How Energy Drink Brands Can Win Online
For the CPG industry, e-commerce has always been the “energy drink” of sales channels. While the digital channel might not always be margin accretive for CPGs, its sales growth is impressive. Likewise, despite possible health concerns, sales of energy drinks are on the rise. In fact, recent IRI data showed that U.S. consumers drank more than $11.7 billion worth of energy drinks in the 52 weeks ending June 16, an 11 percent increase over the previous year.
Beverage analysts predict sustained future growth as the category matures and attracts new waves of customers, many of whom will likely be drawn in by the news of both the largest beverage brand (Coca Cola) and the largest internet retailer (Amazon) entering the energy drink market. As increased categorical competition continues, I expect that e-commerce will play a similar opportunistic role for energy drinks as it has for the rest of the CPG industry.
In this article, I discuss three strategies that energy drink brands should employ to beat the competition online.
Energy Drink E-Commerce Is Buzzing
Beverages and e-commerce certainly haven’t had the perfect symbiotic relationship that Forrest Gump described as “going together like peas and carrots.” The inherent challenges with selling beverages online (and doing so profitably) mainly have to do with their heavy weight, large pack sizes, and elevated risk of damage. Simply put, beverages are not the easiest products to sell online, and energy drinks might actually be more difficult than the rest of the category. The reasoning for this is that energy drinks are usually purchased and consumed in close proximity to their highest time of functional need. It should therefore be no surprise that online sales only accounted for 2 percent of total sports and energy drink sales in 2018.
While it may seem logical for energy drink brands to patiently wait for clearer paths to profitability in digital commerce before fully allocating resources to the channel, that strategy could leave them severely behind in the current “land grab” that is happening on internet retailers like Amazon. Amazon is quickly becoming a retail destination for energy thirsty consumers, with more than 30 percent sales growth in the category year over year. Seeing this strong sales trend, the company recently threw its hat into the ring by launching a private label energy drink of its own under the Solimo brand.
As market leaders scramble to retain their positions against emerging brands, paid search spend in the Energy Drink category on Amazon is growing rapidly, to the tune of 60 percent year over year. For those beverage brands still temped to wait for better unit economics to enter the digital channel, remember there were similar challenges when the category shifted from sales of concentrates delivered through fountains to packaged, ready-to-drink beverages. The brands that embraced this change are now the biggest and most successful ones in the world.
What Should Energy Drink Brands Do to Win Online?
Consistently Launch New Products
Believe it or not, Red Bull had just one version of its category-creating energy drink for the first 16 years it was in business. While the extended product lifecycles of yesteryear are aspirational, they rarely align with the rapidly decreasing attention spans of today’s consumers. Monster Energy CEO Rodney Sacks recently stated on a conference call that “there is a movement generally with consumers wanting to try new products, new flavors, new innovation.” Feeding this constant demand for stimulation has resulted in energy drink brands rarely going a full quarter without a new product launch.
At the same time, the current merchandising cycles and resources needed to get adequate shelf or cooler space in a physical store makes it difficult to consistently launch new products. To overcome these limitations, energy drink brands should consider using their own direct-to-consumer websites to launch new innovation items on a regular basis. Only releasing a limited number of these items at a time allows you to “test” new flavors and product variants and gather useful sales data that you can later use to scale the idea to larger retail channels.
Fragment the Market
It’s no secret that today’s consumers have increasingly complex demands that energy drink brands must meet in order to succeed. It’s no longer enough to offer a collection of products that is made with only water, flavor, sweetener and caffeine. To stand out from competitors, energy drink brands need to design innovative products with purposeful ingredients that fulfill the needs of a specific customer segment, thereby fragmenting the market. For example, Bang Energy, the fastest growing energy drink brand, has defined a new performance sub-category of energy drinks, which is characterized by the addition of nutraceutical ingredients, higher caffeine content, and a bit of brand positioning.
Energy drink brands seeking to differentiate themselves from competition should also consider targeting a specific buyer group. This was the strategy used by G Fuel when they positioned their energy beverage for video gamers.
Energize Your Product Content
Today, the idea that “eye level is buy level” is just as important online as it is offline. The digital equivalent to appearing at “eye level” in stores is winning the top position in an internet retailer’s search results. It’s crucial for brands to optimize their listing page content so that their products rank well for relevant, high-volume search terms. These include both branded and unbranded keywords. By ranking well for unbranded, attribute-based search terms, energy drink brands can capture the growing segment of undecided online energy drink shoppers. According to OneSpace consumer search data, a majority of searches in the Energy Drink category (approximately 39%) are for unbranded keywords such as “organic energy drinks.”
Amazon’s algorithm also takes conversion rates into consideration when deciding how to rank products in search results. This means brands must also optimize their product content to convert the highest percentage of interested consumers. To optimize your product listings for conversion, invest in robust, high-quality product page content, including copy, images, and video.
OneSpace Can Help
OneSpace helps CPG brands centralize, optimize and publish product content that wins top position on the digital shelf. By combining e-commerce search data and content optimization tools with software for content storage and syndication, OneSpace’s Product Merchandising Platform helps brands increase organic search visibility and conversions across multiple online retailers at scale. Contact us to see how we can help.