Hot Energy Shots to Double in Sales in 2009

The New York Times spent some time interviewing college students, construction workers, c-store owners and others near the University of Maryland recently to study what it calls the “hottest drink category in the country” right now, energy shots.

Energy shots are small package (generally 2-ounce) drinks containing a concentrated dose of caffeine, B vitamins and amino acids. The article marvels at the fact that the drinks cost about 20 times as much per ounce as national-brand carbonated soft drinks and are not noted for their good taste.

“The shots are meant for people who want a jolt of caffeine without having to drink a big cup of coffee or one of the 16-ounce energy drinks that have become ubiquitous,” said The Times. “They go down fast, more like medicine than a beverage. That is part of the appeal to their most devoted consumers: students cramming for exams or partying into the night, construction workers looking for a lift, and drivers trying to stay awake.”

Students were paying $3 or more per shot -- about $1.50 per ounce. Several students said the shots helped them study late at night and worked particularly well in combination with Adderall, a prescription drug for attention deficit disorder that is popular on college campuses. The Adderall helps them focus, they said, and the shot keeps them awake, according to the article.

Other students said they sometimes downed an energy shot before going out drinking, while other said the shots helped them stay awake during long drives home from school.

A 7-Eleven store just off the Maryland campus in College Park has become one of the top sellers of energy shots among the 5,700 United States stores in the 7-Eleven chain. The store’s owner, Million Mekonen, told The Times that sales spiked during finals in May, when the store sold close to 400 shots in a week.’

Construction workers also use the energy shots to get through long, tiring days, the newspaper reported.

Interestingly, sales of the shots are rising as sales of traditional energy drinks like Red Bull have flattened out. Bill Pecoriello, chief executive of Consumer Edge Research, estimated that shot sales could reach $700 million this year, nearly double last year’s $370 million, not counting sales by Wal-Mart Stores, based on sales data collected by Information Resources, Inc.

The Nielsen Company’s Scantrack Convenience Service pegged energy shot sales at $292 million for the 12 months ended June 13, 2009. That’s an increase of 179 percent from the previous 12-month period. Over that same timeframe, energy drink sales were flat, up only 0.9 percent for the 12-months ended June 13. However, the energy drink category is much larger than the shots -- energy drinks rang up $3.5 billion in sales at convenience stores over the past year.

In 2008, traditional energy drink sales in the convenience store industry were up 12 percent on a per-store basis, according to the Convenience Store News 2009 Industry Report. That increase, however, was less than half the growth posted in 2007, when sales of alternative beverages (which includes energy drinks) were up a whopping 28.7 percent on a per-store basis.

C-store retailers attribute the slowdown in sales growth to a variety of factors beyond energy shot growth. In interviews with CSNews, retailers cite the maturity of the category as well as the economic downturn -- energy drinks appear to be more susceptible to a poor economic climate than energy shots because of their much larger size and higher ticket.

With the economy struggling, many retailers cut back on bundling multiple units into promotions, and thus sold more singles, according to the CSNews Industry Report. Suppliers assert that energy shots have a different user profile than energy drinks, and thus cannibalization of energy drinks by the newer, faster-growing shots has been minimal.

The Times article pointed out that the shot market is dominated by Living Essentials, a suburban Detroit company that began test sales in late 2004 of a product called 5-Hour Energy. Pecoriello of Consumer Edge said 5-Hour Energy accounts for 80 percent of the shot market.

Since then, many other big beverage makers have jumped into the shot market. Last month, Red Bull introduced a 2-ounce shot, and Dr Pepper Snapple began test-marketing a 3-ounce version of its Venom energy drink, called Venom Bite. Coca-Cola introduced a shot last year based on its NOS energy drink.

Many smaller companies have jumped in, too, with products like 6 Hour Power, Fuel 7 Hour Energy and Mr. Energy 8-Hour Energy, according to The Times.

Living Essentials expects to spend $60 million this year on television advertising for 5-Hour Energy. It has also gone after several of its competitors in court, challenging labels or product names it said were too close to its own, The Times reported.

- Nielsen Business Media
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