HOW PEPSICO STUNG RED BULL WITH STING
The energy drink has emerged as one of PepsiCo’s top selling beverage brands. How long will the dream run last?
(see table).
Sting’s availability across the board, from paan shops to modern trade stores.
Goel says that becoming widely available in general trade stores works well for on-the-spot consumption, a segment that contributes significantly to sales of beverages in India. “No other energy drink brand is as widely distributed as Sting. They also accompanied this with high level marketing,” he adds.
“Sting has gained significant popularity, particularly among the 15-19 age group, comprising a substantial 126 million individuals. This demographic, mainly consisting of students prioritizing affordability, finds Red Bull often beyond their reach,” says Amulya Pandit, consultant at Euromonitor International. “Furthermore, Sting has received a positive reception in rural areas, where consumers may not distinguish between different soft drink categories,” he adds.
In four years, Sting completely monopolized the segment with 90% share, relegating even Red Bull to the margins. From an estimated sale of 23 million cases in 2021, volumes grew to 65 million cases in 2022 and a record 110 million cases in 2023.
THE WIND
PepsiCo or VBL may not have foreseen the kind of success Sting would receive but it came at a critical time for the company. By 2017, PepsiCo in India was not in the best of shape. It was losing market share in many beverage segments, struggling to compete not just with arch rival Coca-Cola but also with homegrown brands such as Dabur and ITC.
A Mint report from December 2017, which quoted Euromonitor data, had a rather ingenious headline: ‘PepsiCo’s midlife crisis in India’. In carbonated beverages, flagship product Pepsi lost share to touch 13.4% (retail value) in calendar year 2016 from 14.9% in 2013, the report stated. Fruit juice brand Tropicana’s market share dropped from 10.2% in 2013 to 8.8% in 2016 while Slice slipped marginally from 15.6% in 2013 to 15.4% in 2016, the report further added. Similarly, its packaged water brand Aquafina saw its share drop from 11.1% in 2013 to 9.9% in 2016.
The company bled—in 2016-17, PepsiCo India posted a loss of ₹148 crore, its fourth consecutive year of losses. It needed a success
story desperately and Sting provided that wind beneath its wings.
“While energy drink is certainly not a new category, it did receive a boost after Sting’s launch. New brands gaining rapid penetration and also expanding the category is a rarity and Sting is thriving at both,” says K. Ramakrishnan, managing director—South Asia, Kantar Worldpanel, a market research company.
“Inside homes, Sting is currently reaching 2.7% of the urban households annually. Nearly eight out of every 10 households that consume energy drinks purchased Sting in the last one year,” he adds. “Out-of-home, too, Sting has a similar hold,” he further informs.
Sting’s success reflects in the success of VBL.
Between 2018 and 2023, VBL’s top line has more than tripled to ₹16,042.6 crore and net profit zoomed seven times to ₹2,101.8 crore. Last year, the company’s realization per case hit a record ₹175.7 from around ₹145 in 2019, resulting in an operating margin of 22.5% for the calendar year.
“As the mix of Sting improves in our overall sales, it leads to higher net realization as well, as it is slightly more profitable than the other brands,” Raj Gandhi, group CFO, VBL, told Mint.
PepsiCo India turned profitable in fiscal 2018. In 2022-23, it recorded sales of ₹8,031 crore and profit of ₹255.75 crore. However, this performance may have to do more with the growth of its food business.
HEADROOM FOR GROWTH?
Having come this far, how much further can Sting go? VBL cites the examples of Vietnam and Pakistan where Sting accounts for 30% and 25% of PepsiCo’s
overall portfolio, respectively.
In India, Sting has headroom for network expansion. “Our reach today is up to 3.5 million dealers out of the base of 12 million. We got a big runway after Sting, where we added 400,000 exclusive dealers. These dealers were never purchasing the goods from us earlier, and now after Sting, they have also started carrying our other products,” Gandhi said during an investor call on 9 November 2023.
But there are challenges, too. For one, the entry of Coca-Cola in 2022 with Thums Up Charged Berry Bolt, now called Charged, is Sting’s new rival. Coca-Cola, too, has a wide dealer footprint and a marketing muscle that is at par with PepsiCo.
“Already, we are beginning to see that the growth of energy drinks is starting to slag. Coca-Cola’s entry will have an impact. It will stunt Sting’s potential growth,” says Pandit of Euromonitor.
PepsiCo, on its part, remains confident. “Sting will benefit from category growth with the entry of other ‘me-toos’ and its product superiority, engaging consumer activation, superior distribution will ensure it remains the most loved energy drink in the market,” the spokesperson quoted above says.
The other worry is any potential regulatory action by Fssai. Though the regulator did intervene in 2015 as mentioned before, the growing popularity of energy drinks among the youth, and increased scrutiny of health drinks in general, could trigger another round of regulation. That could present a curve ball for Sting.
“We are completely compliant with all the regulatory laws of the markets we operate in. Consumption of a bottle of Sting is comparable to having a cup of a hot beverage like coffee,” PepsiCo’s spokesperson says. “Further, as a responsible brand, Sting gives all mandatory specific cautionary declarations on our product label.”
Considering that there are no regulatory headwinds, we are all set for an engrossing battle ahead, one that would test Coca-Cola for a change.
Coca-Cola did not respond to clarifications sought by Mint. Red Bull said that globally, the company has “a no employee spokesperson philosophy”.
(With inputs from Suneera Tandon)