Marketing Of Energy Drinks

Introduction

The marketing mix (tool largely used by marketers) is composed of the tactics being developed by a company in the 4 P’s areas: product, price, place and promotion, to assist them in pursuing their objectives. These variables have to be carefully managed by the organisation to meet the need of the defined target group.

In this essay, we are going to focus on the “product” variable of the marketing mix.

Phillip Kotler has defined the product as: “anything that can be offered to a market to satisfy a want or need” (Philip Kotler, Marketing Management, 2000).

The product, but also its name and packaging, have a major impact on the brand positioning. They are fundamental tools in helping the company to induce trial and repeat purchase; they are also invaluable to achieve the desired awareness levels and to form positive attitudes among both customers and perspective customers.

Highly profitable and attractive (giving the trend that consumers are increasingly looking for convenient drinks that boost their energy levels), the energy drinks market is highly competitive.

A Mintel’s research (Market Trends category analysis, June 2004, www.PreparedFoods.com), found little brand loyalty among consumers of energy drinks, and a willingness to try a new product if the brand of choice is not available. This suggest the possibility that consumer could be swayed by the appeal of an intriguing package for instance.

In this context, we will try to analyse, with the help of the example of the energy drinks, the importance of the naming and packaging tactics employed by the brands to differentiate their offer from the competition (given that the generic attributes of the energy drinks, in terms of composition, are quite similar).

1 Naming and Packaging: marketing mix tools of the product

1.1 The products levels

Philip Kotler, in “Principles of Marketing”, suggested that a product should be viewed in three levels (a division between five products levels has also been identified by the author but in our case, we are going to keep the simpler scheme of three levels).

(source : www.learnmarketing.net/product.htm, 14/09/2004)

The core product (level one) represents the core function of the product, a generic attribute that will be identical to all products on a specific market. For example, the main attribute a customer is willing to find when buying an energy drink is a liquid which composition will comprise ingredients that boost his or her energy levels (caffeine, guarana, taurine…)

The actual product (level two) involves the brand, the packaging and the possible added features (benefits) that are provided to differentiate the company’s product from its competitors’. In the case of the energy drinks, if all of them actually provide a liquid that increase energy levels, some of them are sold in cans, other in plastic bottles or in aluminium bottles, using different designs and volumes.

The augmented product (level three) is composed of the different additional non-tangible benefits that the company is offering to the customer. This comprises normally added services such as after-sales service, warranties, delivery…It is difficult for a company providing energy drinks to differentiate itself from the competition through this kind of attributes.

This is why we decided to focus on the second level of the energy beverages, their name and package. (www.learnmarketing.net/product.htm, 14/09/2004)

First, what lies behind the concepts of naming and packaging?

1.2 Naming

“The naming of the product, service or company is called branding. A brand or name is the label that consumers associate with your product. For this reason, a brand or name should help communicate the product’s positioning and its inherent drama for the consumer” (Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003).

McCarthy, Perreault and Quester define branding as “the use of a name, symbol, design or combination of the three to identify a product” and more particularly a brand name as “a word, letter, or group of words or letters used to identify a product” (Basic Marketing, a managerial approach; 1997).

1.2.1 The visual distinctiveness of a brand

“The name is composed of the title by which the company, product, or service is commonly known and the graphic forms of identification, including symbols, logotypes or signatures, tag lines, and representative characters” (Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003).

Some products, as paper clips, or energy drinks, are poorly differentiated by their “physical” attributes. One of the marketer’s tasks will be then to develop the brand in terms of its name and its graphic identity (logo), to communicate its differences. Nowadays, the consumers have an astonishing and increasing array of choice. In parallel, their available time to research products and make purchase decisions is decreasing. The importance of having a distinctive name is critical to securing competitive advantage, even more for the products such as the energy drinks, which core specificities have become insufficient to make a real difference.

Consumers must be able to recognize the company in its name, logo, graphics and brand’s slogan; these must provide means of identifying the product as different from that of the competitors’, create a visual and verbal distinctiveness. For example, the name and logo of Ralph Lauren (a polo player) have become high means of recognition for the brand. Coca-cola is one of the best-known names in the world (even the characters’ type can be identified and recognized by the customer nowadays).

Some companies, which offer different product lines, can use manufacturer brands, a name provided specifically for a product or collection of products that is different from the manufacturer’s one. For example, Powerade is the sport beverage supplied by Coca-Cola. Pepsi-Co sells a sport drink line under the name Gatorade.

If the name is the more important element of the brand, one mustn’t forget that a brand can’t be simply reduced to its name. What is important are the positive associations that are going to be related to the brand in the customer’s mind (Philip Kotler, Marketing Management, 2000).

1.2.2 Selecting the right name

A good brand name can help create brand familiarity (really important in the case of energy drinks). In general, good brand names are:

· short and simple (easy to recognize and remember)

· easy to pronounce

· should be able to be pronounced in all languages

· suggestive of product benefits (but not too generic)

· avoid any potentially undesirable connotation or image

(Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003).

1.3 Packaging

1.3.1 Definition

“For manufacturers, packaging holds and protects the product and assists in communicating the products attributes and image. For retailers and service firms, packaging is the inside and outside environment that houses and dispenses the product/services (stores, offices, etc…), and it helps communicate the company’s attributes and image” (Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003).

Kotler has defined the packaging as “the activities of designing and producing the container for a product” (Philip Kotler, Marketing Management, 2000).

1.3.2 The functions of packaging

Three functions lay behind the concept of packaging: protection, facilitating the product usage and communication.

At its basic level, the package serves to protect the product (prevent breakage, exposure to light, exposure to air, spoilage…) and, in some cases, to hold or to contain it. Packaging also plays a role in protecting the consumer as well.

Then, the package has a facilitative role in the use of the product (shape, size, fact that it can be resealed…).

Finally, the product’s package represents a strong communication tool, at two levels. First, the package will comprise indications on the brand name, the product category definition, the composition, the flavour, warnings, directions…

Second, packaging also serves an important role in promotion. Its design, size, shape, materials, colour, text and brand mark…should appeal to the target market.

For example, yoghurt designated to the women on diet will not have the same package than yoghurt targeting the children.

Besides, in today’s cluttered environment, where tens of thousands of brands are fighting for the shopper’s attention, consumers are making more and more purchase decisions at the point of sale.

This is why the package, through graphics and colours that are attractive, plays an important role in getting the product noticed in the selves (to encourage impulse purchase for instance).

(Philip Kotler, Marketing Management, 2000; Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003).

1.3.3 The importance of packaging

Packaging is a critical marketing tool. It can make an important difference from the competition by meeting customers’ needs more effectively. A better box, wrapper, bottle or can may help to emphasize the distinctiveness or novelty of a product or even result in the opening of a new market. It can even improve the product by making it easier or safer to use and then increase its value in the customer’s mind.

Used correctly, the package can then underline the brand image, convey qualities such as freshness, fashion and quality (McCarthy, Perreault & Quester; Basic Marketing, a managerial approach; 1997).

It is important that the packaging elements align with the rest of the marketing strategy to support it (pricing, advertising and other marketing tools). For example, an expensive perfume would rather be sold in a crystal bottle than in a plastic one, to underline and support the prestigious image (Philip Kotler, Marketing Management, 2000).

2 Packaging and Naming for the energy drink industry

2.1 Industry overview

As a relatively new style of beverage in Australia (appearing in the mid 90’s), energy drinks, sometimes known as “smart drinks”, were originally designed to give people a boost. Other benefits advertised by these products are improved concentration, endurance, stamina and the ability to help combat fatigue

(www.education.theage.com.au/pagedetail.asp?intpageid=69&strsection=students&intsectionid=0, 29/09/2004).

“Lifestyles are moving faster. People seem to have become time poor and tend to work harder and play harder. These drinks are for those who need to pack more hours into their day.” (Glenn Martin, general manager, Frucor Beverages, The Age, May 2, 2001).

Typically including a high caffeine level as well as vitamins, amino acids and herbal extracts, they usually sell for about $2 – $3.5 for 250 ml, making them a relatively expensive soft-drink alternative.

(www.education.theage.com.au/pagedetail.asp?intpageid=69&strsection=students&intsectionid=0, 27/09/2004).

Initially popular in nightclubs and hotels, the energy drink market has been booming during the past few years in Australia, and these beverages are now widely available in supermarkets and convenience stores. Although this market is somewhat new in Australia, it is the fastest growing area of the soft-drink market.

(www.education.theage.com.au/pagedetail.asp?intpageid=69&strsection=students&intsectionid=0, 27/09/2004).

2.1.1 Leading brands on the Australian market

In 2002, the energy drink sales were dominated by four brands in Australia: Frucor Beverages Limited’s V (remaining by far the most significant player with 35% volume share), Red Bull Australia’s Red Bull, Coca-Cola Amatil’s Lift Plus and the Red Eye Company’s Red Eye. With a clever marketing and promotional tactics, V managed to cope with the growing competition and to increase its market share between 2000 and 2002, targeting at teenagers and young adults through the sponsoring of youth oriented events and advertising during youth programming (Euromonitor International, Soft Drinks in Australia, August 2004). However, in the latter part of this same period, the best growth was performed by Coca-Cola Amatil’s Lift Plus, which volume share increased from 5% in 2000 to 14% in 2002, to the detriment of the Red Eye brand which lost market share by the same amount. Red Bull signed, in 2003, a distribution deal with Cadbury Schweppes to solve its volume share decline over the recent years by accessing the group’s strong sale network.

(Euromonitor International, Soft Drinks in Australia, August 2004).

Considering the huge number of small brands existing today on the energy drink market, we decided to illustrate our study using exclusively the example of these 4 leaders.

2.1.2 Target market of the energy drinks

The potential customers initially consisted in 90% of young and trendy people (club scene, extreme sports), nocturnal revellers, trendsetters and clubbers. Nowadays, the group of customers has evolved and includes:

· long distance drivers, especially people who work during the night or even employees working out of the office and rushing from appointment to appointment who have come to appreciate Energy Drinks as a good way to wake them up,

· top-level as well as free time sportsmen like snowboarders, mountain bikers, free climbers and downhill racers but also people going to the gym or participating in a triathlon,

· pupils or students under stress who use the energy drinks as a new substitute of coffee.

Users of Energy Drinks buy/drink them to be mentally and physically top fit and wide awake. They are dynamic, health conscious, achievement-orientated and active, in their jobs as well as in their spare time. Most of them are young but there is an increased interest in these products coming from an older age group of the population.

(www.fortunecity.com/tinpan/clapton/843/energydrinks.html#eda, 29/09/2004).

2.2 Packaging issues and trends on the energy beverage market

Due to its growing competitive context, the energy drinks sector saw packaging used as an essential element in establishing brand identity. Consequently, the emergence of plastic bottles was far less pronounced in this sector than in any other soft-drinks sector.

2.2.1 Capacity and materials

When Red Bull entered the Australian market in 1999, the company employed its trademark slim can and made it an immediate sign of recognition for the energy drink product. The brand wanted to use this as a point of differentiation to help consumers distinguish these highly caffeinated drinks from their carbonate counterparts, and competitors such as Lift Plus, V and Black Stallion followed this example to benefit from the association consumer would make between 250ml can and the type of product (Spark Gale, “Sports and energy drink market expanding faster than other soft drinks”, Food & Drink Weekly, February 23, 2004).

This can size not only differentiate the product from the usual soft drink but also, according to the manufacturers, encourages only moderate consumption at any one time, because of the high caffeine content. Indeed, the energy drinks market has suffered from claims that excessive consumption of caffeine can cause a rise in blood pressure and can trigger events such as heart problems and strokes in some people (Euromonitor International, Global Packaging: Key Trends,

www.euromonitor.com.library.vu.edu.au/gmid/default.asp, 20/09/2004)

The initial choice of many energy drinks producers for the can packaging has also been determined according to the purpose of the beverage and the needs of its target market. Indeed, the design of the package and its material had to answer the requirements of people responding to the growing trend for eating and drinking “on-the-move”, had to offer at the same time convenience, solidity, to be light-weighted, easy to handle (the 250 mL format appears more convenient than the usual 330 mL size). Single-serve products also allow busy consumers, to drink in the car, office and in school, which happened to be essential to appeal to a broaden target market as it is now (Marsha Barancik, “Bottle cans’ have magnetic attraction”, Beverage Industry, March 2003).

In fact, when the product entered the market, it was sold in major part in bars, pubs and nightclubs and convenience stores, but as brand like V and Red Bull started to gain distinctive brand identities the started to sell through supermarkets.

In this context the 250mL aluminium can presented another advantage since it was an easy shape to offer in multipack that could fit in shelves optimally, and appealed to consumers because of the lower unit prices offered and the ease of transport to their homes (Euromonitor International, Soft Drinks in Australia, August 2004).

However, the need for differentiating from competitors and for acquiring a strong brand equity, related to number entry the industry saw these last year, pushed the company to innovate, creating packagings that would differ from the overused 250 mL aluminium can. This need happened to strengthen with the addition of supermarket as a channel of distribution: the number of product and beverages that competed with the brand on the purchase decisional process was suddenly more diverse. To that extent, Red Eye used glass packaging as a strategy (that happened to be successful), to build brand loyalty among its consumers and to break with the expected can packaging offered by competitors. Since then, Lift Plus and V also offered a glass format to differentiate themselves from other canned energy drink brands (Global Packaging: Key Trends, www.euromonitor.com.library.vu.edu.au/gmid/default.asp, 20/09/2004).

2.2.2 Graphics and scripts

Packaging in the energy drinks also feature distinctive graphics and script. Each brand will attend to convey a differentiated image using specific colours and visual affect known for being associated by the consumer to positive attributes. In 1988, McGraw Hill studied the feelings and the images conveyed by colour in order to show the importance of the packaging in the purchase decision process. As a result, he found out that consumer unconsciously were making the following association:

· Black: formality and elegance

· White: Crispness

· Violet: tenderness

· Red: revolution, excitement, fire, energy, stanfurd.

· Blue: night, sadness, coolness, tranquillity

· Yellow: happy, warm, optimism

· Aluminium: high-energy voltage

(http://www.alumni.berkeley.edu/Students/Group_Resource_Guide/Marketing_Tips_for_CAA_Student_Leaders.asp, 7/10/2004).

Looking at each brands packaging, we can see that, according to this theory, different feelings are meant to be evocated by each brand. Except for Lift Plus, that is more oriented towards young people and students/children market, the aluminium colour is present on each packaging. The blue of the Red Bull can immediately reminds the customer with the clubbing and the nightlife while the red letter stands for energy and excitement. The yellow can of Lift Plus gives a joyful and playful image to the beverage and makes it a drink to be consumed during the day rather than in nightclub as a mixed drink (like its competitor Red Eye, Red Bull, or V). We can notice also the use of black in the two other packages, that gives a classy and distinctive image to the beverage, allowing them to stand in bar and club’s shelves.

2.3 Naming issues on the energy drinks market

In general, even if branding is one of the most important steps in the marketing plan of a product (a good name provides a strong mean of distinctiveness for the brand), there is not much secondary information available on the naming strategy adopted by the companies. Concerning the energy drinks industry, we are going to focus on the major brands present on the Australian market: V, Lift Plus, Red Eye and Red Bull.

V is a typical example of a simple and memorable brand name that quickly identifies the product with an idea of vibrant, velocity, vitality,
vigour…Above all, V is the widely known abbreviation for volt, positioning the product as a high energy provider (www.frucor.com/brands/aus/new_age.html, 03/10/2004).

The name Lift Plus explicitly suggests the benefits of the drink that, according to its producer Coca-Cola Amantil, as been designed “for people who work and play hard and need a boost to help them make the most of their waking hours”. It is also named after the well-known beverage “Lift”, to inform the consumer on the common point between the two beverages: both have citrus-based flavour (http://www.cokebuddy.com.au/about_brands.asp, 03/10/2004).

Red Bull has been the first energy drink to enter the global market, the name of the product reflects well its attributes and benefits (the bull is a powerful animal, it represents the high level of energy the consumer is going to get by drinking this product). But this brand name has also been subject to a lot of controversy (that has finally benefited the brand by creating some promotion around it) related to the fact that the word “Bull” created a direct association in the public mind with one of the ingredient included in the formula: the Taurine. However, despite whatever conclusions one might draw from the name, Red Bull contains no substances of animal origin; even the taurine used in the formulation is synthetically produced (www.snopes.com/toxins/redbull.htm, 03/10/2004).

Again, as for its competitor Red Eye, the code of colour (“Red”) is used as a way to suggest the energy and improvement of physical performance provided by the consumption of the beverage.

Red Eye, as a following entrant in the energy drink market (after Red Bull), has used the notoriety of the Red Bull name as part of its naming strategy (the two brand names are quite similar). The term “eye” reflects the personality of the product, putting the stress on the ability of the product to provide its consumer with an improved ability to concentrate, an increased alertness and an enhanced reaction time (www.red-eye.com.au/classic.html, 03/10/2004).

(Roman G. Hiebing Jr. and Scott W. Cooper, The successful marketing plan, McGraw-Hill, 2003).

Conclusion

Naming and packaging are critical marketing tools for the company; they assist its brand differentiation in the customer’s mind and product identification in the shelves of the store. Even if these two elements are even more important for products as energy drinks, that have quite generic core attributes (their composition is almost similar) and that cannot differentiate their offer using the augmented level of the product, we discovered through our research that a brand mustn’t limit its marketing mix tactic to its product features (naming and packaging). The three other P’s areas (Price, Place, and Promotion) are critical tools to strengthen the differentiation of its offer. The leading brands demonstrate it by supporting their product with heavy advertising campaigns and diverse promotional actions, as they proved to be essential to ensure their brand equity (sponsoring, sample distribution, co-branding, commercials, ads in various medias…).

The study of the energy drinks market also showed us how the strategies linked to the issues of naming and packaging can evolve as the industry changes. Indeed, we discovered how these two aspects of the “actual product” could be used as way to assimilate the brand to a particular type of product, as well as a differentiation feature. In fact, the energy drinks market demonstrated us that the maturity of the industry influences greatly the challenges implied by the choice of a name or a package. Indeed, all the companies which launched their energy drink at the introduction of the product in the soft drink industry, chose to follow the first entrant (Red Bull) on its package choice, in order to clearly indicate to the customer the kind of product provided. As the industry matured, and the competition increased, offering a packaging that actually differentiated the brand seemed to be the only way to gain customer loyalty and to survive in this mature market.

Sources :

Literature:

· Philip Kotler, Marketing Management, 2000

· Roman G. Hiebing Jr and Scott W. Cooper; The successful marketing plan, a disciplined and comprehensive approach; 2003

· McCarthy, Perreault & Quester; Basic Marketing, a managerial approach; 1997

Websites:

· Market Trends category analysis, June 2004, www.PreparedFoods.com

· www.learnmarketing.net/product.htm

· www.education.theage.com.au/pagedetail.asp?intpageid=69&strsection=students&intsectionid=0

· www.fortunecity.com/tinpan/clapton/843/energydrinks.html#eda

· Euromonitor International, Soft Drinks in Australia, August 2004, www.euromonitor.com.library.vu.edu.au/gmid/default.asp

· Euromonitor International Global Packaging: Key Trends, August 2004, www.euromonitor.com.library.vu.edu.au/gmid/default.asp

· www.alumni.berkeley.edu/Students/Group_Resource_Guide/Marketing_Tips_for_CAA_Student_Leaders.asp

· www.frucor.com/brands/aus/new_age.html

· www.cokebuddy.com.au/about_brands.asp

· www.snopes.com/toxins/redbull.htm

· www.red-eye.com.au/classic.html

Articles :

· Glenn Martin, general manager, Frucor Beverages, The Age, May 2, 2001

· Spark Gale, “Sports and energy drink market expanding faster than other soft drinks”, Food & Drink Weekly, February 23, 2004

· Marsha Barancik, “Bottle cans’ have magnetic attraction”, Beverage Industry, March 2003