Young consumers opt for energy drinks over coffee

The functional beverage industry looks set to grow, with revenue increasing by an estimated 2.5% in 2013-14 to reach $1.1 billion, according to new research from IBISWorld. This growth is expected to continue in the five years through 2018-19, with industry revenue growing by 11.4% to reach $1.3 billion.

In Australia, the past five years have seen big changes in the segment. Previously dominated by imported products, now Australian-made energy drinks outweigh foreign imports in the segment. Locally produced energy drink sales are led by Coca-Cola Amatil’s Mother and Asahi’s Monster.

Over the past five years, energy drinks have grown within the functional beverage production industry, increasing their share of the category from just over 30% in 2008-09 to 39.6% in 2013-14. A failure to innovate or significantly changes its offerings has seen the sports drink segment’s market share decline from almost 58% in 2008-09 to 49.4% in 2013-14 despite consistent volumes.

“Energy drinks carry a more youthful and fresh image than coffee and have been supported by strong advertising campaigns, which has appealed to young consumers,” said IBISWorld General Manager Daniel Ruthven.

Despite a forecast decline of 0.2% over 2013-14, the sports drink segment is expected to increase in revenue by 6% over the five years through 2018-19 to reach $458 million.

“Strong affiliation with some of our biggest sports events, teams, gyms and athletes means that sports drink revenue is anticipated to substantially increase in the coming years given Australia’s reputation as a nation of sports fanatics,” said Ruthven.

The revenue from the health drinks segment is expected to grow by 14.6% in 2013-14. IBISWorld anticipates that growth will remain high in the five years through 2018-19 at a huge 58.2% annualised.

“Consumers are increasingly using health-related functional beverages as supplements to aid digestion, decrease hunger and manage weight. Health drinks, such as probiotic drinks and others with antioxidants or herbal ingredients, are expected to become increasingly popular with health-conscious, time-poor professionals,” said Ruthven.