Coffee. 1 sugar, 2 limes.
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You know what makes a nice, tart, ice cold lime-ade in the summer taste even better? Add coffee to it! At least that's what Starbucks (NASDAQ: SBUX) is trying to sell us with their line of "Refreshers." The drinks debuted in "made-by-barista" form on July 10, though your local Starbucks may have started the promotion early. I myself was thwarted upon trying to purchase a hibiscus refresher before the actual debut, as was another patron gunning for the lime one.
So, what Starbucks tells the Huffington Post is a "breakthrough innovation," I am calling a "hard sell." The canned version of the Refresher has only been out for a limited time so unfortunately sales trends are pretty non-existent, but breaking in was a difficult prospect to begin with. The $6.9 billion energy drink market, currently represented by 300 brands in the US alone, is dominated by Red Bull's 42.6%, Monster's (NASDAQ: MNST) 14.4%, and Rockstar's 11.4%. You'd think the muscle of Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP) would have shoved their way in by now, but they only hold 6.9% and 3.6%, respectively. Suffice to say, it's a pretty crowded and competitive market and it is questionable as to where Starbucks fits in.
The obvious angle is "natural energy," in this case from green coffee extract. But, when I see a can with the green siren logo on it I immediately think coffee. Then my mind goes to the taste of coffee and it gets all confused because the label on the can is telling me what is inside is fruit-flavored. Why they didn't roll this out with the Tazo brand and the more appetizing flavor combination of fruit and tea is anybody's guess, but they didn't. I'm not totally sold on the survival of the canned versions, but I am intrigued by the handmade version. It's an interesting concept; Starbucks is taking the energy drink away from the realm of the gas station kwik-e-mart and turning it into more of an artisan experience. For instance, the hibiscus flavor has whole blackberries and the lime has a real lime wheel.
If there's a way for Starbucks to eat into Monster's and Red Bull's 30% and 32% (respectively) "energy drink at a convenience store" market share, it's going to be by backing in. Similar to their bottled Frappuccino drinks, Starbucks should have proven the concept in-store first, gotten customers to think of the Refresher as a handmade, natural beverage, and then "backed in" to retail. They are doing the opposite. By introducing the canned Refresher first, customers are starting out with the perception of the handmade version as being a gussied up convenience store item. Whether or not they will bite we will find out shortly.
You can find out for yourselves (and maybe leave a comment?) by going to Starbucks on July 13 between noon and 3. Free Refreshers. You're welcome.
TheLaowai has no positions in the stocks mentioned above. The Motley Fool owns shares of The Coca-Cola Company, PepsiCo, and Starbucks. Motley Fool newsletter services recommend Monster Beverage, PepsiCo, Starbucks, and The Coca-Cola Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
