The “tip of the YEAR” when it comes to selling two-ounce energy shots, said Terry Messmer, merchandise manager for NOCO Express Stores in Tanawanda, N.Y., is to protect margins.
“What is happening is that beverage suppliers are very quick to lower the price of the product to get more sales, but we have to still make sure that we have value,” Messmer said. “Energy shots should be selling for $2.99 every day, versus taking a quick price decrease to get some more sales and ending up hurting the category. It’s the type of category that really is not price sensitive.”
That said, Messmer believes it is a fact of retailing that you can sell anything if you are willing to give it away. “If chains want to be serious about energy shots, they have to protect price. Suppliers give you the pricing to do it, but then you lose some margins,” he said. “This is a 50% profit margin category, but when you get your margin down to 40% by selling at only $1.99 all you’re doing is trading people down.”
This is not a category to be taken lightly. According to Information Resources Inc. (IRI), for the 52 weeks ended Dec. 27, 2009 sales of energy shots totaled more than $531.43 million, an enormous 57% increase from 2008.
In 2009, Messmer recalled, there were a multitude of new players in the category. “All we did was put a rack on our counter and there was no shortage of companies knocking down the door to get in on it,” he said. “Now I’m monitoring sales and plan to discontinue slow-moving items to test a few new ones.”
A shakeout has already begun, Messmer said, adding that he expects the field to eventually narrow to just a handful of key players. The two strongest brands at NOCO Express stores remain 5-Hour Energy and 6 Hour Power, which currently account for nearly 80% of the category’s sales at the chain.
Know the Customer
Doug Stephens, president of Retail Prophet Consulting, said retailers may be surprised by who the core energy shot customer actually is. “When we were looking at the issue we sort of figured, ‘well, it’s got to be the high school athlete.’ Oddly enough, it turned out to be 40-year-old men who were terrified of getting old,” he said. “I wonder to some extent whether we wouldn’t find the same sort of thing here—whether it isn’t guys who are just trying to get up at five in the morning to do the commute and come home late at night and still have a family life. Maybe energy shots are a way of coping with that.”
At NOCO Express, the customer for energy shots is generally college age and up, Messmer said.
Top 10 Energy Shot SKUs
|BRAND||SALES DOLLARS||UNIT SALES||AVERAGE PRICE||ONE YEAR PRICE CHANGE|
|Total Single-Serve Energy Shot||$531,438,500||175,850,600||$3.02||$0.05|
|Chaser 5-Hour Energy||$413,084,100||131,241,400||$3.15||$0.01|
|Stacker2 6 Hour Power||$29,265,090||10,047,900||$2.91||($0.01)|
|Vpx Redline Power Rush||$3,517,804||1,068,612||$3.29||$0.08|
|Vital 4u Screamin Energy||$2,996,681||2,670,299||$1.12||
Source: Information Resources Inc. (IRI) for the 52 weeks ended Dec. 27, 2009