Mcdonalds Energy Drink Research Report

McEnergy 1 Energy Drink Research Report For McDonalds Corporation Marketing Research, Unit 9 8 August 2011 McEnergy 2 Executive Summary The purpose of this report is to investigate past trends and forecasts of the energy drink market. Included in this report, is information on market size, target population and statistical data on growth history and growth projections. The aim is to determine if adding energy drinks to McDonalds offerings will create a profitable segment for their menu. The market research collected and contained in this report consists of secondary data. This research was authorized by: McDonalds Corporation. Current market research shows that the energy drink market has grown into a multi-billion dollar business, which has been reported as being the fastest growing segment in the beverage industry since bottled water. The US energy drink industry is expected to more than double in the 5 years preceding 2013. (Comprehensive Reviews) Eighteen to twenty-four year olds or college students are the largest segment of energy drink consumers. NutritionJ) The conclusion of this report suggests that the growth of the energy drink market has been greater than most other liquid refreshment beverage sectors in the US in the past five years and that this trend will continue. It is recommended that McDonalds Corporation add energy drinks to their offerings and target college-aged students. Introduction Fast food consumption in the US has declined during the rece nt economic crisis. To stay profitable, many fast food chains have introduced low-cost or â€Å"value† items too keep sales up. Along with low-cost items, many fast food chains have added specialized items or niche items to attract customers that can more conveniently buy these at a fast food store. McEnergy 3 Energy drinks have continued to gain popularity since Red Bull was launched in 1997. More than 500 new energy drinks were launched worldwide in 2006 and beverage companies are reaping the rewards of the exploding energy drink industry. This report examines the energy drink market and its potential to become a niche item in a fast food chain along with the population to target. Methods This report was conducted using a secondary statistical data and secondary research that was gathered using a focus group and survey of college age participants. The statistical data was obtained from New York City-based Beverage Marketing Corporation which is the leading research firm dedicated to the global beverage industry. The statistical data regarding the previous growth patterns and growth forecasts will be discussed in the results. The focus group and survey were done by Nutrition Journal and focuses on energy drink consumption patterns among college students. The survey was based on responses from a 32-member college student focus group and a field test, a 19-item survey was used to energy drink consumption patterns of 496 randomly surveyed college students. (nutritionj) The population was defined as undergraduate students at a state university located in the Central Atlantic Region of the United States. 85% of the undergraduates were 18-24 years of age, 12% were 25-40 years of age and 3% 41 years of age or older. Sixty two percent of the entire student body is female. The sampling units were individual college students that were generated with a McEnergy 4 non-probability method of asking students around campus if they would like to participate. (Nutritionj) Results Fifty one percent of participants reported consuming at least one, energy drinks a month. Thirty four percent of participant reported consuming at least two energy drinks a month. Table 1 % of college energy drink users reporting amount and frequency of energy drink consumption by situation in an average month Energy drinks consumed Days/month ________________________________________________ Situation n 1 2 >2 1-4 5-10 >10 Insufficient Sleep 169 64 22 14 74 18 8 Need general energy 165 63 21 16 74 18 8 Studying or project 125 50 36 14 85 10 5 Driving long distance 114 63 23 14 86 9 5 With alcohol 136 27 24 49 73 18 9 Treat hangover 42 74 10 16 74 14 12 N= 253 college energy drink users (nutritionj) The US refreshment beverage market grew by 1. 2% in 2010The growth of the energy drinks market is up 5. 4% in the past year. (beveragemarketing) From 2004 to 2009 the McEnergy 5 overall growth of the energy market is up over 240% (Wiley) The shift from consumption of sports drinks such as Gatorade and Powerade towards energy drinks should continue. In the last year, carbonated soft drinks remain the largest liquid refreshment beverages category but their volume slipped 0. 8% from 13. 9 billion gallons in 2009 to 13. 8 billion gallons in 2010, which resulted in their market share decreasing. (beveragemarketing) Table 2 U. S Liquid Refreshment Beverage Market Change in Volume by Segment 2009-2010 Percent Change Segments 2009-2010 RTD Tea 12. 5% Sports Drinks 9. % RTD Coffee 8. 1% Energy Drinks 5. 4% Bottled Water 3. 5% Value-Added Water 0. 2% Fruit Beverages -2. 0% Carbonated Soft Drinks -0. % Total LRB 1. 2% Source: Beverage Marketing Corporation (BeverageMarketing) McEnergy 6 Conclusion The energy drink market has grown into a multi-billion dollar business, which has been reported as being the fastest growing segment in the beverage industry since bottled water. Having grown 240% in the past five years, the only beverage sectors to grow faster that energy drinks last year were ready-to-drink tea, ready-to-drink coffee and s ports drinks. McDonalds already distributes these other three beverages and would benefit by adding the next fastest growing beverage sector, energy drinks. Despite the large market share that carbonated beverages owns, there is a demand and shift towards other beverage sectors as evidenced by a decrease in carbonated beverage market share last year. A large segment of energy drink consumers is the college-aged consumer. With over 50% of college students drinking at least one energy drink a month and 34% at least two a month, this would be a good population to target. Recommendations Include energy drinks to the offerings at McDonalds fast food restaurants. Target college-aged students with initial locations and marketing strategies. McEnergy 7 References: – Gonzalez de Mejia, E. & Heckman, M. A. & Sherry, K. (2010). Energy Drinks: An Assessment of Their Market Size, Consumer Demographics, Ingredient Profile, Functionality, and Regulations in The United States. Comprehensive Reviews in Food Science and Food Safety. Retrieved from: http://onlinelibrary. wiley. com/doi/10. 1111/j. 1541-4337. 2010. 00111. x/pdf – West, T. (2011). The Energy Market is Still Full of Growth Potential Reports. Wholesale News. Retrieved from: http://web. ebscohost. com. lib. kaplan. edu/ehost/pdfviewer/pdfviewer? vid=12&hid=123&sid=eeec713f-80bc-4ca6-b6ce-02c68e0f1f50%40sessionmgr112 – The US Liquid Refreshment Beverage Market Increased by 1. 2% in 2010. (March 2011). Beverage Marketing Corporation Reports. Retrieved from: http://www. beveragemarketing. com/? section=pressreleases – Aeby, V. G. & Barber-Heidal, K. & Carpenter-Aeby, T & Malinauskas, B. M, & Overton, R. F. (2007). A Survey of Energy Drink Consumption Patterns Among College Students. Nutrition Journal. Retrieved from: http://www. nutritionj. com/content/6/1/35