WildCat Energy Drink – A Profitable Franchise Opportunity

The US, China and Brazil will be the most important markets for energy drink growth through the next decade.

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The energy drinks market has boomed over the years and consumption has grown on average 10% annually since 2007. This brings consumption up into the 10’s of Billion Litres in the short space of just 10 years.

This growth will not stifle in the near future. The burgeoning B.R.I.C.S economies which will represent new growth regions as the present markets such as North America mature. A trustworthy industry wide sales figure is hard to obtain in relation to the energy drinks market. However, Zenith International estimates the market to be worth approximately $37 Billion. To put this into perspective, Smirke placed the total revenue of the global recorded music industry at $16.5 billion. This demonstrates the growth that the energy drinks industry has undergone.

Energy Drink Industry Analysis

The Energy Drink industry is clearly a profitable one. The success of Red Bull, Monster and other private labels has ultimately attracted many envious eyes. Subsequently, we have seen new market entrees looking for their share. In particular, those who have made significant profits from the now declining soft drink industry who are looking to compensate for losses.

The new level of competition has increased risk for those in the market. Those with the largest share have the most to lose. Companies like Red Bull and Monster, could fall victim to being substituted as the number of manufacturers increase and consumer demands change.

The market is frequently becoming more & more segmented in terms of flavours, various sugar-free & low-carb options. Companies are finding it difficult to create an individual image that can separate them from their competitors. This is likely to change. Companies may soon position themselves to target groups such as women, who currently have a very low consumption rates in comparison to men. Overall, the industry will continue to grow due to very high sales growth from emerging economies.

Red Bull Company Analysis

Being the first mover into the market has its distinct advantage. Over the years Red Bull has developed strong brand recognition & loyalty. However it is becoming a victim of its own success due to their premium price and lack of USP. As a result there is a growing number of competitors entering the market & undercutting Red Bull. For instance, Monster Energy who is now the market leader in the U.S. This is leading to a slow erosion of its market share.

In the past, the Red Bull branding has always been distinctive due to its association with extreme sports such as snowboarding & motocross. However, it is losing this distinctive image as new entrants are emulating this approach and influencing young affluent consumers who are looking to follow new and upcoming brands.

Whereas in the past, Red Bull’s appeal has always been to the 18-34 male segment, it now has to look elsewhere due to the level of competition. Therefore Red Bull will not be able to carve out a new competitive advantage. In an effort to steal a slice of Red Bulls market share, competitors are entering with more masculine extreme images. As a result Red Bull’s image is now quite “soft” in comparison to its competitors. As a result, Red Bull has very little potential to widen its focus outside of its own segment, while still being capable of competing in its current market.

Economically

The energy drinks industry has continued expanding at a double figure rate during the last decade. Unlike other beverage markets, this growth has largely been unaffected by the economic downturn. This is quite a testament to the growing popularity of energy drinks which tend to be more expensive than substitutes such as coffee. We would expect the opposite to be true due to declining disposable income following the 2008 financial crash. The fact is, worldwide figures are masking the slowing down of sales in mature economies which are now below the 10% mark. Though these growth figures are still quite high, the true growth now lies in the BRICS & the Middle East.

Social

Energy drinks companies are very active on social media sites such as Twitter & Facebook. For example, nearly half of all energy drink related tweets. mention Red Bull.

Socially, energy drinks brands are seen as cool for their extreme sports image & team sponsorships. This cool image has helped companies such as Red Bull become quite popular with clubbers, students & drivers.

However, energy drinks receive a lot of criticism via new digital media such as blogs. In particular, in relation to deaths that were caused by excessive energy drink consumption in combination with spirits. Consumption of alcohol together with energy drinks is quite popular amongst students & clubbers due to the energy boost. As a result, this creates a double edged sword for energy drinks companies. On the other hand, energy drinks companies are also being swept up in the general wellness trend. This has resulted in the release of low carb & sugar free options.

Technological

The main tech forces are limited to improving manufacturing & transport capability. Innovation in this industry tends to come from product segmentation. The most important Technological factor in the energy drinks industry is the internet. This invention has allowed people across the world to interact with the brands from the comfort of their home. Whether it is a viral advertisement to create a buzz such as the Red Bull Stratus event, which had the largest live audience on YouTube ever, or merely interacting with their social media page.

Environmental

While this could come under the social section, we kept this separate to highlight its importance to the modern consumer. While there is pollution caused by the manufacturing of energy drinks the industry is very focused on package recycling. The most common form of packaging is the aluminium can which is 100% recyclable. Some of the cheapest brands use plastic packaging for their larger products such as 1 litre bottles to assist profits. But, these again are recyclable and are a relatively small percentage of sales.

Legal

Legally we are seeing increasing measures being taken against all unhealthy products such as soft drinks. This is especially in relation to advertising at children. Energy drinks in particular are given a lot of flak from political establishments which are looking to limit their point of sale. This is down to two reasons: rising obesity and the high profile deaths linked with energy drink consumption. While not illegal, regulators are looking at idea’s such as sugar taxes to help reduce consumption of these products. There is also restrictions being placed on advertising at children, who are a prime target for companies looking to become recognised by consumers before spending habits are set.

Conclusion

WildCat is adaptable in terms of its nature as a business. This adaptability can be seen through a range of sustainable and contemporary products that are widely available in different markets. We have a centralised marketing strategy that targets the right people. This has proven successful in different international markets including North, South America, Europe and the Middle East. WildCat has manufactured and supplied 22 countries and has 2 franchisees in the last 3 years where the brand is growing at a natural and organic rate. General data on the companies profitability, general position and growth patterns over the years are to be discussed throughout the development of the business policy.

To keep updated on the latest WildCat news, visit our LinkedIn brand marketing page or the News section on our website.

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