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| Market for energy drinks growing, despite high price |
| Viveat Susan Pinto & Shahana Joshi / Mumbai/New Delhi Dec 23, 2009, 01:06 IST |
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As a category, energy drinks in India is a small one — Rs 100 crore — by conservative estimates. But the market is opening, slowly but steadily. An indicator is the rate at which it is growing — 25 per cent CAGR (compounded annually), according to experts, leaving little room for doubt that potential for the segment exists in India. “There is scope for growth,” says Purnendu Kumar, senior analyst, Technopak India.
Which is why from multinationals such as Coca-Cola and PepsiCo to local players such as Mumbai-based Goldwin (makers of Cloud9), quite a few have been rushing to make their presence felt in the segment, in recent years. For companies such as Coca-Cola, this is the second shot at the category, which it first entered in the 1990s, with a drink called Shock. Now it is Burn that they have launched. But it has quite a few rivals to contend with.
The key ones include Red Bull, Cloud9, Sobe (from PepsiCo) and Powerhorse. What’s more? A new player is set to join this growing list, say industry insiders. Its called SJ XXX, promoted by the JMJ group, a diversified Indian conglomerate, which is into manufacturing, healthcare, hospitality, etc. The group is going to promote the drink in a big way by associating with Sunburn, the music festival in Goa from December 27-29.
Clearly the space is getting increasingly crowded. “The party-going segment is growing,” says Prakash Mishra, senior president, field & operations, Goldwin Healthcare. “These youngsters want to try out something different. Energy drinks are an alternative to alcoholic beverages. It’s non-alcoholic. So, quite a few land up trying it because it helps you stay awake for a while.”
Overseas, it’s not the party-going segment alone that consumes energy drinks. Those wanting a strong stimulant opt for it, too. The market in the US, for instance, is estimated to be $4 billion or Rs 18,720 crore. It is also a profitable segment for those who operate in that market, especially for companies such as Coca-Cola and PepsiCo. That is the because the price of a can is steeper than other beverages. In India, for instance, a 250-ml bottle is priced at Rs 75, a standard for most players who operate in the market. Some products, such as a pomegranate variant of Cloud 9, are priced at Rs 90, but those are few and far between, say experts. “The Rs 75 price point is key,” says an official from Red Bull India. “For a party-goer, this ticket size is hardly substantial. So, he is willing to spend this kind of money on the product.”
But, experts argue it is this steep price that preventing a wider consumer base for energy drinks. Then, the issue about high caffeine content, as much as 25 mg in a 250-ml bottle, is also there. “It’s a myth,” says an executive with an energy drinks company. “Coffee has higher caffeine content.”
Despite these hiccups, energy drink players are working hard to seal as many outlets as possible to push their products. “With each new entrant, the rush to seal outlets only grows,” says Mishra of Goldwin. “We have to pay 25 per cent of the maximum retail price of the product to the outlet, in addition to a fee for using his premise to push the product. Over and above this, there is collateral material we give to the outlet to promote the product. In the end, there is substantial investment we make at the retail level. But, you have to do this if you want to push your product to the right audience,” he adds.
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