The use of natural ingredients is one of the main drivers for growth, with health concerns associated with the regular consumption of energy and sports drinks prompting the launch of products with these ingredients, says the report.
Other drivers for the category are increased brand awareness among consumers and rising disposable incomes. The expanding popularity among non-athletes is also boosting the category, as are clean label products.
As manufacturers develop new products, the target audience for the category broadens, said report author Vijay Sirathi. Millennials are a major target market for energy drinks.
“Initially athletes were the major consumers of these drinks; however with the expansion of the market, the customer base has also shifted from just athletes to other customer segments also.”
Like the carbonates category, sports and energy drinks need to address increasing concern from consumers about sugar content, said Sirathi. Consequently, manufacturers are launching sugar-free and low or zero calorie products.
Both new entrepreneurial brands and global companies are innovating in this sphere.
“Established players are following suit when newer brands enter the market with lower sugar variants and benefits beyond the caffeine energy continuum,” said Sirathi.
“For instance, Red Bull has highlighted the benefits of Red Bull Zero, which is sweetened with sucralose and contains B vitamins. Its Zero Excuses marketing campaign helped add approximately $10.56m in sales, according to the brand.”
The industry is evolving with the launch of new product lines, particularly with different product categories or alternative sizes and flavors.
“For instance, the launch of energy shots has created a segment due to the creation of a new product line. Currently, vendors are developing energy water and energy gum. These products are made up of natural ingredients,” said Sirathi.
“PepsiCo's AMP has launched different flavors: blueberry, white grape zero, passion fruit, strawberry limeade, and watermelon zero, as well as energy gum. This type of product line innovation is expected to drive the global energy drinks market during the forecast period."
Energy drinks are also taking inspiration from other product categories, added Sirathi.
“Energy drinks made with real fruit juices is an emerging trend in the market which is attracting health conscious consumers who are staying away from consuming energy drinks. Similarly cocktail inspired flavors are increasingly becoming an important trend driving the younger consumers to increase their consumption of energy drinks globally.
“Tart and fruity flavors, coffee and energy, and tea and energy are some other notable examples of innovative products launched recently. Consumers have been tempted by the introduction of new flavors."
Negative publicity in the media, stringent government regulations, and increasing health concerns among consumers are posing challenges to the growth of the energy drinks industry, says the report.
Bad publicity is picked up by the mass media and can have a huge negative impact on the sales and profitability for companies.
Government regulations are becoming increasingly stringent, added Sirathi.
“Several years ago, France and Denmark had banned Red Bull because of the usage of taurine as one of the ingredients. However, the ban was lifted in 2008. Such government policies act as a challenge for the global energy drinks market, thereby having a negative impact on consumption patterns.”
The high caffeine and taurine contents in many energy drinks also continue to raise concerns for consumers.
“Consumers are increasingly becoming conscious of these health risks and are opposed to consuming energy drinks containing these ingredients. Therefore, the increase in health concerns among consumers is another key challenge that is hindering the growth of the global energy drinks market.”