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Energy drinks: double-digit growth trajectory

The ready-to-drink (RTD) energy drinks category continues to be the fastest growing segment within the non-alcoholic beverage industry in South Africa, according to a new BMi Research report.

Khathu Musingadi, Research Analyst at BMi Research, explains that this growth is driven by a consumer perception that RTD energy drinks offer both a refreshment benefit, as well as an energy boost, and as such provide a value-added benefit.

Growth is also aided by aggressive pricing of value-brands and effective promotional activities which have contributed to the continued prominent performance of this category, and further abetted by brand owners advertising the potential of energy drinks to boost physical and mental performance, a message which has found a receptive market.

RTD energy drinks were initially all largely imported, premium-priced products, with locally-produced, value-added products subsequently introduced to the category almost a decade ago.

“The emergence of these value brands has attracted more consumers to this category and has ensured RTD energy drinks alternatives for consumers across the economic spectrum,” she says, adding that energy drinks are increasingly being used as mixers with alcohol, as well as being used as a hangover cure. This has led to a rise in demand for energy drinks at social gatherings where alcohol is consumed.

[Just watching people in the streets, it’s also glaringly evident that cheap energy drinks are a food substitute and energy source for poorer folk. Ed]

BMi Research has been tracking the energy drinks market for more than 20 years. While overall beverage sales dropped in 2020 as a result of the Covid-19 pandemic, the RTD energy drinks market was the only non-alcoholic beverage category to record both volume and value growth in this period, albeit at a slower rate than pre-pandemic.

Double-digit party

Post the pandemic, its growth has recovered and in the last two years the RTD energy drinks category has recorded double digit growth in both volume and value.

However, as the RTD energy drinks market becomes increasingly saturated, Musingadi expects that category growth will start to slow.

“In the last four years, the category has experienced a 17% year-on-year growth rate and this year we expect a growth rate of just over 18%. However, as the market becomes increasingly saturated from a volume perspective, it will become harder to achieve these high growth rates.

“We therefore expect growth to start slowing down in the medium to long term to around 15% from 2025. Locally-produced value brands are expected to drive this continued growth due to their affordability and innovation,” she says.

When it comes to distribution channels, the wholesale channel is currently the largest, having experienced the most growth between 2022 and 2023, followed by top end retail and garage forecourts.

Bottom end retail, including spaza shops and street vendors, is also seeing growth, albeit off a lower base, with more affordable value-brands targeting the working class.

Persistently high inflation, a high unemployment rate and a sluggish economy are amongst the factors impacting growth in the category.  While the price of value-added products remained static for many years, that is slowly starting to change with price increases starting to be noted.

Energy drinks were initially primarily targeted at consumers interested in sports or with active lifestyles. Most energy drinks include the amino acid taurine and have a high caffeine content. Some also include other legal stimulants such as guarana and ginseng. They differ from sports drinks which are high in electrolytes and typically come in a plastic bottle with a lid.

RTD energy drinks, on the other hand, are typically packaged in a can.

Source: BMi Research [Alas, BMi will only provide the media with broad category outlines, revealing nothing on market sizes and sales volumes, or brand share. Ed]

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