When it comes to the popularity of energy drinks, health and wellness trends continue to be factors driving the success of the category. However, with the blurring of lines in functional beverages, the category is facing some competition, experts note.

In Beverage Industry’s August 2024 issue, Sally Lyons Wyatt, global executive vice president and chief adviser for consumer packaged goods and foodservice at Chicago-based Circana, noted that what’s interesting about energy drinks is that the category has risen above the clouds of blurriness in the functional beverage market.

“Energy is definitely coming through with strong unit and dollar sales,” Lyons Wyatt said. “But you’ve seen so many different categories, whether it be water, whether it be soft drinks, whether it be dairy products, all trying to get into what would be this functional beverage space.”

According to Circana data, the total energy drink category was just shy of $25 billion in sales, an increase of 5.5%, in U.S. multi-outlets and convenience stores for the 52 weeks ending April 20. Meanwhile, unit sales were up 2.9% for the same time period.

Sydney Riebe, analyst for food and drinks reports at Mintel, Chicago, noted in Beverage Industry’s August 2024 issue, that strong performance for the energy drink and shots category was driven almost exclusively by energy drinks in the past year.

“Energy drink growth is on par with other functional drink categories like sports and nutrition drinks,” Riebe explained. “While a smaller market, the performance drink category is growing more rapidly, focusing on health as well as energy enhancing claims that indicate a continued blurring of categories due to common consumer interests across beverages.”

Roger Dilworth, senior analyst at Beverage Marketing Corporation (BMC), Wintersville, Ohio, noted that despite energy shots’ decline — approximately 2-3% in terms of both volume and retail dollar sales — the overall energy drink category showed strong growth in the past year.

“Energy drinks grew volume by about 6% in 2023 and retail dollars by around 13%, much stronger than sports drinks and a little slower than protein drinks,” he said in Beverage Industry’s August 2024 issue.

Meeting the moment

With continued blurring of the lines and more consumers looking to functional beverages to support well-being, experts weighed in on how the energy drink category can further meet consumers’ various need states.

Circana’s Lyons Wyatt suggested beverage-makers should look to make products more accessible and available where consumers are for different moments around the day.

“I would say that there are functional beverages that cater to consumers that are on a well-being journey and it could be for pre-, during or post workout,” she said in Beverage Industry’s August 2024 issue. “But energy drinks kind of fit more toward an extra boost through the day… and that might mean, ‘I need a boost to get through my fitness routine.’ … And I think what some companies have done well is made it accessible when and where consumers might be considering a functional beverage.”

Mintel’s Riebe, meanwhile, pointed to consumers’ growing demand for drinks with natural ingredients and health claims such as hydration as driving innovation.

“Consumer interest in health has driven the energy drink market toward more natural, functional and fitness-oriented products that are marketed as a lifestyle and are attracting traditionally less engaged category consumers like younger women,” she explained in Beverage Industry’s August 2024 issue

Further, Riebe noted how sugar reduction trends are impacting the energy drinks and shots market.

“With around one-third of U.S. adults who have decreased energy drink consumption citing concerns with sugar as the reason, it is not surprising that the North American market has responded with over half of new product launches carrying the sugar-free claim in the past year,” she said. “An overall rise in the use of natural sweeteners and improvement of their tastes look to make sugar-free options more appealing.”

BMC’s Dilworth echoed similar sentiments, noting the increased popularity of low- and no-sugar drinks.

“More consumers are gravitating toward zero- and low-calorie energy drinks,” he said in Beverage Industry’s August 2024 issue. “Like in the CSD segment, marketers are downplaying any reference to ‘diet.’”

Circana’s Lyons Wyatt noted that energy drinks with no-, low- or less sugar claims grew in dollar sales in the double digits for the previous year.

“... That is really incredible growth when you’re talking about you know one in 2% volume growth,” she explained. “Getting double digit anything these days is amazing.”

Aside from sugar reduction trends, broader health trends also are impacting the market.

BMC’s Dilworth noted, in Beverage Industry’s August 2024, a shift in the category toward general health attributes.

“It seems that there’s been a slight shift from emphasizing sports drink cues such as branched chain amino acids and more toward general health attributes such as immunity and brain health,” he said. “It’s not a full-on trend yet, but the direction seems to be toward nootropic and focused energy, particularly as some energy drink consumers grow older.”

Meanwhile, Mintel’s Riebe noted that functional needs like cognitive enhancement and stress reduction are influencing category innovation.

“Additionally, younger consumers are increasingly interested in customizable beverages, including varying caffeine levels, textures and the ability to mix and match flavors,” she said in Beverage Industry’s August 2024 issue. “Globally, Gen Z consumers are particularly interested in bold and unique flavor combinations, such as red grape sour watermelon and yuzu flavor combinations. Flavors that borrow from other beverages like Earl Grey, green tea and ginger are also entering the category.”

Riebe added that in the U.S. market, energy drinks are incorporating flavors that evoke nostalgia and fun like frosted grape, blue raspberry, lollipop and gummy worm.

Circana’s Lyons Wyatt also noted in Beverage Industry’s August 2024 issue that candy flavors are popular among younger consumers, with the market also seeing growth with flavors such as mandarin marshmallow, green apple and cherry.

Market trends

Although consumer trends continue to prompt innovation within the energy drink category, experts noted that the market is not without its challenges.

“Many energy drink consumers are mid-to-lower income and a deteriorating economy may cut into sales in the short term,” BMC’s Dilworth said in Beverage Industry’s August 2024 issue. “Energy shots continue to be challenged by their limited usage occasions and innovation potential.”

Mintel’s Riebe noted how the market is becoming increasingly competitive with adjacent beverage categories intruding on the energy drinks’ territory by offering similar energy-boosting propositions.

“This category blurring intensifies the competition and makes it harder for energy drinks to differentiate themselves,” she explained in Beverage Industry’s August 2024 issue. “Additionally, younger consumers like Gen Z and millennials are highly engaged with energy drinks but are also more scrutinizing about the ingredients (i.e., sugar and caffeine levels) and benefits.”

Circana’s Lyons Wyatt suggested that, because the energy drink category is a young category compared with other categories that have been around for decades, offering a variety of options is key to appealing to a broader base.

“Coming out with varieties that are a little more transparent, that have ingredients that give people options, and that are educating consumers around what these ingredients can do for them, I think those [factors] are so incredibly important,” she said in Beverage Industry’s August 2024 issue. “… Yet, at the same time just good old-fashioned energy drinks are seeing solid growth too. So, I think what it’s pointing toward is that the more variety, more types that are out there, then [the category] is going to appeal to a broader base and continue to have growth.”

Looking ahead, Mintel’s Riebe anticipated continued innovation in flavor, health and functional benefits and the blurring of beverage categories, allowing energy drinks to capture non-traditional occasions.

“In the United States, the energy drink market is expected to continue its strong performance, with estimated annual growth between 6-9% over the next five years,” she said in Beverage Industry’s August 2024.

For 2024, BMC’s Dilworth noted in Beverage Industry’s August 2024 issue that energy drinks are projected to grow at a 5-6% rate in volume and retail dollars, while energy shots are expected to continue their modest declines.

Meanwhile, Circana’s Lyons Wyatt suggested that the amount of growth will be dependent on whether the industry continues to innovate, offering varieties of flavors, varieties of sugar options and varieties of caffeine options.

“I think the category will continue to have very strong growth, but it will be dependent on accessibility,” Lyons Wyatt said Beverage Industry’s August 2024.

“[By] having these drinks available and the varieties available in places where consumers are outdoors, indoors at home, away from home, the [category] will continue to see strong growth for the next few years,” she concluded.