What is the relaxation drink segment and what are its chances of success? - Research in Focus
The explosive growth of energy drinks worldwide is in large part attributable to a global consumer need for quick energy boosts to power through work, errands and other necessary parts of daily life. Many people like the convenience of just grabbing an energy drink rather than having to brew coffee or tea to wake them up in the morning or power them through the late-afternoon doldrums. But, what about the other side of the equation? What does the convenience-loving consumer do when they need to relax?
Alcoholic drinks are certainly one option. Many consumers choose to unwind with a beer or glass of wine, but there are large numbers of people who don't drink or for whom alcohol isn't an ideal solution (people stressed at work, for example). Calming teas are another possibility, but this is a group that doesn't like to spend time brewing their energy: There is good reason to think they may not want to do it with their stress relief either.
Enter relaxation drinks. This relatively new beverage segment seeks to become the mirror image of energy drinks. Brands with names like Just Chill and Tyme Out promise stress relief and caffeine-free focus boosts, designed for the hours between when a consumer needs caffeine and when he/she needs to go to sleep.
Carving out a new category of soft drinks will require a monumental effort. There are serious issues, including a lack of consumer awareness and questions of efficacy, that will need to be overcome if relaxation drinks are ever to become a notable fixture on the soft drinks landscape.
Rebooting from the days of Drank
The segment requires definitional clarification. Terms are bandied about pretty freely in the drinks industry and 'relaxation drinks' is currently used to describe both drinks designed to enhance focus without causing drowsiness and those designed to put the drinker to sleep. To avoid confusion, 'relaxation drinks' will here refer only to the former. This means brands like Dream Water, Slow Cow and Marley's Mellow Mood Tea are excluded, even though it is not unusual to hear them referred to as 'relaxation drinks'". Certainly, there are many similarities between these two categories, but the differences are significant enough that they need to be looked at separately.
Relaxation drinks started to appear in Japan in the mid-2000s and then began to make their way to the US. These first products had somewhat of an edgy - some might say dodgy - feel to them. One major brand was called Drank, a reference to an illicit concoction made out of cold medication. Others had names like Purple Stuff and Lean, which also hinted at vaguely narcotic effects. These brands were marketed towards a partying crowd, yet never managed to break into the mainstream. In the US, the Food & Drug Administration also moved in, shutting down brands like Slowtivate for false health claims.
The second wave of relaxation drinks
The segment's latest group of additions are taking a more mature approach to the category, focusing more on working men and women who need specific functional attributes. Working professionals and busy mothers are particular target markets. The category has not entirely shaken its past, though, and products like the 'relaxing soda' Mary Jane's (whose active ingredient is actually kava, despite what its name hints at) are still on the market.
One brand leading the charge globally is Tranquini. Founded in Austria by a former board member at Red Bull in 2015 and made of ingredients that include chamomile, lavender and green tea extract, the brand is already available in over a dozen European, Asian and African markets and aims to be in 50 worldwide by the end of 2016. CEO & "chief relaxation officer" Ahmed Elafifi laid out his goals to Forbes India - where Tranquini launched this year - saying,: "When you need energy drinks you will buy a Red Bull, when you need refreshments, you will buy a cola, when you need hydration you will drink water and when you need relaxation you will need Tranquini."
The product is not yet available in the US, the world's largest market for both energy and relaxation drinks, but by some estimates as many as 400 other brands are. Many of these brands, however, are sleep aids and the number of focus-enhancing relaxation drink brands is far smaller. Neuro Bliss, whose parent company, NeuroBrands, markets a range of functional beverages that also includes a sleep-inducing drink, is one of the best- known. Just Chill, the creation of a group of Los Angeles-based surfers, is another. Overall, the US market for relaxation drinks is said to be growing at least 20% annually.
In Sweden, NOA Potions took top honours in the premium drink category in the 2014 World Beverage Innovation Awards with a beverage that has the equivalent of 15 cups of green tea extract in a single bottle. NOA is already available in 18 countries around the world, including Mexico, Slovenia, the Philippines and even Afghanistan.
Over in Germany, the category received a boost when the co-creator of the drink Tyme Out was selected to be the star of the local version of TV programme The Bachelor, and he used the platform to promote the brand. Meanwhile, the head of local competitor Rhino's Energy Drinks recently told Die Welt: "As a medium-sized firm, it is not possible to create a new market segment on our own, but I am convinced that the time is coming for these sorts of drinks." He admitted, though, that currently only about 2% of the company's German sales came from its relaxation drink.
Estimates for the size of the market in any country are not easy to come by, both because of the newness of the category and the aforementioned blurry definitional lines. Industry sources estimate the worldwide market to be at least US$200m. Business Insider estimated the size of the US market to be $153m in 2014 and GoodFood put the Australian market at 0.5% of the total soft drinks market in the same year (US$34m using Euromonitor International estimates for the size of the Australian soft drink market). Both numbers are probably including large amounts of sleep-inducing drinks, with the market size of focus-enhancing drinks likely being much lower. In Germany, where estimates restricted to focus-enhancing drinks are available, the market is probably only about EUR1m (US$1.1m). At any rate, it can be said with certainty that relaxation drink sales are minuscule compared to energy drinks, retail sales of which were over US$30bn in 2015.
Should relaxation drink brands stress out about the future?
That people are having trouble relaxing is not in doubt: A recent study from the University of Queensland estimated that one in 13 people worldwide suffers from an anxiety disorder. The American Psychological Association found recently that Americans rate their stress at an average of 4.9 on a 10-point scale (anything over 3.7 is considered unhealthy). In the same study, 37% of American women and 27% of American men reported that stress has made them feel fatigued in the last month. This is exactly the sort of space that these relaxation drinks are targeting. Sales of over-the-counter sleep aids are also increasing worldwide, particularly in the US, where they rose by US$145m between 2010 and 2015.
It remains to be seen, however, whether consumers will actually turn to these drinks to relieve some of that stress. NeuroBrands' CEO has said that he believes that this is a potential multi-billion dollar category. That is within the realms of possibility, but several major roadblocks are currently in the way.
The first is that the average consumer is simply unaware of their existence. As a small category that does not spend a tremendous amount on advertising, raising the profile of relaxation drinks and increasing their distribution into the major retailers where consumers can find them will be essential.
Then, there is the matter of the actual effectiveness of these drinks in reducing stress and heightening focus, which is still very much in question. Studies have shown that some of the ingredients in them, like valerian root and L-theanine, are effective in inducing relaxation in isolation, but there has been little research done on the efficacy of the drinks themselves. In April this year, NeuroBrands was ordered by a court to either conduct human studies to validate the functional claims on all of its product lines or to stop selling them, showing the seriousness of this problem. Aside from regulatory scrutiny, whether these brands can actually make the consumer relax will also, of course, matter a great deal when it comes to getting repeat customers.
Other issues include price - a 12-pack of Just Chill, for example, sells at US$26, over US$2 a can. There is also the fact that a wide variety of non-beverage options also exist to reduce stress. Whereas someone looking for an energy boost basically faces a choice between an energy drink and another beverage, someone looking to de-stress can turn to anything from yoga to adult colouring books. Relaxation drinks could work as supplements to any relaxing activity, of course, but the fact remains that they face a much wider variety of potential substitutes than energy drinks do.
All of these factors combine to mean that no matter how stressed people are, these drinks face a challenging future. Busy people leading stressful lives need products that are widely available and proven to work, neither of which is true at the moment for relaxation drinks. Should a Coca-Cola or another big soft drink player pick up one of the smaller brands and put some serious marketing and distribution muscle behind it, things could be different.
For now, though, relaxation drinks are likely to remain a tiny - and largely irrelevant - sub-category.
- Ten questions for Diageo - Analysis
- Have spirits companies forgotten the mainstream?
- Does alcohol accelerate the onset of dementia?
- How craft beer has shattered its US shackles
- Why Scotch must drop the 'malts good, blends bad'
- Moet Hennessy unaffected by LVMH Dior buy
- Distell acquires majority stake in Cruz Vodka
- BrewDog moves into spirits with LoneWolf launch
- Portman Group heads to Tesco for new chief exec
- Diageo to cut 105 jobs in Scotland, 50 in Italy
- Global Scotch insights - market forecasts, product innovation and consumer trends
- Global Champagne and sparkling wine insights - market forecasts, product innovation and consumer trends
- Battle of the Generations - The fight for iGen, Millennial, Gen X and Baby Boomer consumers
- Craft Beer: Coming of Age or Past Its Prime?
- Myanmar - ISA Country Report