A fortnightly newsletter by SPJIMR WISE Tech

Volume 1 | Edition 1 | 10th November 2024

Quest examines innovation, technology adoption, and societal impact through a multidimensional Ethics-Responsibility-Sustainability (ERS) lens. A contemporary innovation-related event or trend in society triggers each narrative, be it an article, a case study, or an interview story. In response, the narrative raises a thought-provoking ERS question on the consequences of that event or trend in the future and initiates a discussion on what that may imply for managers and policymakers across a spectrum of businesses—from start-ups to large corporates.

As energy drinks increasingly become a part
of lifestyle choices, what are the moral and social
implications of this largely unregulated category?

Article

Energy drinks are amongst
the fastest-growing consumer
beverages and companies are
riding the cultural shift towards
seemingly healthier diet choices.

The functional beverages category is on the verge of a major shift with the rising popularity of energy drinks among consumers across demographics. Red Bull, Charged, Sting, Gatorade, Monster, Burn, Hell, Budweiser Beats, Celsius Heat, Bang Energy, GFuel, Ghost Energy, Prime Energy, and Rockstar Xdurance dot the global and Indian market. Euromonitor International anticipates the global functional beverage category to grow at 7%¹ CAGR next three years.

This growth coincides with the evolving consumer lifestyles and eating habits, coupled with the increasing availability and affordability of incumbents in the energy drinks category.

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Energy drinks: From niche to mainstream

No longer a niche product or a tonic limited to a specific occasion, energy drinks today are positioned as a healthier lifestyle option for the masses. That is why their advertisements appeal not only to consumers who regularly exercise but also masses looking for healthier choices in their routines.

With 37.14 crore⁶ Indian
youth aged 15-29⁷ years,
the future of the energy
drinks market appears
positively charged.

Globally, energy drinks have historically appealed to the youth for heightened alertness, concentration, and an instant increase in energy levels. The European Food Safety Authority Report 2023 states adolescents aged 10-18 are most likely to consume energy drinks². The Report also indicates that amongst all participating European countries, British adolescents consumed the greatest quantity of energy drinks³. Up to a third of UK children under the age of 18 drink them every week⁴.

Back home with India’s young population where 24% are aged 0-14 and 26% are aged 10-24⁵, it remains to be seen how Indian youth shape energy drinks consumption trends.

The buzz is showing no signs of slowing down as energy drink companies are not only ensuring physical presence but also betting big on the era of quick commerce in India.

Influencer-led marketing driving
unprecedented growth

Add to the mix—Gen Z and millennial social media users. Energy drink companies are investing in aggressive social media-led marketing campaigns, creating digitally savvy brands, and increasingly using social media influencers to ‘influence’ consumer choices.

With social commerce projected to grow 3x faster than traditional e-commerce⁸, influencer-led marketing is set to become most lucrative as potential consumers increasingly inch towards buying products directly from platforms.

The rise of ‘Sting’ in India

Sting sales grew from ~180
million cases (24 units per
case) in Q1 CY2022 to ~225
million cases in Q1 CY2023
(25% YoY growth)¹⁰.)

Red Bull once dominated the energy drinks market with a 75% share until 2023. However, PepsiCo Sting has now captured 90% of the market, driven by its lower pricing⁹. Sting is priced at ₹20, versus Red Bull at ₹125.

In response to this shift, Monster launched Predator at ₹50 in 2022.

But are energy drinks really ‘better’
or even ‘good for you’?

A February 2024 Science Direct Review Paper based on 57 studies from across the globe reported a strong positive association between energy drinks consumption and smoking, alcohol use, binge drinking, other substance use, and the intentions to initiate these behaviours¹¹.

FSSAI, GoI, states: “The name
‘energy drinks’ is a misnomer as
it gives the impression that these
should be taken to get energy or
are required to boost energy…
These drinks contain high levels
of caffeine that stimulates the
nervous system. These may be
termed as ‘caffeinated drinks’.”

The Food Safety and Standards Authority of India (FSSAI), in its Proposed Regulation of Energy Drinks and Caffeine (Revised), says: “Energy drinks are non-alcoholic beverages containing caffeine, guarana, glucuronolactone, taurine, ginseng, inositol, carnitine, B-vitamins, etc. as main ingredients that act as stimulants. In recent years, several energy drinks have been introduced in the Indian market to provide an energy boost or as dietary supplements. These drinks contain high levels of caffeine which stimulates the nervous system¹²”. Caffeine overdose heightens the heart rate, blood pressure, and anxiety. Higher doses may even cause seizures and cardiac arrest.

Case in point, Australia. The Australian New Zealand Food Authority, with effect from 1st March 2016, adopted the alternative to call energy drinks ‘caffeinated beverages’ under Standard 2.6.4 of the Australia New Zealand Food Standards Code¹³. The Code defines a ‘formulated caffeinated beverage’ as a flavoured, non-alcoholic beverage, or a flavoured, non-alcoholic beverage to which other substances (for example, carbohydrates, amino acids, vitamins) have been added for the purpose of enhancing mental performance.

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Governments waking up to the adverse
effects of energy drinks

European countries Lithuania, Latvia, and Turkey ban the sale of energy drinks to under 18s. Sweden banned the sale of energy drinks to under 15s. The Spanish Agency for Food Safety and Nutrition recommends under 18s and pregnant and breastfeeding mothers avoid energy drinks consumption¹⁴. The United Kingdom intends to ban their sale to under 16s¹⁵. Health and consumer organisations in Denmark are pushing for a ban on their sale to under 18s¹⁶.

High levels of caffeine and
the presence of other
stimulants in energy drinks
have globally sparked bans
on their sales to children.

This January, Poland enforced new regulations prohibiting the sale of energy drinks to under 18s¹⁷. The regulations prohibit their sale at schools and other educational units, in vending machines, and in advertisements for children, and set penalties of up to 2,000 in the local currency.

India however lacks regulations to prevent the sale of energy drinks to children and adolescents. Even the Prevention of Food Adulteration Act of 1954 does not address energy drinks.

Labelling practices: Wolf in sheep’s clothing

Energy drinks have earned the notorious reputation of being described in lawsuits as ‘a wolf in sheep’s clothing¹⁸’. Owing to ethically questionable labelling, the European Union Food Information Regulation 1169/2011 requires all energy drinks—drinks containing over 150mg/l of caffeine—to display ‘High caffeine content,’ list the caffeine content, and apply warning labels on the front-of-the-can¹⁹. Sri Lanka has also mandated front-of-pack nutrition labels on fat, sugar, and salt content, since 2020.

Energy drink companies use
smart labelling to position
seemingly harmful drinks
as health drinks.

To ensure that products and brands proxy their actual nature and functionalities, the FSSAI restricted e-commerce platforms from using ‘health drink’ or ‘energy drink’ on malt, dairy, and cereal-based products²⁰ since April this year as these terms do not exist under the Indian food laws.

This July, the FSSAI also approved a proposal to ask packaged food companies to display nutritional information on fat, sugar, and salt in bold letters on the back-of-pack²¹.

All the same, stringent measures are required to ensure packaging becomes ethical, helping people make the right choices. The possibility of misguiding information could be why parents buy energy drinks for their children.

Catching the nuances of energy drinks
enticing consumers across the globe

Energy drinks have increasingly become a part of lifestyle choices. All the same, consumers demanding them are children and teenagers who are often unaware of the contents of the drink and the associated health risks.

Yet, this expanding functional beverage category remains largely unregulated. The Government of India has much to do with setting a legal framework and regulatory compliance to strike a balance between product innovation and social impact. Companies too need to adopt better ethical standards, substantiate their claims with scientific evidence, and display information in an easily understandable format. That would go a long way in helping consumers to make informed choices.

Until that happens, your health is in your hands.

Can the energy drinks category continue
its disruptive growth trajectory as consumers
and the government become more discerning?

Author of this edition: Ansha Gupta | | Postdoctoral researcher at SPJIMR WISE Tech

Sources

Email us at wisetech@spjimr.org. >

Coming soon…

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