There is room for new entrants

While cynics might argue that Sheets – the dissolvable energy strips plugged by LeBron James - were just an expensive way to get daily B vitamins and lacked the other ‘energizing’ ingredients contained in most energy shots, they had the advantage of being portable, convenient and new, he said.

“I can see this kind of product being successful, as long as it delivers what it says it will deliver. The fact that they have a different formula to energy shots could be a point of difference.”

Conversely, while the formula of On Point Energy was similar to that of market leader 5-hour-energy, its distinct packaging and focus on appealing to the military or people supporting the military – along with its charitable aims – gave it a real point of difference in the market, he said.

“I think there would have been a market for Cram [the energy shot the On Point Energy team was originally planning to launch for college students] but I think it would have been more of a niche product.”

Mintel: Shots have more universal appeal

Garima Goel Lal, senior analyst at Mintel, said that growth in the US energy shots market had slowed a little during the recession, but the market was still exhibiting very robust growth.

“Energy shots have potentially more of a universal appeal than energy drinks, which are typically aimed at 18-34-year-olds. We’re seeing that 55+ year olds are buying energy shots.”

If firms could come up with new formats – sheets, gums, chews and so on – they could also capture the more price sensitive consumer, she added.

“Livewire Energy (energy chews) is trying to tap into this, and it has good distribution in convenience stores.”

Meanwhile, the growth of private label energy shots suggested that some consumers were prepared to switch to cheaper products as long as they contained the same ingredients, she said.

Suppliers must address safety concerns

But if energy shots were to realize their full potential, firms had to win consumers’ trust, and those trying to appeal to a more conservative audience needed to address concerns about safety as well as promoting the drinks as more natural/less sugary than some energy drinks, she said.

While energy shots are dietary supplements – and include recommended dosages on pack – they are frequently stocked on the counter at retail outlets rather than in the dietary supplements fixture, prompting some critics to argue they are being marketed as conventional foods/drinks, and that consumers might ‘overdose’ on caffeine and vitamins.

In a recent conference call with analysts, Rodney Sacks, chief executive of Worx Energy shot maker Hansen Natural Corporation, said sales of energy drinks and shots combined were up 15.8% in the 13 weeks to June 25, according to Nielsen data.

Sales of 5-Hour –Energy were up 33.4% over the same period, he said.

Energy shots special edition: Flash in the pan or the runaway success story of the decade?

Cynics said they would never catch on. Who would cough up $2.99 for a mouthful of caffeine, taurine and vitamins when you can enjoy a coffee and a snack - or a whole can of your favourite energy drink - for the same price?

Well, rather a lot of people, it appears. In the space of just six years, energy shots have come from nowhere to break the billion dollar sales barrier, attracting everyone from weary office workers looking for a mid-afternoon pick-me-up to sports enthusiasts and military personnel.

In this series of articles, FoodNavigator-USA explores the opportunities and challenges in a market that did not even exist a decade ago.

Does the energy shot market have room for a new player?

A David vs Goliath battle is set to be waged in the US energy shots sector as two ex-Marines seek to carve out a niche in a market so competitive that even Red Bull has thrown in the towel and made a sharp exit.

The entrepreneurial veterans – Dennis Wynant and Doyle Schaefers – are on a mission to capture 5-7 percent of the market (which has grown from zero to $1bn+ in retail sales in just six years) within four to six years with On Point Energy shots.

Energy to engage – and expand?

And if the khaki-clad zero-calorie shots – launched last month in southern California with the motto ‘energy to engage’ - take off, they may also expand the brand into other “fast, convenient energy supplement products”, Wynant told FoodNavigator-USA.

“We’ve talked about extending the On Point Energy brand, and energy bars or energy pill supplements would definitely be consistent with it. But do I see us moving into the 8oz or 16oz beverage category? No.”

The target audience is the military, people that support the military, and outdoor enthusiasts, he said.

However, what really makes On Point Energy stand out from the crowd is the fact that Wynant and Schaefers plan to give away 40 cents out of every dollar they make.

20 percent of net profits will go to charitable organizations that support troops and their families, while an additional 20 percent will go to a venture fund that assists start up businesses, particularly those set up by veterans.

The formula: It really comes down to brand loyalty

While On Point Energy had more B vitamins and a “slightly different energy blend” than market leader 5-hour Energy, claimed Wynant, most shots contained a similar mix of B vitamins, herbs and enzymes, he conceded.

“There are subtle differences between the products; we’ve done some taste testing and people also say ours is stronger, but it really comes down to brand loyalty. We are trying to find a niche in the market.”

He added: “We don’t want to be a me-too brand. I think Red Bull was right toexit the market. I don’t think any company – even Red Bull – can succeed if they just do a me-too. It was always a half-hearted effort on their part.”

Passion, energy shots, and Oprah Winfrey …

While “100lb gorilla” 5-hour Energy had hoovered up almost 80 percent of the market, there was room for another player provided it positioned itself differently, said Wynant, who had originally planned to bring a shot called ‘Cram’ to market.

Cram, which was targeted at college kids seeking to burn the candle at both ends, was almost ready to launch when Wynant suddenly changed course in January, he revealed.

“We’d worked with a manufacturer on the formula, got the logos and the bottle design ready and the marketing strategy all worked out - we were just weeks away from flipping the switch - and then we realized Cram just didn’t make sense.”

The Eureka moment came while watching an episode of Oprah featuring Michelle Obama, Bob Woodward and Tom Brokaw about the sacrifices made by the armed forces, he said.

“Literally at that moment, I called my business partner and said we’ve got to change the product. We didn’t understand the college market; it was not what we were about, whereas 18 members of my family served in the military. We are military guys and former Marines and that’s what we are passionate about.”

The launch and roll-out

The On Point Energy shot (recommended retail price $2.99) is currently available in convenience stores in southern California, but the firm is also talking to chains such as Big 5 (sporting goods), Kangaroo Express (which has 850+ stores within a 25-mile radius of a military installation) and some national convenience store chains about listings following strong initial feedback and favorable press coverage, said Wynant.

On Point’s name derives from the military term ‘riding point’, which refers to men scouting ahead. Today, it is used to describe someone that takes charge of a project or situation.

How much room is there in the energy shot market?

In a conference call with analysts earlier this month, Hansen Natural Corporation – which owns Worx Energy shots and Monster Energy drinks - said there was room in the market for “a good competitor to 5-Hour Energy”.

Chief executive Roger Sacks said: “The margins are good, and so we believe there are still good and valid reasons for us to persist in trying to find the formula that will work to be a credible competitor in that category.”

While there was some crossover, consumers of energy shots and drinks were discrete groups, he claimed: “We believe there is a different consumer that is the principal consumer of energy shots, as opposed to energy drinks."