Kraft Foods Inc. will enter the energy drink market as it plans to launch trial caffeinated versions of its popular MiO drink starting around the new year, the company announced Monday.
Kraft's foray into the energy drink market is twofold. First, the company is looking to compete in a market which has seen enormous growth over the past five years. Kraft spokeswoman Bridget MacConnell said it's a near-$6 billion market annually.
Kraft is also looking to capitalize on the MiO drink, which has been successful in the first year of its launch.
We think it's a terrific product, MacConnell told the International Business Times in a phone interview Monday. Consumers have told us this is something they're looking for. We're very positive.
However, Kraft's announcement comes just a week after the Yale Rudd Center for Food Policy & Obesity found evidence of increased exposure and advertising to children and teenagers in sugary drinks and energy drinks over the 2008-2010 period.
Kraft was one of the companies targeted in the study, along with Coca-Cola and Dr Pepper Snapple Group. Overall, Kraft's marketing had increased only 3 percent, minimal compared to companies like Coca-Cola and Dr Pepper, but its entry into the energy drink market was very bad news, said the study's co-author, Kelly Brownell.
The last thing you need is another heavy hitter in the food industry pushing high caffeine drinks on people, Brownell told the IBTimes. These energy drinks are not necessary. There are too many already. Kraft entering the picture is bad news.
But Kraft will not market the energized MiO drink to anyone under the age of 18, according to the company spokesperson.
We don't recommend it be consumed by kids, said MacConnell..
The study was also critical of the energy drink market. The Yale Rudd Center cited the American Academy of Pediatrics, which said that highly caffeinated energy drinks have no place in the diet of children and adolescents.
Still, in 2010, teens saw 20 percent more television ads for energy drinks than they did in 2008, according to the study.
It's strictly an adult product, and that's the way we'll market it, MacConnell said.
This is Kraft's grand entry onto the energy-drink market after a couple of experiments and consumer demand led the company to launch the MiO energy drink.
MacConnell said the company has released two varieties of Crystal Light within the past four years that have 60 mg of caffeine per serving, as much as a six-ounce cup of coffee. These two flavors are wild strawberry and grape, she said.
Kraft decided to fully enter the market with a new drink that has quickly become popular. MacConnell said the MiO drink is on track for approximately $100 million in revenue in its first year on the market.
We have certainly seen strong growth in the energy drink category, Irene Rosenfeld, Kraft's CEO, told the Financial Times. We've had a smashing success with MiO, and I think this is the perfect platform for the category.
MiO, a liquid water enhancer, is currently available in six flavors. The new energy drink will come in varieties of 12 or 18 servings. Each half-teaspoon that is squirted into water will contain the same amount of caffeine as a cup of coffee.
Last week, Kraft reported a 22 percent jump in third-quarter profits from the same period a year ago, touting investments in marketing and new products to help provide increased profits despite significantly higher commodity prices.
Kraft reported $922 million in earnings and $13.23 billion in revenue, which was an 11 percent jump from last year. Because of its strong third quarter, Kraft improved its full-year outlook.
Our investments in marketing and new products continue to drive high quality growth and solid market shares. And we've accomplished this despite having taken significant price increases to offset record-high input costs, Rosenfeld said in a conference call with investors last week.
Earlier this year, Kraft announced it would split into two companies by the end of 2012. One global snack company would focus on the potential of Oreo cookies, Cadbury chocolates and Trident gum. The other, based in North America, would focus on products like Kraft cheese, Maxwell House coffee and Oscar Mayer meat.
Now, with its new energy drink, MacConnell said Kraft expects to compete with others in the market, including 5-Hour Energy and Red Bull.
It's a large category, MacConnell said of the energy-drink sector, and we want to be sure that we have selections our consumers are looking for.