Will PepsiCo counterattack Coca-Cola Energy with Pepsi Energy launch?
Coca-Cola launched Coca-Cola Energy earlier this year, a drink that ‘takes one of the original brand edges of Coke, its energy boost, to a new level and new taste’. It hopes the launch (powered by caffeine, guarana extract and B vitamins but free from taurine) can reach into the white spaces where the energy category is not yet well developed.
The path is now open for Coca-Cola to expand the drink beyond its UK and Ireland launch markets, following the green light from arbitrators in its dispute with energy partner Monster.
So what is PepsiCo’s play into the energy category going to be? While CEO and president Ramon Laguarta agrees the energy category is one that PepsiCo needs to be in, he doesn't believe branded cola energy blends will be center of the category, seeing PepsiCo’s opportunities come from other brands such as Mountain Dew and Gatorade.
Energy is a growing market, agree Coca-Cola and Pepsi
Something the two companies evidently agree on is the growing opportunity in the energy category. The definition of the 'energy' category in this sense is somewhat undefined (thanks to the blurring between any categories with a potential energy proposition, from soft drinks to energy to coffee). But the consumer demand driving the category is easy to pinpoint: they want more energy.
“Energy is clearly a growing market across the world, and we think that the consumer will continue to ask for products that give them the functionality of higher energy or boost,” said Laguarta, speaking in last week’s Q2 earnings call with analysts.
“We're approaching this from many angles: from coffee, from sports, from obviously the energy category itself.
"So we're capturing some of those occasion already. In the case of US energy, we have a pretty good partner for many years with ROCKSTAR, and we've been playing in this segment for a few years together, and it's working also in some international markets.
“So we plan, obviously, to continue that relationship, innovating and see how we can accelerate our participation in that growth category.”
Asked about the possibility of a Pepsi Energy launch, Laguarta says Pepsi already has a number of formats and flavors.
“With regards to Pepsi Energy or Coke Energy – we’re all trying, I think, as a strategy to make our global brands play more spaces. So we're trying to do that with Lay's or we're trying to do that with Doritos or we're trying to do that with Pepsi.
“Pepsi, actually, if you see our growth internationally, it's a lot on flavors, Pepsi flavors, a lot on Pepsi non-sugar, Zero. And obviously, Pepsi regular in multiple formats. I think we will keep expanding Pepsi into other spaces, whether it's energy or some other spaces. We'll see when we get to the market.”
Laguarta believes that, while brand Coke and brand Pepsi can tap into the demand for energy to a certain extent, it won’t be the main way to play in the category.
“If you think about the core energy consumer, they're looking for something different than what brand Coke or brand Pepsi can offer. I'm not saying that there will not be occasions where some of those consumers will go into our brands, but I think they're looking for different propositions.
"And if you think about Red Bull, Monster or ROCKSTAR or some of the other brands that are capturing majority of that space, they have a very different proposition.
“So I'm not saying it's not a big business opportunity. I'm saying that it's not going to be the center of the category, I think.
“But more to see in the coming quarters, and we'll keep thinking about how we make our global brands play in more spaces, because that is a very high return on investment normally for us. As you can see with Gatorade Zero, with Pepsi Zero, when you put your big brands into new spaces, that is a huge, huge, huge business opportunity.”
'Off field functionality:' New launch Gatorade Bolt24
PepsiCo’s Mountain Dew brand has already been playing in the energy category, with Kickstart, Amp Energy and last year’s launch of Amp Game Fuel specifically for gamers.
“We're trying to move Dew into the energy category in small steps,” said Laguarta. “Kickstart was a great platform. It decreased a little bit, it's starting to go up again. That should solidify Mountain Dew. And then we just launched Mountain Dew Fuel to put one foot into the energy category with a differentiated position and more towards the gaming and that kind of demand opportunity. It is doing very well. We plan to continue to innovating that segment.”
Meanwhile, Gatorade - originally positioned more as a sports drink - now has a Gatorade Endurance Carb Energy Drink; and is set to launch Gatorade Bolt24: 'A functional platform catering to the athlete off the field' with natural, functional benefits (watermelon, water plus sea salt, and vitamins and antioxidants). "This will be off-the-field functionality for the core athlete," said Laguarta.