USA: Anheuser-Busch looks to become a niche player by emerging into the energy beverages market

Anheuser-Busch's move into the energy-beverage industry shows how even the most massive of mass marketers is looking to become a niche player, Sun Herald wrote August 23. Of course, a niche for the St. Louis-based brewing giant would be the Grand Canyon for smaller competitors.

Anheuser-Busch recently inked a deal to distribute the Monster brand energy beverages produced by California-based Hansen Natural Corp., once a rather quiet producer of bottled fruit juices and high-end sodas. But with Monster -- recognizable from its black can bearing the letter M in neon colors -- Hansen rather suddenly finds itself the owner of the number-two energy drink in the United States.

Local Anheuser-Busch vendor Peace River Distributing Inc. is right in the middle of the new venture, helping to market Hansen energy drinks to area convenience stores.

Look for the Monster brand to make a big rush against industry leader Red Bull, said Robert Wenzel, president of Peace River Distributing. Some old-fashioned price competition is in the wind as Hansen attempts to push a big 16-ounce can as the new standard for about the same price that Red Bull gets for an 8-ounce serving.

Energy drinks are non-alcoholic beverages spiked with eye-opening amounts of caffeine - more than caffeinated sodas like Coke and Pepsi, but generally less than an equivalent amount of coffee. Most also contain exotic and supposedly health-enhancing herbs, such as ginseng and guarana.

Also, most energy drinks are heavily sweetened - both for the sugar rush and to mask the odd flavors of those supposedly healthy herbs. There are some artificially sweetened energy drinks for dieters.

"Energy drinks are the new coffee," Wenzel said. Along with four flavors of Monster, Peace River has also taken on two other Hansen energy drink brands, Lost and Rumba. The latter is a blend of fruit juices laced with caffeine and herbs. Although not as well-known as Monster, Wenzel said that Rumba, with predominantly orange and pineapple flavors, may be one of the most palatable energy drinks on the market.

Still, not many people buy energy drinks for the flavor.

Energy drinks now account for about 6 percent of all non-alcoholic beverages sold in the United States, according to industry data. The emergence of a $3.5 billion industry at a time when beverage sales are mostly stable is one of the more impressive marketing achievements of the new century. Some industry analysts forecast the energy drink niche to hit $10 billion annual sales by around 2010.

No beverage since the $4 latte has made so bold a lifestyle statement. Energy beverage consumers tend to be tech-savvy teens or twentysomethings. They value the sugar and caffeine for the boost it gives them while hitting the books or spending long hours working with computers.

Also, energy drink consumers tend to be enthusiasts for extreme sports, a connection that hasn't been missed by marketers. Various brands promote everything from skateboarding to motocross.

Despite the sports connection, energy drinks are a completely different category from sports beverages such as the all-time classic Gatorade. These beverages are enhanced with electrolytes to replace minerals that the body loses when perspiring during exercise. They are usually lightly sweetened and contain no caffeine.

Finally, energy drinks are among the most expensive of non-alcoholic beverages. Red Bull generally fetches about $2 for an 8-ounce "bullet" can.

Considering that its youthful consumers have a virtually bottomless capacity for energy drinks, Hansen concluded that it could cut into Red Bull's niche by offering more for the dollar. And it has enlisted Anheuser-Bush to move its generous 16-ounce cans of Monster to store shelves.

Hansen's market research shows that the 16-ounce size was about a quarter of the market two years ago. Today, it's better than 40 percent and still growing.

For Anheuser-Busch, the Hansen deal is a rare venture into non-alcoholic beverages. But energy drinks fit Anheuser's distribution model, with the one exception that Hansen will be allowed to purchase space on store shelves. This is illegal with alcoholic beverages. But in either case, local Busch distributors simply have to get the product to its destination.

"Anheuser-Busch really perfected the supply chain," Wenzel said. Now, Monster will benefit from the expertise developed through moving millions of cases of Budweiser and Michelob.

Hansen formerly had two Florida distributors for Monster, but earlier this year decided to retain the services of just one, covering the Panhandle. About 25 Anheuser-Busch distributors snagged Monster distribution rights for the remainder of the state -- including Peace River, whose territory covers Charlotte, DeSoto and Glades counties, along with Boca Grande island.

"This is a 100-percent convenience store product and our goal for Monster is to get it as much exposure in convenience stores as we can," Wenzel said.

Indeed, Wenzel recounted that one of his sales managers was recently in a local convenience store and noticed a man stocking up both on 16- and 24-ounce cans of Monster. He introduced himself and explained that Peace River was distributing Monster. It was obvious the customer liked the product a lot -- could he explain why?

As it turned out, the customer was a local building contractor on his way to a job site. The big order of Monster energy drink was just a regular morning pick-me-up for himself and his crew. In Florida weather, they preferred a cold energy drink to a hot cup of coffee.

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