By Travis Hoium

Filed under: Coca-Cola Company, Starbucks, Food & Beverage, Stocks, Investing

They come in coffee cups, small cans, large cans, shots, you name it — energy drinks are everywhere. If the marketing is to be believed, these magic elixirs help us accomplish amazing feats in five hours (5-Hour Energy), excel in extreme sports (Red Bull and Monster), and are the best part of waking up (Folgers).

America is addicted to energy, and every company in the drink business is trying to get a piece of the action. There’s no shortage of choices for those looking to imbibe. But only a few of these manufacturers will succeed, so investors must choose their beverage carefully.

The Energy Drink Epidemic

It all started with our growing addiction to coffee. Americans drink a total of 400 million cups of coffee per day, more than one cup per person. Recently, the trend has been toward more straightforward energy drinks or shots.

Consider this comparison: Monster Beverage (MNST) — which, like Red Bull, is one of the leaders in the energy drink market — has seen its revenue grow 20 times (2,000 percent) in the last 10 years. Starbucks (SBUX) has grown two-and-three-quarters times (274 percent) during the same period.

5-Hour Energy leads the energy-shot front, selling 1.5 billion energy shots since it was launched in 2004. The company behind the product, Living Essentials, had sales of $1 billion last year and pocketed $600 million in profit.

So, What’s Brewing at Coke and Pepsi?

With Red Bull and Monster dominating the energy drink category, soft drink giants Coca-Cola (KO) and PepsiCo (PEP) can’t seem to get a foothold in the market.

Coca-Cola has tried to sell Full Throttle, NOS, Surge, and Vault, with little success.

Pepsi has tried to expand the Mountain Dew brand with Amp and now Kickstart, which is being heavily promoted during March Madness. Time will tell if Pepsi’s latest attempt to sell high-voltage Mountain Dew is more successful than the first, but I doubt it will be.

Just the fact that Coca-Cola and Pepsi are putting so much effort into energy drinks shows how important the market is. Still, they seem to have no discernible advantage over the smaller brands.

Both Red Bull and Monster market their product differently than Coke or Pepsi ever did. They’ve gone after extreme sports, attaching their brands to the craziest athletes on earth. Red Bull has now gotten into film production and owns a fleet of helicopters and other aircraft that have become a marketing dream.

As long as these companies are playing an outsider strategy but attaching to extreme athletes, they’ll be able to hold off the big dogs. After all, everybody likes an underdog, a role extreme sports has played for a long time.

One for the Little Guys

Right now, Red Bull, …read more
Source: FULL ARTICLE at DailyFinance