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Greensboro, N.C., Beverage Maker Tap into Growing Market for Energy Drinks

Posted on: Thursday, 29 December 2005, 15:00 CST

By Fran Daniel, Winston-Salem Journal, N.C.

Dec. 28--GREENSBORO -- When P.R. Performance Inc. was trying to come up with a name for its new energy drink in 2001, the company went with BURN.

Tyler Benedict, the company's president, chief executive and founder, is happy with the choice because he was leaning heavily toward the name Diesel.

"It's got a strong name, but there are very few people who are going to buy a drink called Diesel," he said.

P.R. Performance, a beverage manufacturer in Greensboro that outsources its production, chose Burn because it wanted a name that was universally appealing and didn't pigeon hold the company into a certain type of drink or demographics, Benedict said.

The company's overall brand name is Source Beverages. Its products are Source BURN, Sugar-Free BURN and BURN2.

John Sicher, the editor and publisher of Beverage Diges, said that energy drinks have been around in Europe for a long time but didn't explode in this country until about the last three years.

According to Beverage Digest, energy-drink retail sales in the United States were about $2 billion in 2004 and are expected to be about $3 billion this year.

Gary Hemphill, the managing director for Beverage Marketing Corp., a research and consulting firm in New York, said that people typically consume energy drinks for energy.

The category, which large companies are jumping into, has become increasingly competitive, he said.

Red Bull is the No. 1 product with about half of the market and Monster is at No. 2.

Hemphill said that Pepsi and Coca-Cola, each with a few brands, have been pretty aggressive in the category this year.

There are also smaller companies that sell energy drinks, but it's getting more difficult for them to succeed.

"There are a lot of smaller ones out there because the category is growing so fast," Hemphill said. "Because it's very profitable, it's attracted a lot of attention."

A number of brands have already come and gone.

Of the more than 300 empty cans of BURN's competitors that Benedict keeps in his office at 339 Martin Luther King Jr. Drive, he estimates that about 40 percent are still in business.

Hemphill said that new entries need a uniqueness or point of difference to compete.

"Retailers aren't necessarily going to want to carry them because they already have a lot of products," he said. "And even if a retailer does carry the product, the consumer may not be aware of the brand or be familiar with the brand and would want to have a reason to purchase it over the products that they've purchased historically."

Benedict said he knew several years ago when BURN was created that his company needed a product that tasted better, was healthier and stronger than what was in the marketplace.

He said that what differentiates BURN, which has a citrus taste, from other energy drinks is that it has the highest caffeine content of other products on the market; higher antioxidant vitamin levels and B-vitamin levels; and doesn't contain high fructose corn syrup like most energy drinks.

BURN uses the same sugar profile, sucrose glucose, as the leading sports drinks, he said.

P.R. Performance's revenue was about $400,000 in 2004 and is expected to continue to grow.

Benedict said that sales have grown every year that the company has been in business and that BURN sales are in the top 20 of all energy drinks in the United States, based on his company's research of total revenues of its competitors.

P.R. Performance, which sells its Source Beverages brands nationally in 14 states, recently added distribution in Illinois, Texas, Ohio and Kentucky. The company's manufacturing is done in Indiana and Minnesota, and will expand to California early next year. The majority of its products are sold in convenience stores, but BURN can also be found in bike shops and gyms.

Jack King's Gym in Winston-Salem has been selling BURN for at least six months, buying two to three cases every two weeks.

Owner Jack King said he has a number of clients who drink it before they do their workouts.

"They want it when they come in the door," he said.

King said he plans to keep the product at his gym.

"It gives you a little edge," he said.

Benedict, an extreme cyclist, became interested in the beverage industry in 1998 while doing account executive and creative work at his father's advertising agency in Daytona Beach, Fla.

He researched how to make the ideal sports drink. Then he raised money from family and friends to create his first product, Propel, a powdered sports drink.

In 1999, not long after his company had its first batch labeled, shipped and delivered to its warehouse, Quaker Oats, now owned by PepsiCo, came calling to buy the Propel trademark, Benedict said.

He said he took the deal after he was offered a low, six-figure, giving his company start-up capital.

P.R. Performance relabeled its product and changed the name to Pro Lyte, another powdered sports drink.

Benedict said that the product did well, getting into a few hundred bike shops throughout the country and into two national mail-order catalogs.

"The problem was it was still very much a niche product," he said. "It was really geared toward hard-core athletes, people who will spend 25 or 30 bucks on a canister sports drink as opposed to just grabbing a Gatorade.

He realized that the product would never be a national household name. If he tried to transfer Pro Lyte from a powder to a regular drink product he would be competing against Gatorade, and he didn't have the advertising dollars to go up against a national brand like that.

Ultimately P.R. Performance chose the energy-drink category, which wasn't as competitive a market back then as it is today. The company launched Source BURN (8 ounces) in February 2002. By then the company was based in Greensboro, where Benedict had moved with his wife, Kristi, two years earlier.

The company's Sugar Free BURN (8 ounces) hit the market in summer 2003, followed by BURN2 (16 ounces) in August.

Today, the company has two salaried employees, three outside sales representatives and a part-time worker. Benedict expects to hire an office administrator next year and a territory manager when it starts production in California.

He said that the company's biggest challenge has been trying to make its drinks a household name on a shoestring budget, so it is constantly working on ways to generate more investment capital to keep growing.

"We can't spend millions of dollars on mass marketing, so we're building a grassroots brand," Benedict said.

A lot of the company's business has been generated by word of mouth, and it has found creative ways to encourage word of mouth business.

For example, the company does what Benedict calls midnight runs (from 11 p.m. to 1 a.m.) to places where large crews are working and to businesses, including construction crews, hotels, fast-food restaurants and movie theaters.

Company employees just show up in one of their vehicles, wrapped in a bright yellow graphic that showcases BURN, and start handing out free drinks.

"Once someone tastes BURN they are blown away by how good it tastes for an energy drink," Benedict said.

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PEP, KO,

Source: Winston-Salem Journal

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