Caffeine’s skeletons firmly locked in closet as sales of products soar

By Hank Schultz contact

- Last updated on GMT

Caffeine’s skeletons firmly locked in closet as sales of products soar
Whatever headwinds have afflicted caffeine as an ingredient seem to have had no effect whatever on sales of caffeinated beverages. Monster Beverage, which was once hauled before a congressional hearing on its practice of marketing its beverages to minors, recorded close to $1 billion in gross sales in its fourth quarter.

Caffeine in the crosshairs

In mid 2013 Monster, Red Bull and Rockstar Energy were hauled before Congress to explain the marketing of their products to minors​. The hearing came in the wake of a highly publicized case in which a teenage girl in Maryland died after consuming two 32-oz Monster beverages in a 24-hour period. The girl turned out to have had an undiagnosed underlying medical condition, but nevertheless, the safety of the products for minors was called into question.

The next year the issue was with the sale of pure powdered caffeine, which started to become available in bulk via online sales. The Center for Science in the Public Interest (CSPI) among other groups called for FDA to ban the sale of the product to consumers​. The allegation was that the dosage size—1/16 teaspoon—was too small for consumers with typical kitchen equipment to mete out properly, and the corresponding risk of overdose was high. Trade groups like the Council for Responsible Nutrition concurred with that conclusion​, and also called for a ban.

But even with the questions that have swirled around the ingredient, sales continue to soar. Proponents of caffeine point to the fact that it is one of the oldest stimulant type ingredients on the market and has been consumed safely for hundreds of years. In the absence of better-acting ingredients, caffeine is a staple in many sports nutrition and weight management products. Not only is it familiar, and in typical doses, safe, but it’s cheap, too.

The marketers of some alternative cognitive health ingredients point to their products’ ability to boost focus and attention without the jitteriness that can be brought by caffeine consumption. While getting the jitters might be a problem for a few consumers, it does not seem to have slowed the growth of the category.

Two companies at or above $1 billion per quarter mark

Monster, which markets a line of energy drinks and shots, is the largest publicly traded energy drink company. The largest is a private company: Red Bull, which is an Austrian-registered limited liability company (or the German market equivalent: Gmbh, or Gesellschaft mit beschränkter Haftung). As such the company does not report financial results, but is reputed to have notched more than $5 billion in sales in 2016.

Rodney Sacks, CEO of Monster, said in a recent earnings call with analysts, that beverages overall are having difficulties, while caffeine is not.

“Global beverage industry generally continues to face headwinds, although the energy category continues to gain momentum. In the fourth quarter, net sales were $810.4 million, up 7.5% from $753.8 million in the fourth quarter of 2016. Net sales in the fourth quarter were positively impacted by approximately $7.3 million of foreign currency movements. The company recorded fourth quarter gross sales of $954.8 million, up 10.1% from $848.8 million in the fourth quarter of 2016,​ he said. A transcript of the call is available on the site seekingalpha.com​.

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