Energy drinks sector must set new goals

VALUE brands cannot build a long-lasting and prosperous business while competing on "rock-bottom" prices, a leading Yorkshire drinks entrepreneur has warned.

Simon Gray, managing director of Boost Drinks, also told an industry gathering that brands must concentrate on "out-thinking" rather than out-spending to win market share and keep customers happy.

Mr Gray, whose Leeds-based energy sports drink producer has grown to a 20m turnover business, also revealed he is in talks with leading supermarkets about stocking Boost products.

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The entrepreneur told the conference, which included suppliers and manufacturers, and senior staff from Coca-Cola Enterprises – the largest bottler of the fizzy drink – that the market would become more complex after the recession, as shoppers distinguished between higher value goods, on which they are happy to spend, and "commoditised" items for which they would ruthlessly track down the lower prices.

He said: "At the lower end of the market, which has undoubtedly been benefiting from the downturn, brands cannot sustain rock-bottom prices if they are to achieve business prosperity in the long-term without offering consumers a strong value proposition and they must listen to the consumer.

"If the energy (drinks) sector is to maintain market growth, brands must focus on out-thinking, not necessarily out-spending, to give consumers what they really want. Delivering on your brand's promise, and offering an additional surprise to keep the customer happy is a recipe for success in this altered consumer landscape."

Mr Gray, who set up Boost in 2001, said the firm was still seeing growth despite the recession and that the market is attracting more and more consumers.

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He also said the recession could create a cultural shift in shoppers' attitudes – driven by price comparison websites, a surge in promotional vouchers and online offers – making value brands more widely accepted, citing Poundland, which has mid-market customers and has spawned a host of imitators.

"Price aside, value in the post-recession market will become a more complex, multi-layered proposition for all retail sectors. Consumers are more willing to spend money on goods that they perceive to have genuine "value", while ruthlessly tracking down the lowest prices for goods that are more commoditised.

"Combining performance with quality, delivery and value for money makes for a powerful equation and, exploring the link between value and price, PricewaterhouseCoopers has identified four strategies that consumers are adopting.

These are:

Trading down: buying cheaper types of products or services.

Switching: buying from cheaper stores.

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Buying clever: spending more time comparing prices and finding promotions, and buying less.

"Ultimately, whether it is through enforced need driven by financial necessity or brand choice, consumers have become savvier and pride themselves on getting a bargain."

Mr Gray, whose firm is a regional finalist in Ernst & Young's Entrepreneur of the Year awards, said Boost was at the "high-end of the value brands" on offer. Its success, and those of similar products, had created a challenge for premium and mid-market brands, he said.

"People have looked at value brands and quite liked them. There are some good-tasting drinks. There may not be the shift back (to premium products) we have seen after previous recessions where there were not the value alternatives out there."

Pricing a way into the market

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Simon Gray began his career in food and drink wholesaling in Leeds and, after building up a knowledge of the sector, he spotted a gap in the market for energy drinks at an affordable price.

He launched Boost Drinks in August 2001 when the market was saturated with own-label products and dominated by major consumer brands.

Its pricing was based on value but not at the bottom of the market, and it enabled Mr Gray to build market share quickly.

The firm grew sales by 88 per cent between 2005 and 2008, Mr Gray said.

Today, the firm has

only seven staff because much of its work is outsourced.