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Energy Drink Segment Slowing on Account of Several Factors

NEW YORK — Energy drinks can use a little a boost.

According to Wells Fargo Securities LLC's recent Beverage Buzz survey for Labor Day, retailers have confirmed a slowdown in the energy drink segment, echoing Nielsen data. The lack of fizzle has been attributed to pricing, weather, lack of innovation and a shift to other categories.

As Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, further explained, the survey indicates consumers are pushing back on last year's price increases. In addition, energy drinks are being negatively impacted by a broader shift to healthier/hydration categories. 

Looking at brands, Herzog said initial expectations for Monster Beverage Corp.'s Mutant beverage "are modest, with only half of retailers expecting to carry it when it launches later this month; however, a majority expect to carry it by the first quarter of 2017.

She added most retailers believe Monster has reached a pricing ceiling of consumer's willingness to pay, with some believing it has even been surpassed this price point. More than 80 percent of retailers expect no future price increases this year, according to Beverage Buzz.

"Interestingly, one retailer that manages several hundred stores has yet to be presented Mutant by his Monster rep," she added. "Given that 80 percent of all c-stores are part of chains of less than 200 stores, we believe Monster's initial focus for the Mutant roll-out in large chains may limit impact on third quarter/fourth quarter sales."

The survey also found that a majority of retailers expect to only give Mutant two to four shelf facings, balanced between the two flavors Mutant Green and Red Dawn, and only a small minority indicated they would take shelf space from non-carbonated soft drinks, with most planning to reduce existing energy facings or simply add suctions to energy doors, Herzog said.

Additionally, most retailers have not heard details yet on Monster Hydro and don't expect it until 2017. 

In terms of pricing, many retailers reported that "retail prices [for energy] are too high," with the vast majority of retailers believing there is limited opportunity for further pricing, she added.

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