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Democratisation of Energy Drinks in India

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Energy drinks has historically been perceived as a premium category in India, dominated by Red Bull. Red Bull entered India in 2009 and has dominated the category ever since. In the last decade, several significant brands either exited or were recalled due to concerns from the Food Safety and Standards Authority of India (FSSAI) that combining ginseng and caffeine is harmful. Monster Energy and homegrown brand Tzinga left but subsequently re-entered the market in 2018.

From July 2017, FSSAI mandated that energy drinks companies should have the message "Consume no more than 500ml per day" and display the warning, "Not recommended for children, pregnant and lactating women, and persons sensitive to caffeine". Additionally, the FSSAI set a limit on caffeine at 300mg per litre.

In 2019, the government raised the GST on energy drinks. The effective tax on energy drinks reached 40%, 28% GST and 12% cess, impacting affordability.

Pepsi and Coca-Cola bet on economies of scale by mass marketing their energy drinks

In 2017, PepsiCo entered with Sting, priced at INR50 per 250ml can, while Red Bull charged nearly double for the same quantity. Realising the need for affordability to attract a broader consumer base and mine untapped potential in the category, particularly in rural areas, PepsiCo acted. In 2020, PepsiCo introduced Sting in a 250ml PET bottle priced at INR20. Coca-Cola followed suit in 2022, launching Thums Up Charged Berry Bolt, now called Charged, leveraging the strength of its Thums Up brand. Both companies benefit from extensive distribution networks, allowing them to reach consumers in urban and rural areas. Except for AB InBev's Beats, most of the launches in the last five years have been in the economy/mid-priced segments.ED Competitors 2023

Sting's ascent was driven by its shrewd pricing strategy. The decision to offer the product in PET bottles rather than solely in aluminium cans proved instrumental in extending the product's reach while maintaining an economical price point. Furthermore, the strategic partnership with Varun Beverages for bottling provided an advantage over Red Bull, which imports its products, allowing Sting to control costs and mitigate price hikes during inflation. Introducing the 250ml SKU for INR20 proved to be an ideal move, enhancing market penetration by making it both affordable and portable, facilitating on-the-go consumption.

Varun Beverages ensured that Sting was available at over two million retail locations in 2022, a distribution reach on a par with well-established legacy brands.Off-Trade Volume and Value Share of Energy Drinks in India

Sting opens the category to new consumers

India's young demographic landscape is aiding the product's growth. Sting has gained popularity, particularly among the 15-19 age group. This demographic predominantly consists of students prioritising affordability. Additionally, Sting has garnered a favourable response in rural areas, redefining the value perception of the category among rural consumers. What was once considered a premium product category is now seen as a viable alternative to carbonates, primarily due to its availability at an affordable price point.

The brand also serves the growing gaming community. Gamers turn to energy drinks for various purposes. India provides one of the most cost-effective means of accessing the internet, making it a robust market for e-sports.

Finally, individuals of all age groups seek to decrease their sugar intake. Sting, with only 6.8g of sugar per 100ml, provides a low sugar option compared to Red Bull, which contains 11g of sugar.

Affordability and segmentation are key to energy drinks category development in India

Riding on its affordability and growing favour among young and rural consumers, Sting swiftly ascended to a dominant market leadership position. The brand contributed to a decline in the average price within its category, notable as CPG prices across the board were escalating due to inflation. Growth is fuelled by India's low per capita consumption and extensive consumer base, allowing companies with local bottling units, such as PepsiCo and Coca-Cola India, to emphasise economies of scale, deviating from their global emphasis on value over volume.

Building on its success, the company expanded its product line by introducing Sting Blue in September 2023. This move by PepsiCo India has also created opportunities for businesses within the category. Coca-Cola India has allocated substantial resources to promote its energy drink, Charged, with a particular emphasis on the ICC Men's Cricket World Cup 2023. Meanwhile, Monster Energy launched mid-priced brand Predator in 2022 and has plans to introduce a mass-market brand. In contrast, Red Bull remains steadfast in its commitment to premium positioning and will continue targeting the high-end segment. It remains to be seen whether they will explore collaborations with local bottlers to enhance accessibility.

For more information, read our white paper, How to Be a Disruptive Brand, where we provide a framework for how businesses execute change to disrupt an entire market or category.


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