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Direct sellers don’t need a caffeine jolt to wake up to the power of the energy-drink market. They’re keyed in on the multibillion-
dollar industry and are making their mark. The beverage phenomenon has grown more than a hundredfold since the likes of Red Bull and Monster were novel items on the grocery shelves. Now there are capsules, powders, tiny cups and bars filled with energy-giving formulas. The direct selling industry brings its own blend of marketing, health-consciousness and personal appeal to this product segment.
Some direct selling companies have been providing energy products for years. AdvoCare’s Spark product helped build the 
15-year-old company, and components of this original product have found their way into the company’s new energy product lines. Amway launched its XS Energy drink in 2002—a long time ago for the segment—and it’s a “significant part of our business,” according to Gary Mougalian, Director of Nutrition for the company. New products like Xooma’s EDGE, Vemma’s Verve, AdvoCare’s Max 3, USANA’s Rev3 and Surge Pack, Limu’s Blu Frog, and EIRO Energy have all launched in the last year. The success has been absolutely remarkable.
Now a 4-year-old company, Vemma launched its original formula at its opening, but it added energy drink Vemma Verve in an 8-ounce can one year ago and, recently, 3-ounce shots. “We did more than $20 million of just Verve sales our first year, so it got exciting,” says BK Boreyko, President and CEO of Vemma. EIRO Research
, a new company still in it
s pre-launch phase, has confidently added EIRO Energy for its independent associates to bring to the masses.
Direct sellers realize that one product does not fit all. Several companies have taken their initial success and added to it by creating other products. AdvoCare’s Spark Energy Drink in a powder formulation has been a strong seller for several years. Within the last year and a half, the company added Slam, a 2-ounce relativeof Spark, with additional nutrients in a portable size. It also created Max 3, a product marketed as a weight-loss formula but which also gives sustained-release energy. “Spark has traditionally been our No. 1 seller, however it just got replaced with Max 3,” says Mark Miller, Vice President of AdvoCare Research and Development.
Amway also has added to its energy buffet with a wide variety of XS drink flavors, energy bars and DOUBLE X multivitamins that provide energy. Xooma has a companion product for EDGE in its energy-boosting capsules called MetaboWize AM. The product was launched in October 2007 and is a strong seller for the company. USANA developed a convenient Rev3 Surge Pack for the Canadian and New Zealand markets. “It’s a different delivery system, and sales have been very robust,” says Dan Macuga, Vice President of Marketing and Public Relations.
In addition to Original Limu, which serves middle-aged folks and baby boomers very well, Limu has added its Blu Frog energy drink. “There’s a whole generation lined up to drink these energy products,” said Gary Raser, President and CEO of Limu. “The altruistic side is I want young people to drink something that’s good for them, so we engineered a product that’s really, really healthy for them.”
Energy drinks have been the center of controversy in recent months, with major news media and health research facilities issuing strong warnings. Some of the big players in the industry have even been implicated in heart attack-relate
d deaths of people who consumed several energy drinks on a daily basis. Whether consumers are downing Monster, Red Bull, coffee or soda, there are health trade-offs.
Direct sellers fill the void by providing healthier alternatives. It’s the right time for such a move. Much of the recent growth in this segment has come from those who address health. According to Beverage World magazine, “Beverage categories that have a health halo… are the principal drivers of growth [in 2007].”
Excess caffeine is the most common culprit in people’s bad reactions to energy drinks, and direct sellers have addressed that. Many, such as Vemma, USANA, Limu and EIRO, have natural, tea-based sources of caffeine at lower levels than industry leaders. Vemma has 80 mg of guarana caffeine; USANA’s 80 mg of caffeine comes from green tea; and EIRO Energy, too, draws its caffeine from guarana. XS Energy has 83 mg caffeine, but it also has no-caffeine versions. Blu Frog also registers at 80 mg of gurana-sourced caffeine. Yet, there are high-caffeinated beverages being sold among direct sellers. Most say they are simply competing with the likes of Red Bull and are adding other healthy components into the products that the standard drinks don’t have.
Vitamins and nutrients are packed into most direct sellers’ energy products. AdvoCare Slam combines B vitamins with amino acids to aid energy production and support mental clarity. At USANA, Rev3 is famous for what it doesn’t have as well as what it does. It has no preservatives (as a result, Rev3 cans expire in two years), artificial colors, flavors or sweeteners. Rev3 does, however, have antioxidants, thermogenic agents, low-glycemic sugars and vitamins and minerals to support the body at the cellular level. Vemma has amino acids and a philosophy of blending the nutritional wisdom of Eastern and Western cultures. Upstart EIRO Energy is, as described by CEO Chris Hausman, “a balanced, natural, clean energy drink. We’re not loading with different chemical stimulants but natural extracts, so it uses guarana, green tea, ginseng and gingko biloba as its sources of energy. And it’s in a base of very healthful fruit juices to deliver a balanced level of energy.”
Many within the industry provide energy products with fewer calories than those on grocery shelves. Amway’s XS Energy was the first energy drink launched with 0 grams of sugar, making it a great source of energy without adding the crash that comes from high sugar consumption. Vemma also has a sugar-free version of its Verve drink and a reduced-sugar version as well. The first weighs in at 4 calories, and the second at 78 calories. USANA’s Rev3 Surge Pack has only 2
grams of sugar for a total of 10 calories. Xooma’s Director of Marketing Ken Marsh explains it best: “We’re in the middle of the worst obesity epidemic that the world has ever seen. The last thing anybody needs is another sugar-filled, high-calorie, acidic energy drink that’s just going to make them fatter. You add our product to water, so it’s noncarbonated, it’s nonacidic, and you end up with no sugar and only 10 calories. Everybody wins.”
Typical energy-drink users are teens to young 20-somethings, primarily male. But the typical direct sales individual is middle-aged and female. How do you balance these demographics? Ingenuity and diversity.
Direct sellers’ energy products are geared toward everyone, from youth to baby boomers. Vemma’s first namesake product was designed to deliver strong antioxidants to baby boomers who want to retain physical and mental vibrancy into their senior years. With its follow-up product, Vemma Verve, the company went for the jugular of the big energy drink brands—the youth market.
“I was reading an article on energy drinks and saw the facts that more than 35 percent of teenagers are drinking them, with $5 billion in sales and 262 million gallons consumed last year,” Boreyko says. “I was thinking, ‘This is the poisoning of America’s youth.’ I got the idea to take Vemma and put it into an energy drink.” With a huge splash in
the market and delivering more healthy components, Verve is certainly on its target.
Generations X and Y are common targets for energy products within direct sales. USANA’s Rev3 is positioned as the drink for people who are the “outdoors type”—involved in sports with healthy lifestyles. “These are the people who were asking for an alternative to the typical energy drink,” Macuga says. “Our target has expanded into a much broader audience, though, because when you throw in things like sodas and sugar-based coffee, your demographic expands.”
Limu officially added Blu Frog to its lineup on Jan. 23, 2009. It is designed and marketed for 18- to 30-year-olds, attracting a whole new set of customers and members to the corporate ranks. It gives the younger generation something they can really grab as their own, and they hold meetings around just Blu Frog.
At Amway, Mougalian doesn’t boil it down to a single target market. “XS is really for a certain mindset, not an age,” he says. “It’s for anyone who wants to live a full, active life.”
Tailoring the message and capturing attention requires multiple messages to reach multiple demographics. For the teen and early-20 age group, you’re likely to find hyped-up, rocking-out Web sites. Vemma developed a site devoted to Verve that is truly youth-oriented. (Just turn down the volume first if you’re using your office computer.) At Xooma, the message for college kids emphasizes being mentally sharp and awake to study for tests. For young people just starting in careers, the pitch is that Xooma EDGE will help you get ahead in this shrinking job market yet give you energy for the rest of your life, too.
USANA’s associates are young, sports-minded, outdoorsy and very connected. Gen Y (defined here as those born between 1981 to late 1990s) is one of the company’s fastest-growing associate groups, and they’ve led the way to social media. Sites like MySpace, Facebook, Twitter and blogs are awash with USANA links, discussions and marketing. “They’re playing a huge role in how we communicate to our associates and the public,” Macuga says. “It’s keeping up with technology. More and more people are looking toward social media sites to get their answers, to talk to people, to share thoughts on things. So that has become our primary focus.” The company even developed a viral sticker campaign, encouraging customers and associates to take a Rev3 sticker and place it in an extreme [geographic] location, interesting site or recognizable landmark and send in photos. It’s all posted on social media sites and generates its own marketing.
Limu is also going to where its young customers are. They have recruited a bevy of young beauties, christened them “Blu Frog girls,” and sent them out to college campuses, party events, and Nascar race locations to hand out free samples. The company has even sponsored three Nascar vehicles that recently raced at Daytona. Blu Frog is all over sites like MySpace, Twitter, Flickr, YouTube and blogs around the Internet. The company hosts a monthly competition for whomever can produce and post the best Blu Frog video. With a $2,500 prize and eligibility for the grand prize of $10,000 plus a trip to Mexico, young folks are paying attention and posting videos constantly. “That’s where these kids live,” Raser says. “They think they’re talking when they’re typing. We’ve got lots of young people having a lot of fun with Blu Frog.”
In reaching Gen X (roughly defined here as those born between 1965 and 1980), companies are going to where their demographic lives: health clubs, Little League fields, offices and PTAs. AdvoCare focuses on this group and health in general by touting athletic and sports performance. “We have a lot of distributors who work in gyms and training facilities,” Miller says. In addition, there’s the parental factor at work with Gen Xers. Vemma aims to be a hip, cool energy source for youth that also satisfies mom and dad’s health concerns for their kids. EIRO is, in part, addressing Gen X mothers who are looking for a safe, healthful energy alternative that they can give to their teens.
But not all the older generation is suffering. Most baby boomers are intently focused on aging well and maintaining youthful vigor. They are looking for ways to safeguard their hearts (no mega-caffeine here, please) retain mental faculties and even have some energy to spare. This group, however, doesn’t want pumped-music messaging. They definitely want nutritional and scientific information, front and center, preferably in printed material. Xooma is making a strong appeal to boomers through a new, soon-to-be launched upscale Web site that focuses on science. There will, of course, be a hard copy brochure, too.
EIRO Research is finding an “in” with boomers by answering health concerns. “One of the groups becoming more and more concerned about what they’re putting in their bodies is baby boomers,” Hausman says. “They’re really quite savvy. When they buy a product, they read the label and not just the marketing.” With EIRO’s natural ingredients, the company feels certain that its label puts boomers squarely in their camp.
Ultimately, direct sellers are about wide appeal. Xooma’s messages about mental clarity capture the attention of younger people who never sleep and older people who are looking for their eyeglasses… again. Amway’s products and customized packaging, sampling and pro sports sponsorships bypass mass marketing altogether but manage to pull in a very diverse customer base. “NUTRILITE tends to have a ‘personality’ of being trustworthy, caring, fun and energetic but fit and nurturing,” Mougalian says. “XS is very active, very energetic, but also healthy and accomplishment-oriented.” These descriptions could work for any group.
Direct selling has a big advantage when it comes to marketing. The companies don’t have the multimillion-dollar ad budget of the Monsters and Red Bulls, but they’ve got personal demonstrations and explanations from people’s close friends and associates. “Our associates are experts at explaining the difference between traditional energy drinks and Rev3,” says USANA’s Macuga. “It’s a great icebreaker at the gym, work, wherever.”
At Xooma, the company’s distributors get their message through the clutter far more effectively because it’s customized every time. Marsh at Xooma says, “We have research and clinical dosage results and can have someone tell this story even though it’s not a 30- to 60-second message.” In fact, Amway and USANA say that their salesforces are trained to explain the differences in their products and then armed with lots of samples.
When it comes to price, direct sellers are very competitive. While they pay for training and commissions, they don’t pay for space on shelves or for commercials on television. “The Verve shot is the same as other products’ retail price,” says Vemma’s Boreyko. “Our Verve in a can sells at a 15 to 30 percent premium, but when there’s someone there to explain that Verve is actually three products in one (energy drink, superjuice and ultrapremium vitamin and mineral product), there’s no pushback on price.” USANA is in line with retailers at $3 a can for a 12-pack; and Xooma’s powder sticks are $1.99 per stick, which works out to be less than canned energy drinks.
Finally, direct selling allows for a lot of flexibility in distribution. Vemma is working with a hybrid retailing model in which its distributors can stock and sell at retail outlets like fitness centers, tanning salons and health food bars. It’s even allowing 14- to 17-year-olds to sell its products—with parental permission, of course.
Careful study, clinical research and concern for consumers’ overall health gives direct selling companies an edge against many traditional retailers. From USANA to EIRO to others, safety and efficacy are top deliverables.
Amway also concentrates on providing the “Best of nature. Best of science.” It pours extensive resources into clinical testing and derives many ingredients from the company’s own organic farms. These are important selling points for consumers concerned about health and the risks of traditional energy drinks.
“A lot of energy drinks out there have dangerously high levels of chemical stimulants like caffeine and different B vitamins,” says EIRO’s Hausman. “Recently there’s been quite a bit of bad press surrounding energy drinks. Some articles and studies have shown that ingesting these high levels of stimulants can be not only addictive but cause psychological problems.” EIRO avoids these issues with its superfruit product centering on key antioxidants and phytonutrients.
No one knows exactly where the industry is headed. The growth has been phenomenal, with huge increases like 109 percent growth in 2000/2001 down to a mere 24.7 percent rate in 2006/2007. The surge seems to be slowing as market penetration and competitor entries reach a saturation point. But, drinks and products with health benefits are still appealing to consumers, as are formats beyond the can, like shots, powders and bars. There’s still plenty of promise in the market, depending on whom you ask. “The energy pie is getting much larger,” says AdvoCare’s Miller. “The mass market is truly gravitating to it.”
Hausman of EIRO Research says, “I still think this market has a long way to go in terms of growth. It’s still very, very young. We’re seeing a lot of entrants in the market, but as the population grows, the desire and demand for these products will grow…. Overall, the new trend is people are moving toward whole foods, natural foods. But it’s tough to say.”
Some forecast the $5 billion market will top $10 billion in 2010. Liquid, canned formats have been very popular, but many are betting that the small-shot market will continue to grow. “The energy shot industry is projected to go from $100 million in 2007 to $500 million in 2009,” says Boreyko. “I see the energy shot being where the energy drink was back in 2001 and 2002. Convenience is the No. 1 product in America, and there’s more convenience with a shot than a can.”
America is one thing, but the international market looms large. Amway’s NUTRILITE brand is 75 years old, and the XS energy drink is following its footsteps around the world. “International sales are very important to the company,” Mougalian says. “On XS, we have an opportunity to expand our international reach. It’s not as global as NUTRILITE. The NUTRILITE DOUBLE X is certainly one of the best-selling supplements in the world, and our energy bars are more U.S.-based as well.” Vemma is just starting its international expansion, and USANA offers its Surge Pack powder products only in Canada and New Zealand.
Direct sellers are undeniably in the energy product market. They’re taking advantage of the need for healthier alternatives, convenience, scientific testing and personalized marketing. This is absolutely a market that is set to continue its growth and continue shifting into new phases.
Energy products are morphing into different formats these days, and direct sellers are there, in line with early entrants.
››› Cans The granddaddy of this market. People are very accustomed to drinking from cans and stocking home or office refrigerators with their energy drink stash.
››› Powders There are large cans of powders, which consumers use to scoop out a tablespoon or so and mix with a drink. There are also “sticks,” small packets of powder that can be mixed with water. They’re portable and convenient, and those like Xooma’s EDGE and USANA’s Rev3 Surge Pack allow users to control how much of the powder they put in their drink. It’s also much easier and more cost-effective for companies to ship these sticks.
››› Shots Reminiscent of half-and-half cream packages at your local breakfast eatery, energy products now come in these 2- to 3-ounce formats. Consumers simply open the package, down its contents and move on. They have the big advantage of portability. Some, like Vemma Verve, do not need refrigeration. These tend to be considered “cool” and at the forefront of a new trend. Red Bull is slated to launch its own energy shot in May.
