The introduction of affordable price points in the energy drinks market with Varun Beverages’ Sting is helping broaden the consumer base for a segment so far limited to consumers with deep pockets.
The growing consumption of energy drinks by price-sensitive college goers, gamers and youngsters just starting to work is now pushing premium foreign brands to take notice of this segment and plan products to compete for this consumer base.
For comparison, a Red Bull or a Monster energy drink is priced at about Rs 110 – Rs 125 for a 250 ml to 350 ml can, while Sting is priced at about Rs 35 for the same size can.
“While the overall energy drinks category is growing by 50%, the affordable segment would be growing at 140%. It is a Rs 100 product versus a Rs 20 product,” Muffaddel Janjira, country head (India and South Asia), Monster Energy, told FE.
According to Janjira, the premium segment of the energy drinks market held around 95% share in terms of value four years ago, but now the premium to affordable share is a 50-50 mix in terms of value.
Given the growth in the affordable segment, premium energy drink makers are looking to grab a share of the market. For instance, Monster, which has been present in India with its premium energy drink offering by the same name since 2014, has launched a new product called Predator priced at Rs 50 this year in India. Janjira said the firm will be launching another drink in the Rs 25-35 category soon. “We have answers to all the three price points in the country — the premium segment with Monster, the mid-segment with the Predator can, and we are working on launching a drink below that segment where Sting and others are playing,” he said.
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According to industry players, the opportunity to grow in the Indian market is large compared with the penetration and consumption of energy drinks in the rest of developing nations. In China, the energy drink segment sales are said to be around 800 million cases, while the Vietnam energy drinks market is understood to be around 170-200 million cases. According to a Nielsen estimate, India is likely to close the year with 30-35 million cases in 2022.
Some estimates suggest the market size of energy drinks in India is estimated at Rs 2,400 crore, growing at a CAGR (compound annual growth rate) of 45-50%. At the same pace, market players estimate that the category should be touching a minimum of Rs 10,000 crore by 2027, as both the premium and affordable segments are seeing good growth.
In its recently reported September quarter earnings, Varun Beverages said the India business has delivered an organic volume growth of 22%, led by a favourable demand environment and a strong performance of its energy drink Sting.
Ravi Jaipuria, chairman, Varun Beverages, told analysts over an earnings call that there has been a big jump in the segment. “I think energy drink is a large market and we will always have a first-mover advantage which we are seeing. Our product is very good and it has been liked by the market, so we just have to keep on expanding our distribution. I am sure we will grow and I am sure the competition will also do well,” he said.
Analysts at Jefferies said: “Sting has done well, growing 31% y-o-y. Its contribution improved to 12% of the company’s India volumes in September quarter and 9.5% in the first nine months of 2022. It also has 65% higher realisation which helped the overall company realisation at Rs 167 per case by around Rs 8 per case. Sting has distribution in more than two million outlets.”
According to Janjira, even though the carbonated soft drinks (CSD) culture has been in India since the early 90s, energy drinks were late entrants, and it is only now that growth is picking up to the levels seen by the CSD segment. Red Bull was the first entrant to the country in 2002 with an import model, and given the premium nature of the category it took time to grow.
“Approximately, CSD growth in India is ranging around 10-15% y-o-y, they have a big base and 35-40 years of history in the country. They have a superb route to the market with their distribution strength. Energy drinks entered the market in 2002 with an import model. We are anyway 12 years late. In the phase of early 2000s, the CSD growth was at its peak. Now that growth is coming into the energy drinks segment. The category is a late starter in the country, but it is growing and there is space for sure,” Janjira added.
