Will Moms On The Go Guzzle Energy Drinks?
Tuesday June 1, 12:37 pm ET
Patrick Seitz
Energy drinks aren't just for young men anymore.
Hansen Natural (NasdaqSC:HANS - News) is expanding the category to women, older men and anyone who could use a boost during the day.
The Corona, Calif.-based company gets about half of its annual sales of $120 million from energy drinks such as its Monster brand products. They've helped to make Hansen a top performer among publicly traded soft drink companies this year.
The traditional market for energy drinks has been 18- to 40-year-old males. But Hansen is rolling out new products geared to a range of age groups, demographics and lifestyles. That includes low-carb versions for dieters and larger cans for younger consumers.
The energy drink category, launched in the U.S. in 1997, is still a "very small niche," but should experience strong growth as it spreads to a broader consumer base, says Rodney Sacks, Hansen's chairman and chief executive officer.
"Ultimately everyone needs energy," Sacks said. "Our lives are more hectic now than they were 10 years ago."
Consider a mom who has to get up early to take the kids to school, run errands, make dinner and manage a household, Sacks says. She could use an energy boost at different times of the day as much as sleepy office worker or tired student.
"As the category broadens, there will be different types of beverages and different packages that will appeal to different consumer demographics," Sacks said.
Energy drinks use a combination of sugars, caffeine, vitamins and minerals to give users a kick. Makers claim the products can improve alertness, concentration, reaction time and endurance.
Red Bull In A China Shop
Privately held Red Bull of Austria is the clear leader in the category. It's responsible for more than half the sales volume in energy drinks, says Gary Hemphill, a senior vice president at Beverage Marketing Corp. But Hansen is doing very well in the category, he says.
Soft drink makers sell about 40 million cases of energy drinks a year, says John Sicher, editor and publisher of Beverage Digest. That's a drop in the bucket compared with about 10 billion cases of carbonated soft drinks sold each year in the U.S.
Hansen also sells natural sodas, fruit juice and soy smoothies, and sports drinks.
"What's driving the industry is a perceived requirement that what you should be consuming now really does need to be healthy and better for you," Sacks said.
The issue of obesity has people concerned about the types of beverages they drink. That's forcing Hansen and others to focus on diet and low-carbohydrate products.
Many of the newer diet drinks, especially those using the no-calorie sweetener sucralose, sold under the brand name Splenda, are much better-tasting than those with the more widely used low-calorie sweetener aspartame, sold under the NutraSweet banner, Sacks said. Hansen uses Splenda in its diet sodas.
Industry giants Coca-Cola (NYSE:KO - News) and PepsiCo (NYSE:PEP - News) compete with Hansen in the alternative beverages market, but the volumes aren't large enough to make much of an impact on the big guys, analysts say.
As a smaller company, Hansen is able to adapt more quickly to new trends than the cola kings. Plus, it's less risky for Hansen as a minor player to launch a new product because the scale required isn't as great. "The cost of a failed product for us is not very costly," he said.
Still, distribution remains a challenge, Sacks says. Getting its products on the shelves of traditional supermarkets can be expensive. Vendors often have to pay slotting fees to retailers. But Hansen has been making progress on that front every year, he says.
Hansen received the prestigious Beverage Forum Company of the Year Award for companies below $1 billion in revenue Wednesday for its performance in 2003. Judging criteria included the company's financial performance, depth of senior management and positioning for future growth.
In the first quarter, Hansen earned 19 cents a share, up 217% from last year. Sales jumped 42% to $31.3 million.
Sacks credited strong consumer demand for Monster Energy drinks, which were introduced in 2002, and Lo-Carb Monster Energy drinks, which debuted in August 2003, for the gains.
Hansen's new Lost Energy drinks in 16-ounce cans, which debuted in January 2004, as well as its natural sodas, Deuce Energy and Energade energy sports drinks also contributed to the advances.
The sales increase was partially offset by lower sales of energy and functional drinks in 8.3 ounce cans, multi-vitamin juice drinks in aseptic packaging, Diet Red Energy in 8.3 ounce cans, smoothies in cans and bottles, private label sodas and teas, lemonades and juice cocktails.
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