This summer season the cola majors are turning on the heat in the energy drinks segment. Coca-Cola’s caffeinated beverage Charged by Thums Up is stepping up its visibility as one of the key official sponsors in the ongoing season of Indian Premier League on Star Sports. Not to be left behind, PepsiCo’s Sting is advertising heavily in the T20 league too and is an associate sponsor on JioCinema.

There is a new energy in the niche energy drinks category which has been growing rapidly in the post-pandemic era. The growth is being driven by a shift in consumption habits as consumers are experimenting with new options. Though the segment is dominated by Redbull, the launch of Sting by Pepsico at an affordable price has put the zing into the segment. Other players include Tzinga, Hell Energy, Monster and Charged by Thums Up.

According to Euromonitor International, a market research consultancy, the energy drinks category grew 12.6 per cent in total value between 2021 and 2022, touching ₹16,488.6 million last year. The growth was nearly 35 per cent from 2020 levels. In terms of volumes, it was pegged at about 33.5 million litres compared to 30.4 million litres in 2021 and 26 million litres in 2020.

Category creation

A big factor in the growth, according to industry observers, is the “massification” of energy drinks, thanks to the cola majors making it available in PET bottles, and also an affordable pricing strategy.

The introduction of Sting at ₹20 in PET bottles has helped PepsiCo’s leading bottler, Varun Beverages, make big strides in this segment in the past 2-3 years.

On an earnings call in February, Ravi Jaipuria, Chairman, Varun Beverages, noted, “We are excited to share that our energy drink Sting has had a remarkable year contributing significantly to both volumes and realisation growth.” He said the mix of Sting in the company’s sales volumes grew exponentially to about 9.6 per cent of total mix in India in 2022.

The bottler has been rapidly expanding the brand’s presence across the country, and it is being sold in more than 2 million outlets.

“Sting’s contribution during the December quarter was much higher than the full year contribution. It went up to as high as 16 per cent.”

Jaipuria noted that energy drinks were too expensive earlier. “Since it has been fine priced now, the market has just grown out of proportion, he stated.

Abneesh Roy, Executive Director, Nuvama Institutional Equities, said the segment has taken off in the past few years led by Sting. “Sting grew as much as 175 per cent in the December quarter for Varun Beverages. This kind of category creation by right-pricing has opened a huge opportunity for the energy drink segment across metros as well as smaller towns and cities. The high decibel marketing, visible by Coca-Cola and PepsiCo, will help scale up the category,” he added.

Distinct segments

According to industry observers, the energy drink market has now got segmented in three sub-segments — the mass market segment in PET bottles; the mid-price segment largely in cans at ₹45 - ₹60; and premium segment in cans with much more bespoke targeted marketing, where global major Red Bull is positioned.

Unnikannan Gangadharan, Director, Hell Energy India, which is in the mid-price segment, says, “Over the last five years, we have been growing at a healthy high-double to triple digits growth rate (barring the disruptions due to the pandemic).”

As he explains, “Earlier, energy drinks was a top-heavy category led by the premium cans segment. Massification of this category started when the format expanded from premium aluminium cans to PET bottles. This movement is being ably supported by high decibel advertising from all the players and has helped bring new consumers to the fold.”

The Indian demand

Hell Energy, which established a pan-India presence in 2019, was earlier largely importing its products to India from its home market Hungary. “To cater to the huge demand in India, our products are now being supplied from two factories in Hungary and Sri Lanka. We have also begun advertising strongly in markets such as Maharashtra, Andhra Pradesh, Telangana and Punjab. Quality and taste are the key growth drivers for us. Portfolio expansion with popular flavours will also be a key growth area in the coming years,” says Gangadharan.

As far as the battle between the cola majors goes, an industry player pointed out that for now Sting seems to have the first-mover advantage over Thums Up’s Charged.

In more mature markets like the US, young male adults are the biggest consumers of energy drinks. Given India’s youthful demographics, it’s not surprising that the energy drink makers are all charged up.