5-Hour Energy Shot Volume Climbs 30% In Vending Channel

Posted On: 9/30/2009

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FARMINGTON HILLS, MI -- Energy shots have become so essential to the everyday consumer that they have earned a place at the coveted convenience store checkout counter. And, as demand continues to soar, more vending operators are claiming their share of the emerging category by putting the concentrated energy drink alternative in the hands of consumers in the locations where they desire a quick pick-me-up.

Brandon Bohland, marketing manager of Living Essentials, says sales of his company's 5-Hour Energy shots are up 30% over last year in the vending channel, as operators are beginning to recognize the magnitude of the market for the product. In just a few years, the "shots" have has grown from a niche purchase to a mainstream must-have.

Sales of energy shots are expected to almost double this year, to about $700 million from last year's $370 million, according to Stamford, CT-based market analyst Consumer Edge Research. Convenience stores are on track to achieve such growth; according to Nielsen data, they have posted the largest dollar sales increase in the first half of 2009 for "liquid vitamins, supplements and energy shots" -- up 120.5% over the same period last year.

Easily consumed any time, anywhere, the 2-fl.oz. 5-Hour Energy shot bottle provides a concentrated sugar-free dose of caffeine equivalent to a cup of coffee or a can of energy drink. They also contain B vitamins and amino acids associated with alertness and focus. Students cramming for exams, truckers driving for many hours, and fitness enthusiasts seeking a boost are among the diverse consumers relying on the "shots" for an on-demand power boost.

"It took awhile for the vending industry to catch up," Bohland told VT. "Even in 2008, operators said they couldn't believe anyone would pay $3, but they weren't giving it a chance to see whether people would. But the current economy is driving vending operators to reevaluate their machines and say: 'What can we change to get people back and get more dollars per vend?'

"We were ahead of our time when we launched 5-Hour Energy in late 2006 in vending, and it didn't work well for some operators," Bohland recalled. "But awareness of the brand and demand for it has exploded; we're selling 4 million bottles a week, and those same operators are trying it again and finding success."

Living Essentials has invested heavily in advertising over the past couple of years to secure a leading position for 5-Hour Energy. While the competition is heating up, it's also helping build the market for energy shots. Red Bull recently introduced a "shot" version of its market-leading beverage, Dr Pepper Snapple began test-marketing a shot of its Venom energy drink (Venom Bite) and Coca-Cola has added a shot based on its NOS energy drink. Shotz, which made its vending industry debut at last fall's National Automatic Merchandising Association National Expo, is another contender in the fast-growing category.

This year, Living Essentials plans to spend $60 million to promote 5-Hour Energy. "We change our ads constantly to reach the mainstream consumer on television and we target every industry magazine we can, from firefighters to truckers -- people who work too long, find it hard to 'eat healthy' enough, and appreciate that our product benefits their bodies with vitamins and no sugar," said Bohland. "Fitness centers are a huge market. It's becoming an everyday-use product, and our advertising is helping spread the word." At 3:00 PM, he observed, the product is a healthful alternative, and vending makes it easy for consumers to enjoy it.

A specially designed column shim makes it simple for operators to merchandise the product through a chip coil in a snack vender. Bohland reported that the availability of this easy fix has been instrumental in building operator willingness to add the energy shots as a new category.

He added that DOT Foods will soon be able to supply Vistar with smaller quantities of 5-Hour Energy, making it easier for more vending operators to sell the product. "We'll be able to reach more areas this way, and Vistar will be able to bring 5-Hour in -- even small quantities for one operator," said Bohland. Living Essentials will also be making its newest flavor -- orange -- available to the vending channel in 2010, and will introduce a grape variety in the fall that will enter vending in the new year. "Vending operators tell us two things: people know the product, and they want the flavors they have access to in other channels. We're responding," said the marketing manager. "Our brokers have stuck with 5-Hour and are still behind it to take it to the next level. Energy shots are filling a big niche and vending operators have a huge opportunity to put something in front of people that they want. in the places they want it."

Gary Skibinski, supervisor of central services at Truckee Meadows Community College (Reno, NV) has featured 5-Hour Energy in campus vending machines for the past three years. It's built a loyal following in 10 snack vending machines, which are located in the main lobbies of the busiest buildings on campus, and food vending banks at high-traffic areas across college grounds.

"It holds its own against energy drinks at $3 a vend; people like that they can throw it in their sack and drink it whenever they want because it's a small bottle and it's shelf stable. And the profit per turn is far superior to energy drinks," he said. "It seems to gain traction each school year, as 5-Hour Energy advertises and people see the brand more and more. With the energy drinks and energy shots side by side, at first people didn't even look in the snack machine; they just bought an energy drink from the drink machine. But the advertising made the brand so familiar that it catches their eye in the snack vender; they see it, recognize it and buy it."

While the median age on the community college campus is 38, Skibinski said energy shots are certainly more of a draw for the "20-something" consumer. He added that sales of the product spike during midterms and finals when students need the extra study boost.

"I'm sure custodians and others who work the graveyard shift buy it too. It's quick and convenient. You just pop it and you're revved up," he commented. "I drink it myself; it's real clean, you don't get a spike with a sugar high. It elevates your energy and maintains it, and it lets you down more gently than most energy drinks."

Todd White of Glen Pye Vending (Chico, CA) has also found colleges to be a prime market for 5-Hour Energy over the past two and a half years and is considering rolling it out in other venues. "At Chico State University, where we have both beverage and snack machines, it doesn't interfere with energy drink sales -- it has its own following," he observed. "It's the highest price point in the snack vender, but there are people who choose vitamins versus sugar. And college kids are the best market because they're generally not spending their own money!"

At a community college where Glen Pye Vending does not have the beverage contract, providing 5-Hour energy adds an in-demand "drink" category to the snack machine, he added. "Red Bull energy drink will outsell the energy shots side by side, but there are people who like that 5-Hour has less sugar and healthier ingredients. As an operator, it's very easy to put it in the machine with the shim from 5-Hour Energy. It keeps the product straight and it vends perfectly."

White said sales of 5-Hour surged to new heights during the past school year, which he attributes to consumers seeing the energy shots on TV and tied in to several major sporting events.

"They're spending money to get the name out and it's paying off," he remarked. "And you see it at the checkout counter at practically every c-store, so you know it must be selling."