The energy drink is a new trend in the world of beverages that is one of the fastest growing beverages on the market. You can find them pretty much anywhere you can purchase a can of coke or a bottle of water. You can even mix the energy drink with alcoholic beverages. I am going to analyze the trends of the energy drink and explain how it is quickly taking over the beverage industry. First I will give you a brief summary of a few of the economics definitions to help you understand the findings of the article that I analyzed.
Economics is the social science that studies the production, distribution, and consumption of goods and services. Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society and also in business and finance. Microeconomics is a branch of economics that studies how individuals, households, firms, and some states, make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold. Microeconomics examines how these decisions, and behaviors, affect the supply and demand for goods and services, which determines prices; and how prices, in turn, determine the supply and demand of goods and services. Microeconomics also looks at interactions through individual markets, given scarcity and government regulation.
Law of supply is a microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers’ increases and vice versa. Law of demand is a microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa. Some of the factors for the change in demand are the tastes, customs, and preferences of the target market, the consumer’s income level, the quality of the goods or services being offered, and the availability of competitors’ goods or services. The law of demand states that, in general, price and quantity demanded in a given market are inversely related. In other words, the higher the price of a product, the less of it people would be able and willing to buy of it (other things unchanged). As the price of a commodity rises, overall purchasing power decreases (the income effect) and consumers move toward relatively less expensive goods (the substitution effect). Other factors can also affect demand; for example an increase in income will shift the demand curve outward relative to the origin, as in the figure. Some of the factors for the change in supply are production capacity, production costs (including wages, interest charges, and raw materials costs), and the number of other businesses engaged in providing the goods or services in question. The theory of demand and supply is an organizing principle to explain prices and quantities of goods sold and changes thereof in a market economy. In microeconomic theory, it refers to price and output determination in a perfectly competitive market. This has served as a building block for modeling other market structures and for other theoretical approaches. In recent years, the energy drink has become one of the fastest growing markets in the world. The global energy drinks market once again saw double-digit growth in 2006, up 17% (ResearchandMarkets, 2009). Growth was driven by new energizing concepts, strong marketing and product positioning, and a push into emerging countries. Changes in branding and marketing strategies are altering dynamics at the product, player, and market level. For energy drinks, a male-oriented market is witnessing players make an all-out effort to attract more female customers and retain aging consumers. Leading companies are responding to flavor preferences of women with buzzwords such as light, sugar-free, low-carb, crisp and delicately carbonated beverages. The market is characterized by the presence of specialized manufacturers as well as food and beverage powerhouses.
Key players in the marketplace include Pepsi, Coca Cola, Danone, Hansen Beverage Company, Monarch Beverage Co, Red Bull, Dark Dog, GlaxoSmithkline, Extreme Beverages, Taisho Pharmaceuticals and Otsuka Pharmaceuticals. In terms of market share, Red Bull leads the energy drink segments, respectively. The energy drink craze has now leaked into the night life crowd. There are many adult beverages that contain energy drinks and the energy drinks not only make a tasty drink, it also give you extra energy to be able to party until the bar closes down. Bar owners are taking advantage of this trend by charging an obscene amount of money to mix alcohol with the energy drink. They are smart because they are taking advantage of what is hot in the market and turning the tables to benefit them by making more money. In the past five years, energy drinks sales through mass-market channels grew 56%, while carbonated sodas declined 1% (ResearchandMarkets, 2009). The rub for the soda industry is that energy drinks are harkening back to the good old days and positioning products as elixirs of good health. In essence, energy drinks are reinventing the original soda platform from the late 19th century with a return to the early functional benefits of the soft beverage category.
The bottom line is energy drinks are not going anywhere anytime soon. They continue to boost revenue for beverage companies as quickly as they can concoct a new recipe. The reason that they are so popular is because they are very tasty, they give you a boost of energy that everyone needs every now and again, and they are reasonably priced. With the many different flavors and brands that are offered in the marketplace, picking the brand of your choice may be overwhelming, but you will eventually find the one that makes your mouth beg for more.
References:
ResearchandMarkets (2009). Global Energy Drinks 2007 Provides Full Analysis of the World’s Leading Energy Drinks Markets, with Clear Insight and Market Commentary on the Main Developments and Trends . Retrieved January 26, 2009, from http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20071206005748&newsLang=en