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