Issue No. 201: Liquid Gold

Beverage brands are betting on Red Bull and Gatorade and betting on energizing elixirs.

Clean energy

Consumers are thirsty for a pick-me-up.

Among US adults, energy (37%) and weight loss (30%) are the most desired benefits of food and beverages.

At the same time that the harmful effects of the American diet are becoming undeniable, health-conscious consumers are cutting back on sugar. Younger generations in particular strive for functional nutrition and transparency of the ingredients.

Shifting demand coupled with falling soda sales set the stage for a so-called “clean energy” boom:

  • Sports drinks are projected to bring in $30 billion worldwide by 2025.
  • The global energy drinks market is expected to exceed $175 billion by 2030.

Emerging and established brands are grabbing the attention and targeting the market by eliminating sugar and adding caffeine while promising improved energy, cognition and performance.

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leader. Gatorade (over 70%) and Red Bull (over 40%) are pioneers in their respective categories and control a significant market share.

PepsiCo CEO Ramon Laguarta said in the company’s earnings call in July that the sugar-free trend is “unstoppable,” noting that sugar-free beverages are growing three times faster than sugary alternatives.

PepsiCo has stayed true to these trends:

  • In 2020, the company acquired Rockstar and paid $3.8 billion for the energy drink brand.
  • Last month, the company bought a $550 million stake in Celsius, valuing the fitness-focused energy brand at $7.5 billion.
  • Earlier this month, Gatorade introduced Fast Twitch, a sugar-free, high-caffeine pre-workout drink.

While Red Bull offers sugar-free options, Monster Energy also added sugar-free, electrolyte-fortified, and coffee-based beverages in second place. Coca-Cola didn’t miss out, buying a 16.7% stake in Monster as part of its diversification strategy.

Speaking of Coke, because its Powerade line never matched Gatorade, the soda slinger paid $5.6 billion for BODYARMOR last year. In addition to traditional sports drinks, BODYARMOR also offers low-calorie/high-sugar and caffeinated options, as well as alkaline water.

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Evolving Playbooks. Updated strategies are taking shape with new audiences in mind.

According to Gatorade CMO Kalen Thornton, the brand aims to serve “a broader range of athletes”:

“We’re trying to move from not being a sports fuels company to a brand that promotes sports culture and sports well-being.”

In line with consumers’ desire for holistic wellness, Thornton said The drum that Gatorade focuses on activities where people are happy, moving, and striving to be their best selves — from pickleball to dance.

dr Pepper invaded Red Bull territory, paying $15 million to sponsor Thrill One events like Street League Skateboarding and Nitro Circus.

emerging sectors. Gatorade isn’t the only brand that’s going beyond sports.

  • Bang (owned by VPX) makes billions from energy/pre-workout drinks and supplements.
  • Kevin Hart invested in Nutrabolt, whose fitness-focused C4 line recently introduced “Smart Energy.”
  • CrossFit favorites LIFEAID, which raised $20 million last year, and Kill Cliff both target clean energy.
  • Another approach, the Anheuser-Busch-backed Ghost and the esports-focused G FUEL, are gaining traction with gamers.
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Elsewhere, The Rock launched Starpower ZOA, TikTok influencers Josh Richards and Bryce Hall debuted Ani Energy, and YouTubers Logan Paul and KSI created functional beverage line PRIME Hydration.

open: As consumers look for an energy boost, beverage brands are leaning in. Still, there’s little evidence that sports drinks are necessarily outside serious competition, and energy drinks pose a number of health risks. On the plus side, the trend towards better and sugar-free options could be a step in the right direction.

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