Sports and Energy Drinks Term Paper

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Energy Drink

The strategic group map for the energy/sports drink category should focus along the axes of energy and sport. An energy drink is basically a caffeine/sugar bomb, intended to provide a burst of energy and alertness. A sports drink tends to also have a lot of sugar, but not necessarily caffeine, and instead will have salt as a means of boosting electrolytes. Thus, the two categories can be quite a bit different from one another, but can also have some overlap. My strategic group map looks at how the industry is structured along these two axes (Ketchen & Short, 2014).

A drink that has no caffeine but focused on electrolytes and sugar would be viewed as a sport drink, in the upper right quadrant. Examples would be Gatorade, Powerade, and numerous other knockoffs thereof. In the lower left quadrant are the energy drinks that include the likes of Monster and Red Bull. Along the strategic map there are outliers. For example, Mountain Dew has a lot of caffeine and a lot of sugar, fitting the mold of an energy drink, but lies more in the upper left quadrant, somewhere in between a soda and an energy drink. The lower right quadrant lacks attributes of energy drinks, but also lacks elements of sports drinks, but still has some benefit as a sport drink. Water is a good example here -- used by many as a sports beverage but without the typical attributes of other products in the category.

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So the map shows sports and energy drinks, with beverages in the middle of the chart capable of being both, with substitutes as outliers on the continuum.

2.

There are several key factors that drive success in these alternative beverage categories. Marketing is critical. Companies that have developed a brand name, in particular the ones with first-mover advantage, have been able to build out their market share. Two early entrants, Red Bull and Monster, dominate the category, illustrating the value of getting into the business early. Latecomers typically either seek out a niche (i.e. VPX Redline) or they struggle as industry also-rans (i.e. Full Throttle) (Caffeine Informer, 2014).

One key success driver besides successful marketing and the ability to create a powerful brand story, is distribution. For a new product, getting distribution is a challenge because of the number of players already in the market. A success here is 5-Hour Energy, which gained distribution with a different bottling format. But other new entrants have typically been owned by major beverage companies, as a means of getting into stores. Without distribution, nobody can buy the product, and there will not be economies of scale in production. If we look at the recent strong new entrants like NOS, which is increasing sales at a time when most secondary brands….....

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