In simple terms, energy drinks are formulated to boost metabolism and enhance alertness. A typical can contain caffeine, niacin, taurine, guarana, ginseng, and often a significant amount of sugar.
According to Mordor Intelligence, the size of the India Energy Drinks Market is projected to be approximately 0.74 billion USD in 2024, with expectations to reach 1.01 billion USD by 2030. This growth represents a compound annual growth rate (CAGR) of 5.46% during the forecast period spanning from 2024 to 2030.
Over the past six years, Red Bull’s Energy drinks market dominance dropped significantly, from 75% in 2018 to just 7% by 2023. Meanwhile, PepsiCo’s Sting saw a remarkable rise, capturing 90% of the market during the same period.
In just four years, Sting achieved a complete monopoly with a 90% share, surpassing Red Bull and achieving significant growth in sales volume. Estimated sales increased from 23 million cases in 2021 to 65 million cases in 2022, reaching a record 110 million cases by 2023.
Source: Euromonitor International
Let’s understand what caused Red Bull to lose market share in India and how PepsiCo differentiated its Sting product to gain a strong position in the Indian market.
Convenient Packaging Size
While Red Bull maintained its standard 250ml can packaging, Sting introduced convenient and affordable 250ml PET bottles, making it easier to carry and consume on the go. Sting’s introduction of 250ml PET bottles, while Red Bull offers only aluminum cans, has been instrumental in extending the product’s reach and maintaining an economical price point.
Strategic Partnerships:
The pepsico’s strategic partnership with Varun Beverages for bottling for sting provided an advantage over Red Bull, which imports its products, allowing Sting to control costs and mitigate price hikes during inflation.That enhanced sting’s market penetration by making it both affordable and portable, facilitating on-the-go consumption.
Affordability
Red Bull targeted urban consumers with high disposable incomes, setting their energy drink prices in the Indian market between Rs 125 and Rs 150. This pricing strategy limited the reach of Red Bull to a niche segment, keeping energy drinks as a small part of the beverage market.
In contrast, Sting’s rise was fueled by a strategic pricing decision. Pepsico disrupted the market in 2020 by introducing Sting at Rs 20 (US$0.2), 80% lower than Red Bull’s price. Available in vibrant red and blue variants, Sting quickly became extremely popular. By 2023, Sting dominated the energy drink market, holding a 90% share in terms of volume.
Distribution
Red Bull entered the Indian market in 2009, employing a Hub & Spoke model by appointing distributors. The company also relies heavily on wholesalers and cash-and-carry supermarket chains like Metro for redistribution. Additionally, Red Bull benefits from significant infiltration from nearby countries.
In contrast, Sting was launched specifically for the Indian market by PepsiCo in 2017. As a PepsiCo product, Sting benefits from the highly organized distribution network of Varun Beverages Limited (VBL), which has appointed distributors across India to maximize coverage.
By 2022, Varun Beverages ensured that Sting was available at over two million retail locations, achieving a distribution reach comparable to well-established legacy brands. Furthermore, Sting received a favorable response in rural areas, redefining the value perception of the category among rural consumers.
Segmentation
The “Sting” energy drink brand caters to the growing gaming community. Gamers turn to energy drinks for various purposes. India offers one of the most cost-effective means of accessing the internet, making it a robust market for e-sports.
Sting has gained significant popularity, particularly among the 15-19 age group, comprising a substantial 126 million individuals. This demographic, mainly consisting of students prioritizing affordability, often finds Red Bull beyond their reach.
Finally, individuals of all age groups are looking to reduce their sugar intake. Sting, with only 6.8g of sugar per 100ml, offers a lower sugar option compared to Red Bull, which contains 11g of sugar.
Localized Flavors and Branding
Red Bull likely stuck to its core original flavor and did not introduce many localized or India-specific variants. In contrast, Sting offered localized flavors such as Gold Rush, Power Lime (Kiwi/Lime), and Berry Blast (Strawberry) to cater to Indian tastes. Sting also had a catchy Indian brand tagline, “Energy Bole Toh Sting,” which resonated well with the local audience.
Over the past 5 years, Varun Beverages Ltd shares have surged by 1000%, with an additional gain of 95% in the last 12 months. On Friday, the company’s shares closed at ₹1,638 each, marking a 3.75% increase.
Varun Beverages Limited (“VBL” or the “Company”) is a key player in the beverage industry and one of the largest franchisees of PepsiCo in the world (outside the USA).
The company manufactures, distributes, and sells a wide range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.
Written By Omkar Chitnis
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