Nooyi: Energy drinks remain a niche category

by Eric Schroeder
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NEW YORK — Even as beverage manufacturers flock to the increasingly popular energy drink category, Indra Nooyi, president and chief financial officer of PepsiCo, Inc., is convinced the segment is still a niche market.

"Energy drinks at this point are a niche category," Ms. Nooyi, speaking at the JP Morgan Consumer & Retail Holiday Conference in New York on Tuesday, said of the $3 billion energy drink category. "The challenge we all have is to make sure we don’t treat these niche products — these splurge products — like we do core C.S.D. (carbonated soft drinks). So, if we deliberately lower the price on those products prematurely and try to drive too much volume to the energy drinks category, that is a problem."

Ms. Nooyi’s comments come in the midst of PepsiCo’s launch of Mountain Dew MDX, an extra-caffeinated version of Mountain Dew. The company also owns SoBe No Fear and Adrenaline Rush brands through its 2001 acquisition of the South Beach Beverage Co.

"I think the fact we’ve launched MDX is a very strategic move, because what it does is it lets the people who want to pay for the energy drink category, who want that extra boost, to go off and buy our energy drinks," she said. "And they are sort of the high-end part of the portfolio. But the velocity on those products and the volume will always remain as a niche category."

She noted that while MDX may not provide the "full boost" of an energy drink, it provides enough to hold its position within that value segment.

"I think that’s the way we’ve handled the energy category, so we don’t bring that energy high-end down to the C.S.D. value business," Ms. Nooyi said. "I think that’s the way we’ve decided to address the energy drink category."

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