A well-known saying posits that the powers of one’s mind are directly proportional to the quantity of caffeine consumed. For most people, coffee has long been the preferred form of delivery for that inspirational stimulant.
Indeed, coffee is the second most traded commodity in the world, just behind crude oil. For decades, the U.S. has been its primary end market with Americans drinking nearly 150 billion cups each year, making it by far the world’s biggest coffee consumer—and one of the largest consumers of caffeinated beverages.
That dynamic is changing, however, as members of the Millennial and Generation Z cohorts are turning to alternate ways of achieving their caffeine fix.
It’s no secret that the growth trend among this demographic is in energy drinks that are often brimming with caffeine. And with most energy drinks containing an average of 160 milligrams of caffeine versus 100 mg of a typical cup of coffee (and 35 mg for a typical can of soda), it’s no surprise why Millennials have made the switch.
Beyond the obvious appeal of the mega-caffeine boost, energy drinks appeal to the health-conscious Millennial crowd as they’re typically fortified with vitamins, herbs and other such ingredients. And while many energy drinks contain sugar, there are plenty of sugar-free options in this category to choose from.
For investors, the growth potential of this booming industry is unquestionable. Research from the Oregon Consulting Group reveals that while the global coffee market is expected to grow by an annualized 0.9% between now and 2025, the energy drink market is projected to grow at a 1.4% annual clip.
With this in mind, let’s take a look at some potentially worthwhile investment opportunities in this space. What follows are three of the leading players in the energy drink market—each of which has an attractive relative strength and revenue growth profile.
Celsius Holdings (CELH) offers sugar-free energy drinks with no preservatives, artificial flavors or colors and made with healthy ingredients. The company’s products are aimed at health-conscious consumers who love energy drinks but want to avoid the “crash” and jitters that often accompany them (some have called Celsius the “new Red Bull”).
Along with its popularity, the firm’s reach is growing, and in recent years has secured distribution agreements with big names like Anheuser Busch, Pepsico, Keurig, Dr. Pepper and MillerCoors. Further, its U.S. distribution now exceeds 174,000 retail locations as of earlier this year (up 50% from a year ago). It also boasts a 17% share and is the second-largest energy drink brand on Amazon, ahead of Red Bull but behind Monster.
As the brand grows increasingly popular, revenue has followed suit, with sales jumping over 110% year-over-year during Q2 to a record level of $326 million. Wall Street expects top-line growth to double over the next two years based on the company’s aggressive brand expansion strategy.
One of today’s top-performing caffeine stocks is Monster Beverage (MNST), the maker of the ultra-popular Monster Energy drinks. This fast-growing company has flourished in recent years and dramatically outperformed its peers during the Covid-related economic slowdown.
Post-Covid, Monster remains the top seller in the energy drink category on Amazon (specifically, Monster Energy Ultra Sunrise) and can be found in most U.S. food-and-beverage retail sales outlets. Moreover, according to Nielsen data, Monster has just overtaken Red Bull as the global sales leader among dedicated energy drink producers, with a 37% market share (versus 35% for Red Bull).
A big part of Monster’s growth strategy is predicated on international expansion, and to that end, it recently acquired rival energy drink maker Bang Energy (previously the third-largest energy drink maker in the U.S.). Looking ahead, analysts see the expansion initiative paying off and predict steady 10%-ish total sales growth for Monster in each of the next five years.
Vita Coco (COCO) produces a popular line of coconut water sold in health food shops and grocery stores around the country. Vita Coco bills its drinks as a natural source of electrolytes and vitamins, with at least one of its product offerings, Vita Coco Energy, containing caffeine.
The company has a limited trading history as it came public in October of 2021, right before the bear market, but sales and earnings growth have been impressive to date and the stock has outperformed most of its energy drink peers.
Wall Street anticipates earnings more than tripling this year and continuing to grow at an impressive double-digit clip in the coming two years.
While these three are all in different phases of their growth trajectory, all three are poised to benefit from the changes in how younger generations get their caffeine fix.