Energy Drink Pricing

For the past few years the market has been dominated by two companies, Monster and Red Bull. These two drinks work really well, and you see them in almost every store you go into. However, these drinks, for a small 16OZ can it will cost you around $2.50 depending on where you live. This, at least in my head is insane – especially since the drinks aren’t all that good. Now a few more competitors such as NOS and Rockstar have come on the scene, but they both came in at the same price point. This could be detrimental to their business because they don’t have nearly the same brand recognition as Monster or Redbull. Personally, I love energy drinks. I just don’t drink any of the main ones… I guess you could call me a hipster of energy drinks? Actually, please don’t call me that. My personal favorite drink, Venom. Venom is the best tasting energy drink I’ve had, with flavors ranging from Energy Drink flavor to Mango… Yes, they have a mango flavor and it’s fantastic. 

So what? What does this have to do with the energy drink market. Most of you have probably never heard of Venom, but you might a few years down the road. Why? Price point. You can own a Venom for 0.99$. That is less than half the price of a redbull or monster, and it works just as well. Now, I first saw Venom about a month ago in a local gas station and since then I’ve had the opportunity to see how the market responded to these new drinks, favorably. It was like people were going into the stock market and they miraculously found out that they could purchase apple at a 50% discount. The gas stations were almost always out of this drink. Now when I walk in I see these massive cases of Monster or Redbull without any inventory missing, and I have to dig to the back of the fridge to find the last Venom available.

So why are people reacting to this price change so favorably for a brand that they’ve never seen before and how can this affect the energy drink market in the long run? Since I first saw Venom at the 0.99$ price point I’m beginning to see more and more new energy drink companies showing up on the shelves of my local gas station… all at 0.99$. On top of this people are viewing this goods not as inferior, but as a substitute for their typical Monster or RedBull. Currently, these companies are so small that they don’t pose any immediate threat to these two giants, but they pose a long term threat, or at least the possibility of a threat. I’ve only seen this happen in three gas stations on the same road, but as time goes on I feel that these drinks will make their way to most local gas stations and begin to affect Monster and RedBull in two ways that could prove to be harmful to their long term business model.

1) As more of these low priced subsitutes enter the market, these large companies will begin to lose marketshare to these lower priced drinks. These two companies survive off of marketing, and the marketing stunts they pull are far from cheap. Therefore, if they begin to lose revenue, they will begin to lose marketing dollars starting a big spiral of doom that ultimately ends in the companies disappearing from the face of the Earth.

2) The price of their drinks will drop. They may not drop to the price of the substitutes but they may be close – causing them to lose even more revenue. One thing these companies have that the others don’t is brand recognition. When I say RedBull or Monster, we all know who I’m talking about because their branding is everywhere sports related. 

So that’s just my take on the whole Energy Drink market. It isn’t really relevant any time in the near future, but as I sit here, drinking a Venom, it’s something that came to mind, and something that I wanted to share. Thank you for reading!

About Aaron G

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