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(Deborah Baic/Deborah Baic/The Globe and Mail)
(Deborah Baic/Deborah Baic/The Globe and Mail)

Global Exchange

Kraft enters energy drinks sector Add to ...

Kraft is entering the energy drinks arena with the roll-out next month of a caffeinated version of its MiO “water enhancer”.

The move will put the largest food company by revenues in competition with products such as 5-hour Energy, which sells flavoured caffeine “shots”, and Red Bull, the carbonated soft drink.

However, Kraft’s foray also comes at a time in which consumer companies face regulatory pressure to stop marketing such products to children.

Irene Rosenfeld, Kraft’s chief executive, said: “We have certainly seen strong growth in the energy drink category. We’ve had a smashing success with MiO and I think this is the perfect platform for the category.”

Ms. Rosenfeld said MiO Energy would be targeted at “millennial” male consumers who tend to buy energy drinks at convenience stores. She said that original MiO, which is a coloured, calorie-free, flavoured liquid that is added to water, is poised to generate $100-million in revenues for its first year on the market.

MiO Energy will be potent, with a regular size bottle containing the caffeine equivalent of 18 cups of coffee.

Kraft estimates the total U.S. energy drink market represents $6-billion in annual sales. According to Euromonitor, U.S. energy drink sales volume grew by about 17 per cent between 2005 and 2010. Analysts at Bernstein Research project sales to increase by low to mid single-digit figures during the next several years.

“There was a question among big beverage players about whether energy was going to be a fad or a lasting category,” said Stephen Powers of Bernstein. “It’s becoming more mainstream and popular.”

PepsiCo is present in the market with AMP Energy and analysts speculate that Coca-Cola, which distributes Hansen’s Monster Energy, is ripe for an acquisition in the category. However, Muhtar Kent, Coke’s chief executive, downplayed the category’s prospects in September. “As a long-term perspective, there will be a tapering off of demand,” he said. “It’s not something that will be here to stay in 20 years’ time.”

Health officials say drinks with high concentrations of caffeine can have adverse effects on children and that mixing them with alcohol poses health risks.

A study this year from the American Academy of Pediatrics warned of “potentially serious adverse effects in association with energy drink use”. Last year, the U.S. Food and Drug Administration ordered companies that made alcoholic energy drinks to remove the caffeine from their products.

Elaine Lutz of Living Essentials, maker of 5-Hour Energy, said the company does not condone children drinking its products. She said 5-Hour Energy, which has launched an “extra strength” version, is intended for athletes, working mothers, first responders and anyone who needs help being alert.

For its part, Kraft acknowledged the potential misuse of MiO but said it was marketed for people older than 18. “We always hope that consumers will use our products appropriately,” said Liza Laibe, senior brand manager for MiO, noting that an overdose of the product would not taste good. “We never encourage any kind of overuse.”

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