Energy on Tap

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Energy on Tap

Convenience store retailers are infusing their fountain programs with a new type of beverage — the energy drink — and the results they're seeing are supercharged.

Amerada Hess Corp., 7-Eleven Inc., Ricker Oil Co. and BP North America are among those tapping into dispensed energy drinks, reporting the option offers customers another alternative that will draw them into their locations."We sell a great amount of energy drinks in our cold vault," said Keith Broviak, marketing manager for Anderson, Ind.-based Ricker Oil. "We wanted to bring that same offering to our fountain customers. It's another reason to bring them into our stores."

The addition of an energy drink to its fountain program was an obvious choice for Ricker, which considers the category a driving force of its business. The fountain category accounts for 18 percent of the company's total sales per year.

Always looking to brand optimize, Ricker was one of the first to put an energy drink on tap. Wild Stallion Red Zone, a wild-cherry-flavored energy drink, containing a blend of guarana, ginseng and taurine, tested in select stores four years ago.

Since then, Broviak said sales of the supplied drink have continued to rise, prompting the chain to extend the offering first to 20 percent of its stores, and now to approximately 80 percent.

"It's doing well," he said. "(Energy drinks) are still very strong for us."

Creating Their Own

Several convenience store chains, including Hess and BP, have taken the concept a step further and developed their own energy drinks for the fountain.

Hess, rolled out a proprietary fountain energy drink, Tremor, to more than 600 of its stores this summer. A company official said they looked at the fountain program and decided this was a way to be different than the competition and stay ahead of the curve. Fountain sales make up roughly 20 percent of Hess's food segment sales.

The Woodbridge, N.J.-based company expected the citrus-flavored, caffeinated, vitamin energy drink to be a good seller, but it has far exceeded expectations — even within the first 45 days. "Phenomenal" is how one Hess official described the response, adding that it's been a challenge reloading the pipeline since the initial distribution of Tremor.

"We really underestimated how it was going to sell," the Hess official explained.

Hoping to build on the popularity of such beverages, Hess has been making a conscious push in energy drinks. Aside from Tremor, the chain also features the Tower of Power, a refrigerated open-air fixture holding seven shelves of canned energy drinks.

BP also began marketing a propriety fountain energy drink this year called Unbound Energy. The citrus-flavored, vitamin-enriched energy product contains taurine and ginseng, and is currently available in 950 am/pm stores as well as about 50 BP locations. By the end of this year, the plan is to roll out the beverage to 567 BP stores.

Henry Pulido, category manager for proprietary beverages at BP, said the growth trend seen in both bottled and canned energy drinks prompted the addition of a fountain version.

According to the Convenience Store News 2005 Industry Report, alternative beverages, including energy and enhanced drinks, increased 35.4 percent over the previous year. The average sales per store jumped to $5,964 in 2004, up from $4,404 in 2003.

Three packaged energy drinks also captured spots of the list of the top 10 noncarbonated beverage SKUs in convenience stores. Red Bull led the pack, while Monster came in sixth and Red Bull Diet in tenth. In terms of volume, Red Bull experienced a 33.1 percent increase, Red Bull Diet a 62 percent increase and Monster a whopping 199.5 percent increase.

Offering an energy drink at the fountain provides consumers with greater freedom of choice, Pulido said. Now, not only do they have an offering that before was only available to them in the cold vault, but also at a more attractive price point.

At am/pm stores, a 20-ounce fountain product sells for 99 cents and a 64-ounce product for $1.49. Meanwhile, 16-ounce cans of Unbound Energy retail for $2.49 each.

Unbound Energy is performing higher than expectations, Pulido said, as it is an inherent value that many of their fountain customers are buying into.

A number of BP-owned stores also carry SoBe energy drinks in their fountain program. Placement is based on the equipment each store has — either a 20- or 24-valve fountain unit. Those with the larger units have more flexible planograms.

SoBe offers three different flavors of fountain drinks nationally — Energy, a citrus punch with guarana, ginseng and taurine; Power, a fruit punch with taurine and praline; and SoBe Lean Cranberry Grapefruit, a sugar-free flavor with L-Carnitine.

Circle K, Town Pump Inc., 7-Eleven, Hess and Valero also carry SoBe fountain beverages, according to Christopher Cook, SoBe's senior brand manager.

While the need for bottled and canned products to satisfy a wide scope will always exist, fountain energy drinks are answering a call in the market, he said. Aside from the historic fountain benefits of "price and ice," Cook said the self-serve environment enables consumers to sample a product without risk before deciding on a flavor.

"Coupled with a wider choice of beverage flavors, beverage categories such as energy drinks and diet non-carbonated choices, lead to more satisfied consumers and better margins for retailers than the cold vault offers," he said.

Staying Unplugged

Despite the success of many, not all retailers are interested in tapping into this market.

Richard Mione, vice president of marketing for the 127-unit Worsley Companies Inc. in Wilmington, N.C., said the issue he sees with offering energy at the fountain is energy drink customers are very brand loyal, with Red Bull enjoying about a 75 percent market share.

Red Bull has no plans to offer a fountain variety, said spokeswoman Patrice Radden, though she said she couldn't offer any specific reason as to why.

"It's always come packaged and we will continue to serve it that way," she said.

Jacksons Food Stores Inc., headquartered in Meridian, Idaho, is looking into possibly adding an energy drink to its fountain lineup, but wants to do more research first. The fountain category accounts for 3 percent of its total in-store sales.

Beverage buyer Mark Wilcox said cost factors are a major consideration since the bag-in-the-box costs for energy drinks are usually higher than for carbonated soft drinks.

The question, he said, then becomes how you handle the additional cost. Choices include absorbing it or changing retail prices somewhere, which is difficult on fountain.

Speedy Stop Food Stores, a 102-store chain based in Victoria, Texas, doesn't have an energy drink in its fountain program either and is not considering it.

Speedy Stop vice president of marketing Omar Rachid said all it does is devalue the energy drinks in general, leading to lost sales and margins. For that same reason, he said the company's stores don't sell isotonics on the fountain.

But those retailers who do have energy on tap say the customer who buys a packaged energy drink is a completely different customer than the one who opts for the fountain.

Ricker Oil's Broviak said there's no concern with what one will take away from the other.

"We believe they are two separate customers," he explained. "There are the consumers who like fountain and those that want something from the cold vault."

Whether packaged or dispensed, the one thing that c-store retailers seem to agree upon is the continuing popularity of energy drinks among consumers. It's a trend that they say is going strong and they can't see it slowing down anytime soon.

"It's still in full gear," said BP's Pulido.