Magazine: Forced price increase may end the energy drink boom

Currently the most important factor in energy drink sales is the public health product fee (‘crisp tax’ as it is called). It is rather probable that the new tax will set back the development of the price-oriented market. As the stocks piled in the summer run out, November may bring an increase in energy drink prices.

According to Bernadett Nagy, communications manager with Red Bull Hungary there are two options for market players: they either change the formula to meet new requirements or they leave the products as they are but increase prices. It is clear that the tax raises several questions, e.g.: some low-caffeine energy drinks will contain practically as much caffeine as coke – will these qualify as soft drinks or they will remain in the energy drink category? Sales are almost sure to fall with the increase of average prices and this might entail layoffs or the delay of investments. Market players will only see the effects of the new tax more clearly in about a month or two. Red Bull has been distributed with the same ingredients for 26 years and is now sold in 160 countries. Early October Hell Energy put a product on the market, in which caffeine was replaced with natural ingredients. Hell ‘New Generation’ should be free of the crisp tax but the government already signalled that they are not buying the ‘tricks’ of manufacturers. Hell’s answer was that they had started developing this product one year ago. Since October the company has only been manufacturing and selling products made from the new recipe. Bisztromatika Kft. distributes CELL SHOT, which is not really an energy drink but a healthy alternative. Thanks to its ingredients, it raises the blood’s oxygen content; its effect lasts for 3-5 hours. Owner Attila Vidákovics told us that health and efficiency are their main messages. So far sales go beyond the forecasted level. According to data from Nielsen, in the first half of 2011 the market share of private label products kept falling and the significance of small shops was growing. These trends are expected to change when the average price will go up. János Gréczi, owner-managing director of V-Power and Bio Power distributor Gramex 2000 Kft. is of the opinion that there will be no ‘formula revolution’. He is convinced that consumers are devoted to their good old flavours and they will try to look for places where they can get their energy drinks cheaper. The company will not change the ingredients of their premium Bio Power energy drink. As regards V-Power, from now on they will put it into 1.5-litre PET bottles and they reduced its caffeine content, in order to keep its excellent price-value ratio.