The energy drink industry has two major players: Red Bull & Monster Energy. Red Bull spends ~25% of its net sales on marketing. This is as much as Monster’s entire operational spend. Yet Red Bull fails to grow at the same rate and is also less profitable. Did Red Bull lose its wings while Monster unleashed the beast? Let’s take a look at some insights about these energy drink giants.
Energy drink industry a growing and profitable segment
Overall, it appears that energy drinks continues to be a growing and profitable segment. Compared to other soft drink categories, the segment grows faster and is far more profitable. This is apparent in the figures of the energy drink industry's biggest players: Red Bull and Monster Energy. In 2017-2021, the average growth of soft drinks was 4.5% and the average profitability [EBIT] was 4.7%, where for these two energy drinks companies sales growth was 11.6% and EBIT was 28.3%.
A volume-driven growth for Red Bull and Monster
The growth for both Red Bull and Monster is driven by an increase in volume rather than value. Cans sold by Red Bull increased from 6.3 billion in 2017 to 9.8 billion in 2021 (55%), while net sales only increased by 45%. This means that it generated €0.80 per can (2021) instead of €0.85 (2017). Monster increased its unit sales (measured in U.S. cups) from 8.6 billion in 2017 to 14.7 billion in 2021 (+70%), while total net sales only increased by 64%. This means it generated $0.38 per cup (2021) instead of $0.39 (2017).
Both companies appear to have grown within mature markets, but have shown stronger growth in emerging markets. With its lower-value branded product, Monster may have a better product-market fit than Red Bull going forward.
Increased activity in markets outside the U.S.
The declines in value are in part due to increased activity in markets outside the U.S. and Europe. In 2020, this was (temporarily) reversed as Western consumers shopped more for premium brands through retail during the pandemic. This led to an increase in unit value and an increase in profitability for both players. To give an example: Red Bull achieved a 12% increase in U.S. sales in 2020 despite a largely closed foodservice market.
Increased costs for Monster due to inflation and shortages
In 2021, inflation drove down profits for Monster. Monster cited (among other things) cost price inflation and a shortage of aluminium cans as the main sources for the increased costs. On the other hand, its sales mix returned to normal, meaning the lower valued parts of the market returned to normal for Monster. Red Bull has reported that it managed to increase profits, but not by how much. As Red Bull is a private company, their 2021 profit is not yet known. Following the cost inflation, Red Bull hit the news in September of 2022, raising its prices to distributors by 7%. After this news, Monster’s share price rose 3%.
What about other players in the energy drink industry
What about the other players active in the energy drink industry? Well to be short: no. Rockstar Energy was acquired by PepsiCo in 2020 for $3.9 billion and in August 2022 it took a stake in energy drink maker Celsius. The #1 local energy drink brand in China Eastroc Super Drink has almost tripled net sales in 5 years and Hungarian energy drink maker Hell Energy did the same.
So did Red Bull lose its wings?
To conclude: Red Bull hasn’t lost its wings, the others just had bigger ones. There is hope for Red Bull; if it can continue its 2021 growth (+24%) going forward, it will just fly by the rest again.
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