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Reduced Sugar Energy Drinks Might Be Succeeding Where Diet CSDs Have Failed

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One of the long-standing growth trends in global soft drinks has been the poor performance of the reduced sugar carbonates (CSD) segment. Caused primarily by decline in North America, where per capita consumption of low calorie CSD is historically higher and the category has been especially weak, reduced or zero sugar CSDs have generally (excepting outliers like Sparkling Ice) struggled to build momentum despite clear and growing consumer demand for healthier, lighter beverage options.

Desire for natural ingredients and consumer mistrust of artificial sweeteners are generally given as reasons for the underperformance of reduced sugar CSDs. Yet while low-calorie CSDs struggle, reduced sugar energy drinks have surged, with reduced sugar energy brands quietly outperforming the full-flavour energy segment in terms of global volume growth in 2016.

A mix of favourable, function-first consumers and successful new flavour launches in 2015-2016 in North America and Europe (in some cases exclusive to the reduced sugar segment) may begin to account for the unexpectedly strong (8% in 2016) volume lift experienced by reduced sugar energy drinks.

Global Energy Drinks Volume Growth 2005-2016

Avoiding artificial ingredient stigma

To date, reduced sugar energy brands have been seemingly immune to the stigma attached to artificial sweeteners in traditional CSD – an ongoing debate which has caused leading cola manufacturers considerable pain and bad press. Reduced or zero calorie cola producers have been frequently forced to justify and defend the use of aspartame in the court of public opinion, reformulating a brand in one notable instance (the failed Diet Pepsi conversion to sucralose in the US) and introducing a major ‘natural’ sweetener alternative product like stevia-sweetened Coca-Cola Life across markets.

Reduced sugar energy drinks have certainly not avoided artificial sweeteners in achieving sugarreduction. In the US, Red Bull Sugarfree is an aspartame/ace-k sweetened product, while Monster Energy Zero Ultra contains an erythritol/sucralose blend. Both brands were strong performers in 2016.

Why then, does the consumer appear unfazed? Function-first branding in energy beverages may render concerns over artificial ingredients in CSDs or other refreshing beverages less relevant or urgent. Energy drinks consumers are clearly seeking less sugar, as growth in low-calorie products suggests, but are first and foremost expecting a lab-engineered, high performance beverage that delivers on its core functional claim. All other ingredients take a back seat to caffeine.

A tight core demographic for the category also plays a role. Despite efforts towards outreach within energy drinks for older consumers and less macho branding in some instances, the energy category still primarily attracts a consumer segment that is globally younger and skewed male. There is reason to suspect that natural ingredients are a less urgent priority with this consumer group.

Creative flavour innovation is another important reason for success

One other reason for the success of the low calorie segment is creative, unique applications of flavour to incentivize consumer trial. While reduced sugar CSDS are generally expected to replicate a full flavour product (Coca-Cola and Diet Coke), new reduced sugar energy drinks have introduced bold flavours that are, in some instances, exclusive to the low calorie segment.

Both Red Bull and Monster Beverages were extremely aggressive in terms of package and flavour innovation in 2016. Red Bull Purple Edition (açaí berry flavoured) and Lime Edition, launched last year, are both currently exclusively available as reduced sugar products in the US - meaning flavour and trial can drive consumers to the reduced sugar products in the portfolio. In the UK, Rockstar beverages introduced its best-selling flavour, Punched Guava, to the fast-growing Rockstar Pure Zero reduced sugar range in February of last year. Coca-Cola’s new European super-bottler, Coca-Cola European Partners, also announced the introduction of a citrus flavoured Monster Energy Ultra Citron in January of this year, citing continued strong growth in the lower-calorie energy segment of their portfolio in the UK.

But will it last?

Clearly, reduced sugar energy drinks have been a rare bright spot for calorie/sugar reduction achieved via artificial sweeteners in soft drinks. Early development in zero sugar products in brand portfolios – and a consumer that generally prioritizes functional delivery over ingredients - may allow the energy category to stay on the front foot in terms of the sugar debate, despite other long-term obstacles in terms of caffeine content, potential marketing restrictions and regulation. As the energydrinks category continues to mature, it is inevitable that more functional products like enhanced or caffeinated waters, juice and brewed beverages (cold brew coffee or tea) will find their way to adjacent shelves. Despite the appeal of alternative or so-called ‘natural’ energy, the unique functional delivery of energy drinks and the core demographic of the category will continue to insulate reduced sugar energy drinks for the time being.

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