Analyst Insight by Chris Schmidt – Analyst, Consumer Health

Around the world, consumer demand for energy-boosting products is at an all-time high. At the centre of the energy craze is one of the world’s oldest and most widely consumed drugs: Caffeine. Appearing in everything from soft drinks to confectionery to beef jerky snacks, caffeine enjoys a nearly unmatched ubiquity among functional ingredients. However, as consumer perceptions shift and the threat of more regulation in key markets mounts, companies are scrambling to find the next energy-boosting blockbuster.

King Caffeine: Energy sales go from strength to strength

Providing energy has long been an important promotional positioning in the food and supplement industries. According to Euromonitor International’s most recent health and wellness data, global sales of energy boosting products – foods and beverages positioned primarily around energy boosting claims – grew by 12% to US$29.1 billion in 2012. Within that massive category, energy drinks reign supreme, accounting for US$25.5 billion in retail sales. While some energy drinks rely on mixtures of vitamins and herbal extracts, the vast majority of products sold utilize caffeine as their main energy source. Caffeine is one of the most widely studied and commonly used supplements in the world. Having received GRAS status (generally recognized as safe) from the US Food and Drug Administration and several positive health claims from the European Food Safety Authority, caffeine enjoys high consumer recognition and, until recently, a generally positive view as a functional ingredient.

However, the ingredient’s ubiquity in the food and supplement categories and the increasingly publicized negative side effects of over consumption has led to growing unease among both consumers and regulators. In the United States – the world’s largest energy drink market– there has been a growing push by legislators from the federal all the way down to the municipal level, to institute sales and formulation restrictions on high-caffeine products, such as energy drinks and energy shots, which Euromonitor International tracks in the tonics and bottled nutritive drinks category of consumer health. Simultaneously, consumer interest in caffeine substitutes is growing daily, especially in products positioned as natural or herbal/traditional

Source: Euromonitor International

Caffeine, by any other name…

While most of the caffeine added to energy drinks, tonics and bottled nutritive drinks and caffeine supplements comes from coffee beans and waste tea leaves, there is a growing view – focused in developed markets like the United States and Western Europe – that added caffeine is unnatural and potentially dangerous. As such, consumer interest in ingredients positioned as whole-food sources of caffeine has seen a significant spike recently. Companies – particularly those operating in the health and wellness and better-for-you segments – are increasingly positioning ingredients like green tea extract, green coffee bean extract, guarana, and yerba mate as powerful, natural sources of energy. While all of these ingredients rely on their natural caffeine content to provide energy, this reality seems lost on many consumers. The resulting, very commonplace misperception that the energy these ingredients provide is inherently different from that of coffee or caffeinated energy drinks and shots has led to skyrocketing sales (albeit from a relatively small scale) of these products.

Heirs to the throne: Dietary supplements seek to convert the over-caffeinated

Unlike coffee-analogues, the vitamins and dietary supplements and sports nutrition categories of consumer health offer a wide range of products with non-caffeine-based energy-boosting properties. Perhaps the most established of these products are B vitamins. Naturally occurring in a wide range of fruits, vegetables and grains, B vitamins play an essential role converting energy inputs (carbohydrates, fats, etc.) into cellular energy. B vitamin products have been gaining steam in a number of markets, where savvy producers have jumped on positioning them as standalone energy supplements. Driven by monster growth in the US (40% from 2007 to 2012), which accounts for roughly half of all retail value sales worldwide, the global B vitamin category topped US$3.3 billion in 2012.

While B vitamins enjoy a strong standing among energy ingredients – including EFSA health claims regarding healthy neurological function and fatigue reduction – investments are also picking up on the herbal/traditional front. Here, the centuries old folk remedy ginseng leads the pack. Global supplement sales of the root were more than US$3.1 billion in 2012, led by Asian markets, particularly South Korea and China. In addition to ginseng dietary supplements, the ingredient is widely used by food and drink manufacturers as an energy- and libido-boosting additive. A number of large, multinational pharmaceutical manufacturers – including Bayer AG, Boehringer Ingelheim GmbH, and Sanofi – have been investing in herbal/traditional medicine. This trend is expected to accelerate in the mid-term, and could very well elevate some lesser known herbal and botanical ingredients to the ranks of energy supplement heavyweights. Intriguing ingredients include Traditional Chinese Medicine standbys like goji berry – already a well-known “super fruit” in the US and currently being investigated as a possible energy ingredient by PepsiCo – and ayurvedic ingredients like ashwagandha.

However, the largest potential could lie in switching a category already established around different health claims: protein.