Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm joll Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, We're in the office drinking Celsia's energy drinks. I'm
Speaker 1: just going to start this one like really directly.
Speaker 2: Like, wait, should I do the ambient sound? Yeah? Okay,
Speaker 2: there we go. Okay, yes, you can't get better than
Speaker 2: being in the office drinking Celsius. It's not that early.
Speaker 2: Actually it's nine in the morning, so we needed the
Speaker 2: caffeine boost.
Speaker 1: This is actually my second one of the day, so
Speaker 1: I've had two. I'm on my second can of the
Speaker 1: Celsius energy drink, and also I had a coffee today.
Speaker 2: So people are always like, I love people are always asking, oh,
Speaker 2: does Joe just not sleep? How does he get up
Speaker 2: so early in the morning. The answer is no, he
Speaker 2: doesn't because he has like three celsiuses and two coffees
Speaker 2: and who knows what else.
Speaker 1: Okay, so I know we could just talk a lot
Speaker 1: about my weird sleep patterns or my caffeine consumption patterns.
Speaker 1: But speaking of Celsius holdings this energy drink that we're
Speaker 1: both drinking in the office right now, or speaking of
Speaker 1: Celsius It's owned by a company called Celsius Holding. This
Speaker 1: was like a three dollars stock in twenty eighteen. Today
Speaker 1: it's one hundred and sixty seven dollars stock. So just
Speaker 1: an absolutely extraordinary, mega home run winner for the company
Speaker 1: behind this energy drink. And the thing is, I don't
Speaker 1: know why, and I don't know why I'm drinking it,
Speaker 1: Like why am I drinking Celsius and not Monster or
Speaker 1: Red Bull? I don't know. It's something in the air well.
Speaker 2: I was going to ask, because you introduced me to
Speaker 2: Celsius and you're like, oh, we got to go get
Speaker 2: a Celsius And at the time had never heard of
Speaker 2: it before. How did you hear of it? Why did
Speaker 2: this become a thing?
Speaker 1: I think, like, you know, the cool I go to
Speaker 1: the gym and it seemed like the cool people at
Speaker 1: the gym were drinking it, or they had it in
Speaker 1: the they have it in the refrigerator at my gym,
Speaker 1: and I think, like, I don't know. I probably saw
Speaker 1: someone on Instagram drinking it, and then I started drinking,
Speaker 1: and then I posted about it, and then someone was like, oh,
Speaker 1: you know, it's publicly traded, which I didn't even realize,
Speaker 1: and then I've been obsessed partly, I don't know, like
Speaker 1: I've just sort of been fascinated, but like, where did
Speaker 1: it come from?
Speaker 2: What?
Speaker 1: Like how does this happen that a new brand emerges
Speaker 1: and we're all drinking it? Like where did it come?
Speaker 1: I just don't, like I want to know where it
Speaker 1: came from because it's now it's everywhere.
Speaker 2: Yeah, but I don't know why.
Speaker 1: Well.
Speaker 2: Also, the weird thing about energy drinks is I feel like,
Speaker 2: you know, if you go into a seven eleven or
Speaker 2: a odega or whatever, there are so many of that,
Speaker 2: so many, and there seem to be new ones all
Speaker 2: the time, and it's difficult to keep track, and yet
Speaker 2: some of them really do have staying power. So we
Speaker 2: did an episode previously about Monster that stock has been
Speaker 2: absolutely phenomenal over the years. Red Bull is the other
Speaker 2: classic one, And I don't know, it just feels like
Speaker 2: it's such an interesting product in that there must be
Speaker 2: insane amounts of competition, but if you can get it right,
Speaker 2: it seems like it can be really really profitable.
Speaker 1: Right, I mean, and in the end, like I mean
Speaker 1: I know that you know, like supposedly, like it says
Speaker 1: on the can of Celsius, it's fat burning. I'm like
Speaker 1: skeptical of any of those claims, but you know whatever,
Speaker 1: I'm not a scientist, but like they're all seem like
Speaker 1: the same, right, which is a lot of caffeine and
Speaker 1: then either some sugar or an artificial sweetener of various swords,
Speaker 1: some different flavors. None of them are like that great.
Speaker 2: You're not really drinking them for the taste.
Speaker 1: Not really, but again, like they are kind of the same.
Speaker 1: So why do people gravitate? Like why do some people
Speaker 1: drink Celsius, who drink some monster who drinks some red us?
Speaker 2: Who is drinking those Swedish fish flavored energy drinks? So
Speaker 2: this is what I want to know.
Speaker 1: So this gets to the other thing, which is that,
Speaker 1: as you mentioned, if you go into any bodeg or something,
Speaker 1: love it. There's so many different brands of energy drinks
Speaker 1: these days, and some of them are like really weird,
Speaker 1: Like there's Skittles flavored ones and I think an oreoslavored
Speaker 1: one and a Swedish fish flavored one and ones in
Speaker 1: clearly like a gamers, I don't. It's all very strange.
Speaker 1: So how do you win? Why do some companies win?
Speaker 1: And you know, you mentioned, you know, some of them
Speaker 1: are just such big winners, like Monster as you mentioned,
Speaker 1: you know, it's one of the best performing stocks of
Speaker 1: all time. It's been better performed than Amazon over the year.
Speaker 1: Celsia is obviously just incredible. So like, there's so much
Speaker 1: money in the space for those companies that can get
Speaker 1: it right between distribution, branding, and product, and so I
Speaker 1: think the question is like, what does it take. Why
Speaker 1: do some companies like catch fire?
Speaker 2: Yes, I have many, many questions.
Speaker 1: I have many questions. So in twenty twenty one, we
Speaker 1: did an episode, as you mentioned, on the incredible performance
Speaker 1: of Monster Beverage. Our guest then was Mark Astracan. He's
Speaker 1: an analyst at Stepha Nicholas, and we have him back
Speaker 1: two years later. Actually that was February twenty twenty one,
Speaker 1: so about two and a half years later, and now
Speaker 1: we are talking about a new energy drink winner in Celsius.
Speaker 1: So Mark, thank you for coming back on odd Lots.
Speaker 3: Yeah, thank you for having me. I think the last
Speaker 3: time I was doing this, I was locked in my
Speaker 3: yeah six year old son's bedroom doing this. It's nice
Speaker 3: to be in person.
Speaker 1: In person, all three of us you were drinking the sparkling.
Speaker 1: It's apparently the top selling Celsius flavor. How do you
Speaker 1: get to be the energy drink guy?
Speaker 3: You show up? So I started covering Monsters, the only
Speaker 3: publicly traded energy drink company, probably about oh gosh, seventeen
Speaker 3: or so years ago. At the time, it was, hey,
Speaker 3: this is a fad. When is it going to go away?
Speaker 3: And why are you recommending this thing? And seventeen years later,
Speaker 3: nobody's asking about the fad piece, just about the new
Speaker 3: brands coming in. So it's sort of like I can't
Speaker 3: get out of my own way at this point. People
Speaker 3: want to talk about the space and it's sort of
Speaker 3: ballooned around me.
Speaker 2: How many energy drinks do you need to drink as
Speaker 2: part of this job?
Speaker 1: That's a good question.
Speaker 3: On certain days you can drink a lot. On certain days,
Speaker 3: you get home at like nine o'clock at night and
Speaker 3: you wonder why your hands are still shaking. And you remember, right,
Speaker 3: I had six or seven of these over the course
Speaker 3: of the day, especially during earning season, during trips to
Speaker 3: go see energy drink companies, to go to trade shows
Speaker 3: and whatnot.
Speaker 1: Yes, Oh, we're going to talk for like three hours
Speaker 1: about this. We're going to go. No, But it's interesting,
Speaker 1: you know. I remember so like right before I want
Speaker 1: to get to like why are we drinking Celsius and
Speaker 1: not others? But I but you know, right before the
Speaker 1: recent Celsius earnings and I think they hit it out
Speaker 1: of the park. I went to my local bodega because
Speaker 1: I wanted to pick one up before going to the gym.
Speaker 1: And I looked and I didn't see them. They were
Speaker 1: like none on the refrigerator. I'm like, oh, what's going on.
Speaker 1: It turned out the answer was literally the day before,
Speaker 1: they got a whole new Celsius refrigerator and so they
Speaker 1: had like the Celsius had been moved to their own
Speaker 1: refrigerator within the bodega, and they had way more. I
Speaker 1: just didn't see it at first. So that was like
Speaker 1: assigned to me as like, oh man, they must be
Speaker 1: like doing really well and they must be moving a
Speaker 1: lot of product if like, you know, the celt there's
Speaker 1: a special Celsius branded fridge. Though it is like when
Speaker 1: you like do your work as an energy drink analyst,
Speaker 1: is that what you're looking at you counting the number
Speaker 1: of cans on the shelf, Like what is that into
Speaker 1: the sort of the field work.
Speaker 3: Probably back in the day you you could do that.
Speaker 3: At this point, you're you're talking to folks who are
Speaker 3: are putting into the product on the shelf, talking to
Speaker 3: the distributors that are that are managing the folks that
Speaker 3: are going into stores every day and resetting. And you
Speaker 3: also have what we like to call scanner data, which
Speaker 3: is basically data that we pay for that measures how
Speaker 3: much product is purchased on a weekly or bi weekly
Speaker 3: basis a sort of cheat and you get to see
Speaker 3: the revenue, you get to see the volumes, and you
Speaker 3: can slice and dice the data into grocery stores and
Speaker 3: convenience stores and all sort of which ways and have
Speaker 3: a whole lot of fun with it.
Speaker 2: My favorite brand of analyst research is always when they
Speaker 2: just send people outside to the stores, like they send
Speaker 2: them all to the shopping mall to measure like retail
Speaker 2: footfall and things like that. But Mark, why don't we
Speaker 2: start sort of at the beginning and maybe go back
Speaker 2: in time. Because Joe mentioned the Celsius stock chart, I'm
Speaker 2: looking at it going back to I think two thousand
Speaker 2: and seven. What is this company where they always making
Speaker 2: these energy drinks? And because Celsius itself, I feel like
Speaker 2: is fairly new, or at least I had only heard
Speaker 2: about it relatively recently. What have they been doing for
Speaker 2: the past, like more than a decade.
Speaker 3: Well, essentially the same thing. It's just a question of
Speaker 3: showing up and getting increasing brand awareness, people knowing the product,
Speaker 3: and sort of trying it and trying it again. I
Speaker 3: like to call it a ten or fifteen year overnight success,
Speaker 3: and that the product has always essentially been the same.
Speaker 3: You have a lot more iterations of it today, but
Speaker 3: essentially it's the same product. And they had struggles for
Speaker 3: a while in terms of getting the product on shelf,
Speaker 3: getting people to understand what it was or why they
Speaker 3: wanted to drink it, and then it's sort of blossomed
Speaker 3: as you had more product on shelf. You know. The joke,
Speaker 3: of course, is like eighty ninety percent of success is
Speaker 3: showing up, and then once you get there, you have
Speaker 3: to figure out how to keep people coming back, in
Speaker 3: this case, consuming the product. And so I think that's
Speaker 3: an interesting sort of story in and of itself, in
Speaker 3: that you have to understand how to get on shelf,
Speaker 3: or understand why these products get on shelf, because that's
Speaker 3: really what drives a lot of the opportunity to be successful.
Speaker 3: So as you can imagine, it starts with money. And
Speaker 3: so you have a bunch of beer and the legacy
Speaker 3: soft drink distributor selling the stuff, and they're always on
Speaker 3: the lookout for the newest and latest and greatest products
Speaker 3: to increase consumption of stuff on their trucks. Right, you
Speaker 3: think about a beer or soft drink distributor, You've had
Speaker 3: a truck, You've got stuff on shelf, and so if
Speaker 3: it's selling well, great. If it's not selling well, you're
Speaker 3: trying to figure out what you can put on the shelf.
Speaker 3: And so from a volume standpoint, you think about beer distributors,
Speaker 3: and volumes have been declining for a long time, and
Speaker 3: so they're always looking for things, especially outside of alcohol,
Speaker 3: to put on those trucks that ultimately sell. And so
Speaker 3: if you go back fifteen years ago, Monster, which was
Speaker 3: the up and comer at the time, goes and does
Speaker 3: a deal with Anheuser Bush. A few years later, Coke
Speaker 3: gets a little bit jealous and says, man, this is
Speaker 3: doing really well. They strike a deal, so you have
Speaker 3: fifty percent of Monster's business in the late two thousands
Speaker 3: going through Monster or going through antzer Bush, fifty percent
Speaker 3: going through Coke. Twenty fourteen, Monster and Coke announce a
Speaker 3: big asset swap, including Coke taking what's now a twenty
Speaker 3: percent steak in Monster. As part of the deal, Monster
Speaker 3: has to put all of its distribution into the Coke system,
Speaker 3: so you leave fifty percent of the enheuzer Bush network
Speaker 3: high and dry. They're looking for products to replace our
Speaker 3: math is like a billion dollars of profit at that
Speaker 3: point that the beer distributors lost when Monster decided to
Speaker 3: go to the coke system. So we're talking lots and
Speaker 3: lots of money. We're also just talking about trucks to
Speaker 3: go to the same store at the same time of
Speaker 3: day every day with the same driver. You already paid
Speaker 3: for the truck, and so you're trying to figure out
Speaker 3: a product that you can put on there to make money.
Speaker 3: So those distributors went out and found a brand called
Speaker 3: Bang that was.
Speaker 1: I've had some of that. It's not bad. It's like
Speaker 1: their flavors is like they have their a little more
Speaker 1: candy flavored, like bubblegum flavored, and it's a little I
Speaker 1: go back and forth, but anyway, keep going.
Speaker 3: Yeah, So Bang replaces Monster in a lot of those
Speaker 3: nhezerd Bush houses. They do it across the country. They
Speaker 3: move from the fifty percent to one hundred percent distribution.
Speaker 3: By late twenty seventeen twenty eighteen, the product is just
Speaker 3: flying off shelves hundreds and hundreds of percent growth. The
Speaker 3: brand goes from a nothing sort of like where Celsius
Speaker 3: was ten fifteen years ago, to be four or five
Speaker 3: market share and arts to get the attention of Monster
Speaker 3: and a whole bunch of these other companies. By twenty nineteen,
Speaker 3: run rate revenues were probably approaching a billion dollars at retail.
Speaker 3: It's got something in the high single digits of market share.
Speaker 3: Like a lot of brands, you look for the better,
Speaker 3: the better distribution. And so by early twenty twenty, Pepsi
Speaker 3: decides to go out and buy a brand that they
Speaker 3: had long time distributed called Rockstar, because Rockstar had an
Speaker 3: exclusive relationship with Pepsi that didn't allow Pepsi to sell
Speaker 3: any other energy drink brands. And once they bought rock Star,
Speaker 3: they allowed themselves to go out and do more distribution deals,
Speaker 3: including going after Bang. So early twenty twenty, Bang moves
Speaker 3: over to the Pepsi system. The Anheuser Bush distributors who've
Speaker 3: been selling Bang and making lots of money doing it,
Speaker 3: are like, uh, oh, now what And they go out
Speaker 3: and they find this brand Celsius, and they put it
Speaker 3: on trucks, and essentially at that point it's kind of
Speaker 3: muscle memory to put the product on the same space
Speaker 3: that Bang was losing to go over to the Pepsi system,
Speaker 3: and all of a sudden, Celsius is everywhere and obviously
Speaker 3: get on shelf. As I said, eighty ninety percent of
Speaker 3: successes getting there, and then once you get there, you've
Speaker 3: got to keep it.
Speaker 2: So Monster kind of shot itself in the foot with
Speaker 2: the coke deal. It sounds like, or at least they
Speaker 2: made a hole for a potential competitor to come in
Speaker 2: and fill.
Speaker 3: Well they didn't. They didn't. Monster stocks probably up four
Speaker 3: or five x. This is true from from twenty fourteen
Speaker 3: twenty fifteen. Monster got great distribution through coke domestically. But
Speaker 3: what they more goot was.
Speaker 2: Joe's had so much energy just knocked over my.
Speaker 1: Can on my keyboard. I was worried I was going
Speaker 1: to do that. Well, okay, keep going.
Speaker 2: They really work. We're like literally buzzing in the studio.
Speaker 3: I keep going, keep going. So yeah, Monster also got
Speaker 3: it big international distribution through Coke. You know, Coke is
Speaker 3: one of the biggest, not the biggest, and best distributed
Speaker 3: brands around the world, and they have their distribution system.
Speaker 3: So Monster got a great, great distribution from Coke. But yes,
Speaker 3: they also gave up their slots with others and sort
Speaker 3: of created opportunities for other brands to come in. But
Speaker 3: I also think, and we'll probably touch on this, Yeah,
Speaker 3: there's an evolving consumer taste going on here as well. Right,
Speaker 3: so it's not just hey, I want to drink this Celsius.
Speaker 3: There's a reason behind it, or why Ghost or See
Speaker 3: four or Alanni New or all these other upstart brands
Speaker 3: have done what they've been able to do.
Speaker 2: I definitely want to get into that. But before we do,
Speaker 2: I have a sort of like distribution versus customer preference question.
Speaker 2: And I actually don't drink a lot of energy drinks
Speaker 2: on a normal basis, but I do drink a lot
Speaker 2: of diet coke and things like that, and my local
Speaker 2: cvs they are constantly running out of. Actually the irony
Speaker 2: is I mostly drink caffeine free diet coke, and they're
Speaker 2: constantly running out of it, Like it is a certainty
Speaker 2: that every week they will run out of cafe free coke,
Speaker 2: but they will have hundreds of bottles of vanilla flavored
Speaker 2: coke and god knows what else. And my question is, like,
Speaker 2: it is clear that consumers are expressing a preference here
Speaker 2: by buying the stuff they like and leaving the stuff
Speaker 2: that they don't, And yet the shelves seem consistently filled
Speaker 2: with it feels like things that the brands are trying
Speaker 2: to push. So how how do the decisions about what
Speaker 2: to stalk and distribute actually get made?
Speaker 3: Well, I guess in theory it should get made on
Speaker 3: analytics and what people are consuming, and so going through
Speaker 3: the data that I alluded to before and what people
Speaker 3: are purchasing, I mean, essentially that's what drives the decision.
Speaker 3: I think your caffeine free diet Coke is probably one
Speaker 3: of those brands that that maybe a little smaller today
Speaker 3: than it was ten or fifteen years ago.
Speaker 2: And no cares about my prize. You know.
Speaker 3: It's sort of like there was an old Simpsons episode
Speaker 3: when I think somebody bought al Gore's book and like
Speaker 3: all of these like Mechanaians in it like back to
Speaker 3: him and all of a sudden like he you know,
Speaker 3: somebody bought the book and he put on a record
Speaker 3: and said, celebrate good times.
Speaker 1: You know, I remember this episode. I remember that.
Speaker 2: You know.
Speaker 1: I'm sort of thinking there's like that like Domino meme.
Speaker 1: It's like monster signs to deal with cocaine. Then like
Speaker 1: one distributor has a hole to fill, and then the
Speaker 1: next distributor then has a hole to fill, and so
Speaker 1: like there's big game of musical chairs and suddenly we're
Speaker 1: drinking celsius. So my one of my questions is if
Speaker 1: you look at some of these big distributors, like a
Speaker 1: Pepsi or an Anheuser Bush, that is sort of senses Okay,
Speaker 1: beer consumption is down. We need something to fill this
Speaker 1: gap because we just lost this client or partner to
Speaker 1: another distributor, et cetera. What is the process by which
Speaker 1: they go out and find the next one? Is it
Speaker 1: a sort of mutual bidding thing where like the small
Speaker 1: upstart energy drink companies like try to fill that spot,
Speaker 1: Like how does how does that process work? Do they
Speaker 1: look for like a brand that seems to have something
Speaker 1: like talk to us about where that how that works.
Speaker 3: I think it's it's all of the above, okay, And
Speaker 3: I don't think there's any special secrets here. I think
Speaker 3: you can kind of arrive at the same answer in
Speaker 3: a lot of different ways. Remember, you have all these
Speaker 3: these companies that are going in and out of stores
Speaker 3: all the time that they're talking to distributors, talking to companies,
Speaker 3: and so they have some idea of what's selling and
Speaker 3: what's not selling. They have some idea of where consumer
Speaker 3: tastes are evolving to, and so some of it is
Speaker 3: you're just trying to find the next big thing, even
Speaker 3: though there are various examples where you've tried and failed
Speaker 3: and you've moved on to the next thing. And so
Speaker 3: from their standpoint, you can put a whole bunch of
Speaker 3: stuff on the truck, and what works you stick, and
Speaker 3: the rest you kind of move on with. And I
Speaker 3: think there's a lot of examples of that. I think
Speaker 3: people talk about the big winners over time and forget
Speaker 3: some of the smaller brands at the same time that
Speaker 3: have tried and fail. I mean, gosh, remember the Jolt
Speaker 3: brand in the eighties, right that that was an energy
Speaker 3: drink before it's time, and yet it never really took
Speaker 3: off just to drink serge.
Speaker 1: When I was in high school, it was another one
Speaker 1: that we used to we used to get I mean
Speaker 1: obviously like a distribution and just sort of the pure
Speaker 1: muscle of the trucks and everything, and shelf space is important,
Speaker 1: But like what about like the role of and so
Speaker 1: you know, Celsius seems to have like an athletic like
Speaker 1: I mentioned, like I saw the people of my gym drinking.
Speaker 1: They're like, oh, what's that? And like it seems like
Speaker 1: they've like sort of like branded themselves as like kind
Speaker 1: of the one for like athletes, and they have this
Speaker 1: like fat burning plane, which, like I said, I'm skeptical of.
Speaker 1: But like how significant is that is that in terms
Speaker 1: of the staying power for these companies?
Speaker 2: Olnnie Knew is supposed to have vitamins as well, right.
Speaker 3: They all have vitamins. Oh really, Monster.
Speaker 2: Vitro Monster has vitamins.
Speaker 3: Of course, you can get your B twelve fixed anytime
Speaker 3: you want.
Speaker 2: No more flintstones vitamins for.
Speaker 3: Me, something like that. I think it's it's it's it
Speaker 3: evolves into a question of who's drinking. This in brand positioning,
Speaker 3: right if you go back fifteen twenty years ago and
Speaker 3: maybe even longer, Red Bull created this category in most
Speaker 3: of the world, but it evolved into a product that
Speaker 3: was consumed or still is consumed by eighteen to thirty
Speaker 3: five year old, largely white collar males, more can assumed
Speaker 3: on premise than any other brand, meaning bars and restaurants.
Speaker 3: Monster decided that they wanted to go after a different clientele.
Speaker 3: They offered a sixteen ounce can. They geared it on
Speaker 3: a more value oriented proposition, selling essentially twice the volume
Speaker 3: for the same price as Red Bull. It evolved into
Speaker 3: more of a blue collar construction workers sort of not
Speaker 3: on premise, not bar and restaurant business that was still
Speaker 3: is the core consumer of Monster today. Rockstar was a
Speaker 3: brand around fifteen twenty years ago that did kind of
Speaker 3: the same thing, sort of positioned itself as a little
Speaker 3: bit more value priced as it evolved over time, and
Speaker 3: then really the category didn't do a whole lot. You
Speaker 3: had five Hour Energy if you remember that. That came
Speaker 3: in maybe late two thousands, early twenty tens and was
Speaker 3: offering obviously a shot so in a really concentrated form
Speaker 3: of caffeine. But you had a period there that nothing
Speaker 3: else was really changing until Really Bang came along and
Speaker 3: sort of positioned is more of a performance gym oriented brand,
Speaker 3: as Joe is talking about. And I think you had
Speaker 3: a whole lot of other brands and people that saw
Speaker 3: the success of this and tried to figure out how
Speaker 3: they could participate in this category. Because remember, it all
Speaker 3: goes back to the money. It all goes back to
Speaker 3: the category's importance to the store selling this stuff. Volumetrically,
Speaker 3: a lot of beverage categories are declining. Energy as a
Speaker 3: category continues to grow because the selling prices is higher.
Speaker 3: You make more money selling an energy drink. It becomes
Speaker 3: a bit of a self fulfilling prophecy here, so you
Speaker 3: want to put more stuff on shelf. I mean, interestingly too,
Speaker 3: it continues to evolve. I was looking at this the
Speaker 3: other day. Yeah, total distribution points for energy drinks are
Speaker 3: up over forty percent over the last three years in stores.
Speaker 3: There aren't many or any other categories that you could
Speaker 3: say that about in beverages that have seen shelf space increase.
Speaker 3: I mean seltzers and things like that, which are now
Speaker 3: on the decline. And so what kind of.
Speaker 2: Like stores are they going into. Where's the expansion coming from.
Speaker 3: It's coming from everywhere. But the bread and butter is
Speaker 3: convenience stores. Seventy percent of energy drink sales are largely
Speaker 3: sold inconvenience stories in a seven to eleven speedway, places
Speaker 3: like that. And so back to what I was saying,
Speaker 3: you have these just different propositions, So Celsius, I mean, uniquely,
Speaker 3: it's very interesting. Is a little bit more older male
Speaker 3: and female. It's a little bit younger female, which is
Speaker 3: very different than the Monster in Red Bull consumers Alan,
Speaker 3: you knew you talked about more older female C four
Speaker 3: Ghost or a younger, more performance and lifestyle brand folks
Speaker 3: going after the gym. And so each of these has
Speaker 3: sort of found a niche. Yes, you know, if you
Speaker 3: look at the ven diagram, there's probably overlapped somewhere in there,
Speaker 3: but they've kind of found their niche. And what's really
Speaker 3: fascinating is that the whole category continues to grow, and
Speaker 3: so Monster continues to grow, Red Bull continues to grow.
Speaker 3: Sure they're losing a little bit of share around the edges,
Speaker 3: but the category. Who would have thought fifteen twenty years ago,
Speaker 3: and I started covering the energy duringk category. Here we
Speaker 3: are in twenty twenty three, and the category is going
Speaker 3: to be growing fifteen percent on a dollar basis. In
Speaker 3: twenty three it was up ten percent, and twenty two
Speaker 3: fifteen percent twenty one. I mean, these are remarkably big
Speaker 3: numbers for a category now that it retail is probably
Speaker 3: approaching eleven or even twelve billion dollars.
Speaker 1: By the way, Tracy and Carmen, actually I shot my keyboard.
Speaker 1: You can keep this in, but my keyboard is ruined
Speaker 1: because of the celiciats, and so I can't type two
Speaker 1: right now, casual, So while we've recorded this, I have
Speaker 1: ruined the keyboard. My computer is unusable.
Speaker 3: Anyway, go for it, Okay.
Speaker 2: I have two quick questions. Okay, First, are energy drinks
Speaker 2: taking share from more traditional soft drinks? Have we seen any.
Speaker 3: Evidence of that for certain?
Speaker 2: Okay? What's driving that is that, just like preference, people
Speaker 2: want less sugar or no, we're all more tired and
Speaker 2: need morecaine drinks.
Speaker 3: I think it so it actually starts with that. I
Speaker 3: think it's funny you ask consumers about what they want
Speaker 3: to drink or eat and they'll tell you, Oh, it's
Speaker 3: all about healthy food and drank cleaner label. And yet
Speaker 3: what I just told you about the growth of energy
Speaker 3: drinks would be the almost exact opposite of that, and
Speaker 3: that the list of ingredients is that. And I don't
Speaker 3: think anybody is claiming these are good for you. But
Speaker 3: what they do is provide a function. And so Joe's
Speaker 3: comments at the beginning of this notwithstanding right, people are
Speaker 3: in fact sleeping last They are looking for more energy,
Speaker 3: They want to do more with their day, and these
Speaker 3: provide caffeine. And sure it's the same as basically a
Speaker 3: coffee in a lot of instances in terms of caffeine,
Speaker 3: but it's a different delivery mechanism. You think about younger consumers,
Speaker 3: maybe they don't want to drink coffee. Maybe it's hot outside,
Speaker 3: you don't want a coffee, Maybe you don't want a latte.
Speaker 3: And by the way, the value proposition here also helps
Speaker 3: think about the price of a coffee at Starbucks today
Speaker 3: versus what it was ten years ago. It's probably double
Speaker 3: where it was. Go in and drink your fancy latte
Speaker 3: and it's probably six seven dollars before you get out
Speaker 3: the door. Energy drink prices have gone up, like a
Speaker 3: lot of other categories, but you can still get a
Speaker 3: Monster for under three dollars. You can get a Celsius
Speaker 3: for under three dollars if you get it on promotion,
Speaker 3: which is how a lot of people buy this. It's
Speaker 3: two for five, fifty, two for six, three for seven,
Speaker 3: whatever the promotion is. And so the value proposition here
Speaker 3: is also greater. And it just has a different taste
Speaker 3: and starts with the function, moves to the taste, and
Speaker 3: you do a good job of innovating. I think one
Speaker 3: of the things too, we talked about this on previous podcasts,
Speaker 3: which is Monster has really expanded usage occasions. You know,
Speaker 3: who would have thought putting coffee and energy drink together
Speaker 3: would have made sense? And that's a billion dollar category today.
Speaker 3: Juice is teas zero sugar, full sugar. Yeah, there's just
Speaker 3: a whole bunch of different offerings out there for folks.
Speaker 3: You talked about the candy products there, there's flavors out
Speaker 3: there that have partnerships with some of these.
Speaker 1: Well, we got to get into that.
Speaker 2: This was going to be my next question, although I
Speaker 2: have to say I have a really great product idea now,
Speaker 2: which is pumpkin spice Celsius.
Speaker 1: Oh yeah, don't you think, Yeah.
Speaker 2: For fall, we could be millionaires. Joe, we'll pitch it.
Speaker 3: You should tell the marketing folks that I can put
Speaker 3: you in touch with them. Yeah, assuming they're not going
Speaker 3: to listen to that.
Speaker 2: Who is the Sweetish fish flavored Ghost Energy Drinks? And
Speaker 2: I think there's like sour Patch kids and a bunch
Speaker 2: of different things, like what adults this is actually drinking this?
Speaker 3: So Ghost is a different brand for Ghost, which is
Speaker 3: at least minority owned by Anhezard Busch, which is minority
Speaker 3: owned by Craig Doctor Pepper. Okay, each of those brands
Speaker 3: have partnerships, they have license agreements with candy companies in
Speaker 3: the case of Mandoli's and Eminem Wrigley Mars.
Speaker 2: And tell me there aren't.
Speaker 1: But I cannot bring myself like I'm like sort of
Speaker 1: a glutton like or I'm sort of like you know,
Speaker 1: a test case. I have yet to bring myself to
Speaker 1: try the Skittles flavored? Is that the c flour makes?
Speaker 1: Who makes the Skittles flavors? Okay, I've yet to bring
Speaker 1: myself to try the Skill.
Speaker 3: And Starburst of the two big ones, I can't drink that,
Speaker 3: so it's it's it's differentiation amongst consumers. I guess it's
Speaker 3: a hard thing to figure out exact who's drinking that.
Speaker 3: It would suggest probably more of a younger consumer. I
Speaker 3: think it's interesting if you look at the growth of
Speaker 3: those brands, a lot of the growth is coming from
Speaker 3: those candy licenses. Who knows who exactly is drinking that,
Speaker 3: But yes, I think that's probably a good way to
Speaker 3: think about it. It's probably not the same consumer as
Speaker 3: the monster in the Celsius.
Speaker 1: But unlike with alcohol, you don't have to have like
Speaker 1: a show your age to buy an energy drink.
Speaker 3: Right. It depends on where you are in the world.
Speaker 3: Oh really, but in the West, not in the US. Okay,
Speaker 3: If there are limits, the FDA has limited or has
Speaker 3: has looked at the caffeine content, has looked at the
Speaker 3: other ingredients in there. And this is a big deal.
Speaker 3: Ten twelve years ago and the CEOs of Red Bull
Speaker 3: Monster Rocks were put in front of Congress to testify
Speaker 3: about the health of this and it all checked out.
Speaker 3: But various governments. I think Canada limits the amount of caffeine.
Speaker 3: There are countries like the UK which I think you
Speaker 3: can't buy it if you're under eighteen. So there are limitations.
Speaker 3: But I suppose telling an under eighteen in the UK
Speaker 3: not to drink an energy drink just makes them want
Speaker 3: to drink it more.
Speaker 2: We should do market research and like go out to
Speaker 2: a couple convenience stores and ask them who is actually
Speaker 2: buying it. A good idea, the candy flavored.
Speaker 1: Ghost buying the star Wars flavored. I'll try it, you know,
Speaker 1: let's try I'll try it one day. I'm just not
Speaker 1: ready yet.
Speaker 3: All right, it's a big can too.
Speaker 1: It's a big can.
Speaker 3: Yeah.
Speaker 1: The Celsius is it seems like it's part of its differentiator.
Speaker 1: It's sort of as like a slender, elegant can, whereas
Speaker 1: the other ones are like sort of like these like
Speaker 1: big in your face, like garish brands. It seems like
Speaker 1: Celsius is for refined, sophisticated people like myself.
Speaker 2: And tru We then spill it on their keyboard.
Speaker 3: And we say this, and the growth in all of
Speaker 3: these brands is just off the charts.
Speaker 2: You.
Speaker 3: Ghost continues to just grow triple digits, Sea four grows
Speaker 3: strong double digits. It's great.
Speaker 2: So just on that note, you know, I'm getting the
Speaker 2: sense that like, okay, the product matters. You want to
Speaker 2: make something that consumers actually want to drink. The branding matters,
Speaker 2: you need them to be aware of it. The distribution
Speaker 2: matters because they have to be able to buy it
Speaker 2: from somewhere convenient and probably. Can you give us an
Speaker 2: example of an energy drink that maybe like petered out
Speaker 2: or was unsuccessful, just so we can sort of compare
Speaker 2: and contrast some of the things that matter here.
Speaker 3: Well, I mentioned Jolt that was kind of the original
Speaker 3: energy drink, even if it wasn't called that at the time.
Speaker 3: I think it was just a little before its time.
Speaker 3: This idea of selling a super caffeinated carbonated soft drink
Speaker 3: five hour energy is a shell of its former self
Speaker 3: only ten twelve years ago.
Speaker 2: Oh yeah, I completely forgot about that.
Speaker 3: And you've had a whole bunch of smaller brands. You know,
Speaker 3: Coke had tried, PEPSI had tried. There was a whole
Speaker 3: bunch of Soby if you remember that brand. Yes, no, yes, yeah,
Speaker 3: there's just a whole bunch of those little brands that
Speaker 3: they've tried and found. It's interesting these big companies are
Speaker 3: really good at the distribution side. There's sometimes less good
Speaker 3: at innovating original products, and so with the energy drink category,
Speaker 3: it became a while ago if you can't beat them
Speaker 3: and distribute them, right. So in the case of Coke
Speaker 3: and Pepsi, they tried this. This probably would have been a
Speaker 3: better conversation fifteen years ago. But ultimately the reason why
Speaker 3: they went out and bought or did partnership agreements is
Speaker 3: because these smaller brands tend to move a little bit
Speaker 3: faster than the big companies. They can innovate faster. You
Speaker 3: don't need as much more market research to get the
Speaker 3: product to market, and so they can do just amazingly
Speaker 3: different things than some of the bigger companies. The bigger
Speaker 3: companies can push the product through the distribution system and
Speaker 3: everybody wins.
Speaker 1: So is there more room for like more upstarts. I mean,
Speaker 1: you look at a chart like the Celsius chart, and
Speaker 1: I'm sure that has all kinds of entrepreneurs, and you
Speaker 1: know it's like, oh, let's uh, you know, maybe we'll
Speaker 1: come up with a energy drink, aim if people work
Speaker 1: on the media, or maybe come up with an energy
Speaker 1: drink really tried, like nail, like skateboarders or something whatever
Speaker 1: it is, or some demographic or like esports players or
Speaker 1: whatever it is. Like, if someone has a new idea
Speaker 1: for like a brand or a new flavor, what do
Speaker 1: they do. What's the next step, you know, is their
Speaker 1: capacity to take on new brands, Like what is that
Speaker 1: battle like.
Speaker 3: The growth of the category. And we're talking specifically energy here,
Speaker 3: but you could probably make the same argument for all
Speaker 3: lot of new age beverage brands. There's capacity to add
Speaker 3: energy drinks to shelves because the consumers want to buy it,
Speaker 3: they want to trial the product and you can figure
Speaker 3: out if it works later. And so you start small
Speaker 3: and you move up the distribution food chain. Right, You've
Speaker 3: got a lot of local distributors that aren't named Danhuzard,
Speaker 3: Bush or Coke, and they're always looking to get in stores.
Speaker 3: And so you can try to figure out how you
Speaker 3: get the product out there. Go to a mall if
Speaker 3: people still go there, and sample the product, parking lots
Speaker 3: of grocery stores wherever it may be. But samplings, you
Speaker 3: can do athletes, events, sponsorships, things like that. Get the
Speaker 3: awareness out there a little bit. You have a different
Speaker 3: value proposition or different functional proposition of the product, get
Speaker 3: on shelf in a few markets and figure out how
Speaker 3: the repeat purchase looks. Like, if it's doing well, you
Speaker 3: move on to bigger distributors. It can give you more
Speaker 3: geographic reach, and so forth and so on. Obviously, it
Speaker 3: starts with just a product that has a little bit
Speaker 3: of a differentiated positioning or maybe a different packaging differentiation,
Speaker 3: whatever it may be. But sure there's opportunities all the time.
Speaker 3: Think about disruption in the energy space. As we talked about,
Speaker 3: there's so many brands out there now. Think about isotomics
Speaker 3: like sports drinks. You know, body armour didn't exist how
Speaker 3: many years ago and now it's a really big brand.
Speaker 2: What's the biggest disruption threat to the energy drink space? Like,
Speaker 2: what would be the thing that would make you have
Speaker 2: to like rush out and I guess rewrite all of
Speaker 2: your god your research.
Speaker 3: I don't know if I've ever actually thought about that.
Speaker 3: I assume it just will continue to grow forever, right,
Speaker 3: Just assume it will grow forever.
Speaker 2: I'm sure that's a much healthier attitude to take.
Speaker 3: I think one of the big things that that knock
Speaker 3: on wood has come and gone is the regulatory side
Speaker 3: of this. Yeah, I think if we all figure out
Speaker 3: these are bad for you in a really bad way.
Speaker 3: But but clearly the FDA has looked at this and
Speaker 3: that's not the case. I think maybe it's evolving taste.
Speaker 3: What's the next iteration of this? Can you make a
Speaker 3: truly healthful energy drink that people want to to drink?
Speaker 3: Is a new category. We're not thinking about new ingredients
Speaker 3: that potentially work together to give you this same effectiveness
Speaker 3: in different form. But I feel like the product works
Speaker 3: because it delivers on what it's supposed to deliver on.
Speaker 3: And so at the end of the day, I think
Speaker 3: if people like the taste of it, and you want
Speaker 3: the caffeine and you need to do more stuff in
Speaker 3: the day, you're gonna keep drinking and energy drink. The
Speaker 3: question is what brand are you gonna drink?
Speaker 2: You know?
Speaker 1: Another question I have about the product creation is like,
Speaker 1: let's say Tracy and I had an idea for a brand.
Speaker 1: You know, it came up with a cool looking can
Speaker 1: and a cool looking name and a cool looking you know,
Speaker 1: figured out the demographic that we wanted to target. Do
Speaker 1: we actually need to be in the business of creating
Speaker 1: the liquid itself or the third party companies that would
Speaker 1: like handle that. It's like, oh, like work with them.
Speaker 1: It's like, Okay, we want something, you know, tangerine and
Speaker 1: you know marshmallow flavor, Yeah, pumpkin spice, like other third
Speaker 1: party companies that we don't know their names that sort
Speaker 1: of like do the actual creation of the liquid side.
Speaker 3: Yes, that's that's the short answer. I mean, there are
Speaker 3: lots and lots of companies behind the scenes that will
Speaker 3: help you from idea to shelf. And yeah, there are
Speaker 3: flavor and fragrance ingredients companies that create the flavor. There
Speaker 3: are co packers as they're called, who produce the products
Speaker 3: for you. You put it in a warehouse, you put
Speaker 3: it on a truck, and you put it on shelf.
Speaker 3: So yes, there's lots of different ways if you wanted
Speaker 3: to get a product to market that you could do that.
Speaker 2: I just have one more question, which is kind of
Speaker 2: where does this all end? Like what is the end
Speaker 2: of the energy drink boom? And I know there's a
Speaker 2: lot of saturation in the US right now, but are
Speaker 2: are we seeing more pickup, for instance, in international markets?
Speaker 3: From a US standpoint, the growth continues to be phenomenal,
Speaker 3: as I mentioned, probably better than I think anybody had thought.
Speaker 3: And so the question is how big. Can the category
Speaker 3: become over time? And I guess the law of large
Speaker 3: numbers at some point catches up to the category. But
Speaker 3: I could have would have said that five, ten, fifteen
Speaker 3: years ago, and here we are. I think you have
Speaker 3: the profitability piece continues to push the retailers to sell it.
Speaker 3: I think the consumers continue to want to buy it.
Speaker 3: So domestically, it seems like we continue to go. International
Speaker 3: is the big opportunity at this point. Monsters is just
Speaker 3: an example. Forty percent of their businesses is international. That's
Speaker 3: a really big number at this point. I think you're
Speaker 3: talking almost three billion dollars of revenue.
Speaker 2: Are they taking share from red Bull? Because red Bull
Speaker 2: is always the one I think of as like international.
Speaker 3: They're taking insane amounts of share from red Bull outside
Speaker 3: the US. In the US, Monster and Rebel are seatings
Speaker 3: shared a lot of the brands that we're talking about,
Speaker 3: But outside the US, Monster is growing like a weed,
Speaker 3: partly through the benefit of coke distribution, partly through innovation,
Speaker 3: partly through just increasing shelf space, brand awareness. A lot
Speaker 3: of the athletes events sponsorships that they do, but they've
Speaker 3: done phenomenally well. The question is can it be seventy
Speaker 3: eighty percent international at some point maybe Celsius, not surprisingly
Speaker 3: is has looked at what Monster has done outside the
Speaker 3: US and they've started talking about international plans, probably in
Speaker 3: part or or largely through the PEPSI system because of
Speaker 3: the relationship they have in the US. So that'll be
Speaker 3: a very interesting thing to watch over the next several
Speaker 3: years as that develops. There are some energy drink brands
Speaker 3: outside the US, but largely in these international markets. It's
Speaker 3: a Monster in red Bull game and Celsius I think
Speaker 3: can have success in trying to do what they've done
Speaker 3: in the US, which is that same older consumer, different
Speaker 3: positioning of the product, and create more category growth over time.
Speaker 1: Mark Astracan, thank you so much for coming in. We'll
Speaker 1: have you back at two and a half years when
Speaker 1: there's another you know, when we're all whatever the next
Speaker 1: brand is. Is there one other brand that we should
Speaker 1: look out for? Are there any other publicly traded.
Speaker 3: Ones not of size? Okay, all right, well, thank you
Speaker 3: so much for coming back on off Yah absolutely, thanks
Speaker 3: for having me. That was great.
Speaker 2: Thanks Mark, that was fun.
Speaker 3: I can't believe you took down your keyboard.
Speaker 1: Tracy, should we start the pumpkin spice. I think I
Speaker 1: sound jittery. I think I actually may have had too
Speaker 1: much caffeine. I feel jittery right now. I think I
Speaker 1: did it today.
Speaker 2: Yeah, we should white label our own energy drink.
Speaker 1: I think that it would be a really fun project,
Speaker 1: or at least like see what entails. Like we could
Speaker 1: get like, you know, one of those AI image generators
Speaker 1: to come up with a name or come up with
Speaker 1: a brand, and then like build this whole thing around it,
Speaker 1: and then like actually see what it would take to
Speaker 1: get this sort of liquid made, and they go to
Speaker 1: the cannery, and it would be a fun project to cannery.
Speaker 2: I feel like I feel like the most difficult thing
Speaker 2: to do and the most crucial thing to do it
Speaker 2: would be get that distribution deal with like a Coca
Speaker 2: Cola or an Anheuser Bush or something like that. I
Speaker 2: feel like that's really what you need for success.
Speaker 1: Neither of us could talk. I think we should just
Speaker 1: like wrap it up because I think I'm just like
Speaker 1: so like well overcaffeinated.
Speaker 2: The other thing I was thinking about was Mark's point
Speaker 2: about you know, one of the reasons this market is
Speaker 2: growing is because people are tired, Yeah, and they need
Speaker 2: energy to do stuff, And it kind of made me
Speaker 2: think about how self medication is just so much more
Speaker 2: like accepted and endemic today than it used to be.
Speaker 2: And I was kind of thinking, maybe I clearly have
Speaker 2: had too much caffeine, But like you know, I was
Speaker 2: thinking about what would be the ultimate disruptor to the
Speaker 2: caffeine segment. Well, what are the energy drink segment? What
Speaker 2: if you got like an nozepic type thing for energy.
Speaker 2: I guess it's called adderall, but like, you know, what
Speaker 2: if you got something like that that completely came out
Speaker 2: of nowhere and just made everyone well.
Speaker 1: I was gonna say, so the one thing that we
Speaker 1: didn't bring up in the conversation. But what I've noticed
Speaker 1: is that more and more in Manhattan, I'm noticing on
Speaker 1: the shelves at bodega's like various Frankly, we'd drinks whether
Speaker 1: it's THHC or CBD, like the CBD infused ones, but
Speaker 1: I'm seeing THHC ones. And I don't know whether hemp
Speaker 1: infused or like actual marijuana, but clear like that is
Speaker 1: a category that I'm starting to see more and more
Speaker 1: on the shelf Like in Manhattan. I'm not entirely clear,
Speaker 1: like you know what's totally being legally distributed, et cetera.
Speaker 1: But it sort of feels like, you know, speak to
Speaker 1: your point about self medication. It's like you know, you
Speaker 1: have your rock, you have your Celsius in the morning,
Speaker 1: and then you like, yeah, well you're like super jederary, right,
Speaker 1: Like you're super jitery and like how do you get
Speaker 1: to sleep? Well, then you have like your sort of
Speaker 1: you know, your opposite drink at night that sort of
Speaker 1: like mellows you out. So I wonder if that's going
Speaker 1: to be a category to watch for all these companies.
Speaker 2: Interesting, Yeah, all right, well shall we leave it there?
Speaker 1: Let's leave it there.
Speaker 2: Okay, this has been another episode of the All Thoughts Podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow our producers Carmen Rodriguez at Carmen Arman and dash
Speaker 1: O Bennett at Death and a special thanks to our
Speaker 1: producer Moses onm. If you want more odd Lots content,
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