The Coca-Cola Company is discontinuing sales of Coca-Cola Energy in North America after the new brand failed to penetrate the market. However, market observers believe that the withdrawal could be the first step to a much bigger move to succeed in this market.
As soda consumption declines in the U.S. Coca-Cola as well as PepsiCo have been pushing into energy drinks. Coca-Cola Energy was launched in the US in January 2020 after rolling out in around 25 other countries first. The drink contains guarana extracts and B-vitamins and has more than three times as much caffeine as a regular can of Coke.
The market launch created tensions with its partner Monster Beverage, in which Coca-Cola holds a minority stake. In June 2015 Coca-Cola bought a 16.7% stake in Monster for USD 2.15 billion in cash and opened its global distribution arm to Monster. This stake has since grown to 19.36% due to share buy backs conducted by Monster.
After Coca-Cola decided to develop two energy drinks, Monster accused Coca-Cola to violate a non-compete agreement and both companies went into arbitration in 2018. The arbitration was finally decided in favor of Coca Cola and the beverage giant launched Coca-Cola Energy also in its home market, the USA.
The Atlanta-based company said the decision to end production in the US and Canada after only a little bit more than one year comes now as it streamlines its portfolio to focus on brands that are performing well. "Our strategy is focused on scaling big bets across a streamlined portfolio," a spokesmen of Coca-Cola said. “As we scale our best innovations quickly and effectively like Aha and Coca-Cola with Coffee, we need to be disciplined with those that don’t get the traction required for further investment," he added.
Sales of Coca-Cola Energy will be taken off the shelves in the US and Canada by the end of 2021 but will continue to be sold in other parts of the world.
What looks like a failure for Coca-Cola could be indeed the first step to a much bigger success story. For years analysts and industry experts have speculated that Coca-Cola could take over Monster Beverage completely.
Monster Beverage Corporation was originally founded as Hansen's in 1935 in Corona, Southern California, originally selling juice products. Monster Energy was introduced by Hansen in April of 2002. After the product became very successful, the company renamed itself as Monster Beverage in 2012.
On June 12, 2015, Monster Beverage closed on the deal to acquire Coca-Cola's energy drinks line. Coca-Cola transferred ownership of all of its worldwide energy businesses including NOS, Full Throttle and nine smaller brands to Monster. Monster transferred all of its non-energy drink businesses to Coca-Cola, including Hansen's natural sodas, Peace Tea, Hubert's Lemonade, and Hansen's juice products.
Over the last 20 years, energy drinks have become increasingly popular, especially with young people, with many clubbers mixing them with alcohol. In 2020, the size of the energy drinks industry was USD 61 billion according to data supplied by T4 and was expected to grow by about 7% per year.
Despite its growth, the market is highly concentrated among a few vendors. The main two players have 82% of the global energy drink market. Market leader in dollar sales is Red Bullwith 43% market share in 2020, followed by Monster with 39% and Rockstar with 10%. Other smaller players are Mountain Dew Amp with 3%, NOS with 3%, Full Throttle with 1%, and Xyience Xenergy with 1%.
Last year, PepsiCo entered the market by acquiring Rockstar for USD 3.85 billion and has entered into an exclusive alliance with Vital Pharmaceuticals, the manufacturer of Bang Energy drinks to distribute the portfolio of Bang Energy beverages in the United States. (inside.beer, 28.4.2020)
PepsiCo is also planning a major marketing flash for its Mtn Dew Rise Energy with new spokesman LeBron James, who was poached by Coca-Cola.