Beverage, Leverage & Regulation
Energy-drink makers stand firm on products' safety, even as opponents look for a weakness.
Monster Energy drinks are loud, fun, active and even extreme. They’re marketed as appealing to “athletes, musicians, anarchists, coeds, road warriors, metal heads, geeks, hipsters and bikers.” It’s an in-your-face, devil-may-care attitude that bares stark contrast to Rodney Sacks, the South African chairman and CEO of Monster Beverage Corp., especially lately.
While still in your face in his own way, Sacks is a dead-serious businessman. Yes, his products are meant to get a party started—and keep it going—but the suggestion that the more than a dozen variations of the namesake energy drink are killing people clearly cuts him to the bone.
“Once again, we reiterate that our products are safe based on both our and the industry’s long track record and the scientific c evidence supporting the safety of our ingredients,” he said with all gravity at the beginning of a quarterly earnings call in late February. “The FDA has confirmed that available studies do not indicate any new, previously unknown risks associated with caffeine consumption. Unfortunately, inaccurate and speculative articles continue to be published in the media regarding energy drinks.”
Sacks says he and his team “endeavor to respond to those inaccuracies when practical,” but the concern remains that irreparable damage has already been done to the hottest new beverage category to come along since bottled water.
A Brief History
Energy drinks have always provoked a certain level of public rancor: Do we really need our kids hopped up on more caffeine and sugar than usual? Is guarana dangerous in large doses? And what the heck is glucurono lactone? (See text at center of page.) For a long time, the manufacturers reveled in it; it added to the element of danger for which energy drink marketing aims.
But real trouble started in August 2012, when The Wall Street Journal reported that New York’s attorney general was investigating alleged “misstatements” about ingredients and health value. Two months later, The New York Times reported that the Food & Drug Administration(FDA) was exploring a link to energy drinks—specifically Monster—in five deaths over three years, including that of a 14-year-old Maryland girl, Anais Fournier, who died in December 2011 from a heart arrhythmia after drinking Monster Energy on two consecutive days. And it didn’t stop there.
In November, federal officials said they have received reports of 13 deaths over the past four years that cited the possible involvement of 5-Hour Energy, the leading energy-shot product in convenience stores and other retail channels.
And in March, a group of medical doctors pleaded with the FDA “to take prompt action to protect children and adolescents from the dangers of highly caffeinated energy drinks.”The avalanche of allegations was more than enough fodder for salacious newspaper headlines across the country(see sidebar, p. 64), while opportunistic local-TV-news reporters staked out convenience stores and grocery aisles to file their cautionary reports with examples of energy drinks in hand.
The major energy-drink makers went on the defensive, issuing statements and reports supporting their products:
Monster responded by offering statistics illustrating years of safe consumption and comparing Monster energy drinks to coffee, which often contains more caffeine than a comparable sized energy drink. The company stated it was “unaware of any fatality anywhere that has been caused by its drinks,” and said that it “does not believe that its products are in any way responsible forth death of Ms. Fournier and intends to vigorously defend the lawsuit.”
Monster later issued its own medical findings in the case of 14-year-old Fournier. While some found the lengthy press release crass and unwarranted, Monster felt it was necessary to state its case publicly.
“Even though Monster had every confidence in the safety of its products, the company retained a group of physicians, including a coroner, to independently ascertain whether there was any basis for the allegations in the suit,” the company stated in the lengthy report.“The physicians stated conclusively that there is no medical, scientific or factual evidence to support the Maryland Medical Examiner’s Report of ‘caffeine toxicity’ or that Ms. Fournier’s consumption of two Monster Energy Drinks 24 hours apart contributed to, let alone was the cause of, her untimely death,” said Daniel Callahan, of Callahan& Blaine, one of Monster’s lawyers.
Santa Monica, Calif.-based Red Bull has generally been brief and to the point. “Red Bull Energy Drink is available in 165 countries because health authorities across the world have concluded that it is safe to consume, “it said in a statement to CSP.“Red Bull Energy Drink fully complies with FDA food labeling laws and regulation. Red Bull voluntarily provides the caffeine content on its labels and adheres to the American Beverage Association’s Guidance for the Responsible Labeling and Marketing of Energy Drinks.”
Living Essentials, Farmington Hills, Mich., in a statement outlined its doctrine of safe use in detail and embraced its categorization as a “dietary supplement.” 5-Hour Energy, it stated, “is not an energy drink, nor marketed as a beverage. … Living Essentials takes reports of any potential adverse eventide to our products very seriously. Woefully comply with all of our reporting requirements. … Living Essentials LLCis unaware of any deaths proven to have been caused by the consumption of 5-Hour Energy.”
Rockstar Energy, Las Vegas, released a white paper in March announcing the results of a study by an “independent panel of scientists.” The panel, according to the report, “concluded that the intended use of the key ingredients in Rockstar products is safe and meets the ‘generally recognized as safe’ (GRAS) standard.”
Seven months after that first report, it seems there is such a thing a bad publicity.
First, the reports ignited or refueled alit any of legislative efforts designed to ban or limit the sale of energy drinks.
And second, energy-drink sales growth slowed, first for Monster and then for the entire category, but far from enough to begin writing a eulogy for the category
While Monster was growing by 18.7% in all channels of retail for the 13 weeks ending Oct. 20, 2012, vs. the same period a year ago, and by 19% in c-stores for the four weeks ending Oct. 20, according to Nielsen data, it slowed to 8.1% growth in all channels for the 13 weeks ending Feb., 2013, and to 7.5% growth in c-stores for the four weeks ending the same date.
For the full category, energy drinks, including shots, increased 13% in all channels for the 13-week period ending in October and only 5.7% for the period ending in February. Similarly, four-week growth in c-stores dropped from 10% in October to 3.8% in February.
“I think what happened was, you initially saw the negative press … focused more on our brand as opposed to the category, and then in more recent times, it’s become a whole-category issue,” said Monster Beverages’ Sacks. Beverage industry consultant Gary Hemphill of Beverage Marketing Corp. agrees, and says the tide could turn forgetter or for worse at any time. “Growth remains healthy and demand for the products is strong,” he says. “This could change if regulation comes, but time will tell. The situation bears vigilance as it can change rapidly.”
Rules and Regulations
While the FDA’s involvement has scaled back (see sidebar, p. 66)—more a product of the media reporting on “adverse effect “filings than an investigation—regulatory efforts as a tool of politics continue on municipal, state and national levels.
Councilmen in both Chicago and Cleveland have suggested limits or bans on energy drinks.
Democratic U.S. Sens. Richard Durbin (D-Ill.) and Richard Blumenthal(D-Conn.) continue to urge the FDA to regulate the level of caffeine in energy drinks.
Five state representatives in Illinois have signed on as sponsors of a bill that would limit energy-drink sales to consumer solder than 18. Sponsoring Rep. Lisa Fine told CSP, “I don’t have a problem with somebody who can make that educated decision purchasing the product. But if they’re under the age of 18, I think we need to protect them, just like we do with cigarettes, just like we do with alcohol. …I think a retailer would feel terrible if they sold these products to a child who had a severe physical reaction, and this would take that responsibility away.”
To date, the only actual action has-been on a county level. Suffolk County in New York, which includes Long Island, agreed to prohibit energy-drink manufacturers from marketing aggressively toward minors; prohibit the sale or distribution of energy drinks (or“stimulant drinks,” as they’re called in the resolutions) in county parks to anyone under the age of 18; and set up a public education campaign on the side effects associated with the beverages. Penalties for disobeying the new regulations include fines of up to $1,000. Though the ban, approved by the county legislature in March, does not ban sales of the products in stores, it can be seen as the first step down a slippery slope.