one area that continues to grow in popularity," says Gray, with sales increasing year-on-year as the modern consumer regularly looks to have more access to exciting but healthier alternatives to their everyday soft drink."
"Every Boost Protein drink contains 20g of protein and, as the government indicates we need approximately 50g of protein per day, Boost Protein can act as a top up for consumers to help them reach their daily recommended intake." Gray acknowledges that the sugar levy has brought "unprecedented change" to the category. But he adds: "What hasn’t changed is that, above all, a customer’s main priority is ensuring that they get the same great taste from their favourites soft drinks without having to pay a higher price.
"We’ve taken the decision to reformulate our recipe, reducing sugar levels but never deviating from our mission to supply great tasting energy drinks at an exceptional price for both retailer and consumer."
Boosting protein intake
The Boost Protein launch marks a crossover into the active nutrition territory where Grenade competes with its Carb Killa shakes. "At the moment they sit in the specialist aisles such as pharmacy or sports nutrition but we’re desperately trying to get moved into the chillers," says head of marketing Rob Flanagan.
"This is about shopper convenience, supplying drinks that are in a format that’s right for them. Serving them chilled is the format that most consumers will drink them in and it’s just joining all of that up for the shopper."
Chief marketing officer Juliet Barratt adds: "Merchandising is one of the biggest challenges. We are developing a category. It’s growing vey quickly and many retailers just don’t know what to do with it.
"There’s the energy boost demand that was the preserve of energy drinks and coffee in the past. But around active nutrition there are other shopper occasions like informed functions, excusable treats, health on the go, calorie reduction and, of course, there’s a sports element in there.
"It’s meeting a new set of needs that consumers are looking for. People are looking for innovation in this space and they don’t want to sacrifice taste to be healthy."
Lucozade Ribena Suntory is investing hard to make sure that it doesn’t get lost in all of the new noise in the wider functional drinks category.
Lucozade Energy is being supported by a £10m campaign that includes TV, outdoor, digital and in-store activity, which it says will reach 94% of adults this summer. The campaign is backed by sampling with seven million million people being given freebies and a 50p-off next purchase coupon.
Meanwhile, Lucozade Zero is currently collaborating with ITV2’s Love Island. The TV advertising is part of a £6m spend behind the Lucozade Zero brand which also includes outdoor, social and digital media, and in-store activation.
And Lucozade Sport is being backed by an on-pack competition where consumers can win Fitbits and holidays.
UK sales director Scott Meredith says: "Sports drinks are an important part of the category for forecourts as consumers look for hydration on-the-go before and after exercise. As the number of health-conscious consumers continues to grow it’s crucial that the brands’ lower-sugar and zero-sugar alternatives are on shelf alongside core variants."
As well as the drinks chillers, functional products are also moving to the counter top. Blockhead markets a portfolio of products which it says are aimed at helping its consumers "live more in the now".
The range comprises energy-giving and essential vitamin chewing gums both sugar-free and a caffeine gum that featured on a BBC programme about sports performance products.
It is available in Londis, Budgens, Nisa and Costcutter stores, and the brand is being supported by sponsorships and events.
Alex Goodman, brand creative and communications manager, says: "Blockhead is focused on merging the functions of the energy and vitamin market, with the ease, convenience and impulsive nature of the chewing gum market. Feedback from our chewers is that it becomes a part of their routine and makes them feel confident about tackling whatever is going on in their lives to the best of their ability, whether that is a journalist racing against a deadline or a cyclist taking on the next hill."
Goodman says it sees Blockhead as sitting alongside protein bar brands such as Bounce, Graze and Trek.
"We are viewing this as the emergence of a new consumer-driven category that we call functional confectionery," says Goodman.
"We are looking at smaller cartons to reduce initial investment from retailers until they can see the rate of sale works for them and their cash flow."
Goodman thinks packaging is important in this category. "We have a black product in contrast to the kaleidoscope of surrounding colours," he says. "We love clean space in our design, and it lends a more premium and sleek feel which helps with our price point. We have also launched resealable pouches, to allow easier recycling and less waste."
Active nutrition is actively growing
With the pressure on high-energy and sugary drinks, a gap is emerging for makers of high-protein, low-sugar drinks to move into.
Grenade is looking to get its Carb Killa shakes out of the specialist sports nutrition aisle and into chillers with other convenience products.
"We don’t see these as specialist products any more, just as alternatives to milkshakes or high sugar drinks that are found in the chiller," says chief marketing officer Juliet Barratt.
Head of marketing Rob Flanagan adds: "Active nutrition is a category that’s in its relative infancy but growing in significant double digits. Over 50% of adults are looking to cut down on their sugar consumption and looking for healthier alternatives. Something like a quarter have bought into this category and have a gym membership. They might not be going that frequently but overall their lifestyles are healthier than ever."
Barratt says brands like Carb Killa meet different customer needs than more established isotonic sports drinks.
"From a retailer perspective 80% of sales in this category are incremental," she says. "This is a consumer looking for a different product. It’s more about refuelling after exercise than an isotonic sports drink that would normally be consumed before or during.
"There’s a really strong profit opportunity for the retailer to take part in this category and put it into relevant positions around the store." Flanagan says there are lots of things they’re doing in terms of visibility in-store, including pos such as counter-top display units.
Putting energy into managing space
With the energy and sports drink market fragmenting into a plethora of sub-categories it can be hard for retailers to manage space.
Rich Fisher, category development manager at Red Bull UK, says: "Red Bull understands that space can be a big challenge for retailers as many look to consolidate their range in-store.
"Red Bull advises operators to stock the most efficient range to drive the greatest value, while category space should be aligned with share of sales."
Fisher says 50-60% of soft drinks space should be allocated to the top five soft drinks brands and that 60-70% of soft drinks space should go to sports and energy.
"Shoppers can only see products within a 1.3 metre breadth," he adds. "Vertical blocking helps shoppers to easily find the product they are looking for, improving their ease of shop."
Scott Meredith, UK sales director at Lucozade Ribena Suntory, says: "To maintain and maximise sales, we advise retailers to follow our simple category advice to focus on layout, assess your range and stock up well.
"SKUs should be brand-blocked with a minimum of two facings per flavour, and more for best sellers like Lucozade Energy Orange.
"Top-sellers should also be placed at eye level, where possible, to help shoppers find favourites quickly.
"Segments should also be vertically blocked to match how consumers see the range and help cut search time by 40%. Being able to shop quickly is an important expectation in convenience shopping."
Rob Flanagan, head of marketing at Grenade, adds: "Getting retail basics absolutely established is key, and recognising, that with things that are going on around sugar, consumers are looking for alternatives and products like Grenade meet that demand.
"It’s also important to stock a range rather than just one product, so consumers can experiment and find their favourite flavour."
Its Carb Killa shakes come in flavours such as Banana Armour and Peanut Nutter.
Low and no opportunity
The sugar levy and general consumer concerns about health have placed low sugar high on the energy drinks agenda. It’s still a relatively small chunk of the overall energy and sports market but sales are growing.
IRI figures show that only 11% of the stimulant drinks category is low calorie, measured by value, but it grew by 9.8% last year.
Coca-Cola European Partners’ latest addition to its Monster Ultra Energy range is Violet, a citrus-grape flavour.
"Low and no-sugar variants are an important contributor to the success of the energy sector and have been instrumental to Monster’s growth over the last two years," says trade communications manager Amy Burgess.
Red Bull has a sugar-free option for every Red Bull flavour or variant in its range. Strategy and planning manager Mark Bell says: "With the heightened importance placed on the health agenda over the past year and the soft drinks industry levy in place, consumers expect healthier options. It is imperative to offer a low-calorie alternative to give consumers choice.
"As an active lifestyle brand, Red Bull understands the importance of offering health-conscious consumers choice. With the demand for no- and low-sugar drinks increasing, Red Bull expects to see more sugar-free options entering the energy category."
Adrian Troy, marketing director at Barr Soft Drinks, notes that low-calorie energy has increased by 50% in the last three years (IRI). "Shoppers are using energy differently depending on their mood state, increasing the demand for low-sugar options," he says.
Retailer view: Spar Hambleton
Rachel Corbett, store manager of the Spar Hambleton Service Station at Poulton-le-Fylde in Lancashire, says: "Energy drinks sell well. We have a Monster fridge right at the front of the shop, so we sell quite a lot of that.
"Red Bull and Relentless are very popular, especially whenever they’re on offer. We have a building site nearby building a huge new estate so a lot of the builders come in to buy energy drinks.
"At the moment sugar-free is big but I think that’s only because it’s cheaper.
Before the sugar tax came in it was dead if I’m honest. Because the sugary drinks are slightly more expensive we’re finding a spike in low-sugar."