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3 Stocks to Watch Amid the Rising Appeal of Energy Drinks

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·4 min read
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Energy drinks are gradually gaining popularity as one’s daily dose of caffeine to stay vitalized for daily activities. The younger generation, especially the millennials and Generation Z, find energy drinks quite appealing, and several brands have resorted to marketing strategies, especially advertisements, to make the most of this trend.

In fact, a report by the National Center for Complementary and Integrative Health, last updated in July 2018, showed that in the United States, after multivitamins, “energy drinks are the most popular dietary supplement consumed by American teens and young adults.” Moreover, the report stated that most energy drinks are consumed by men between 18 and 34 years while almost one-third of teens of 12 to 17 years, consume them on a regular basis.

Notably, even though the coronavirus outbreak put a brake on economic activities and compelled people to stay and work from home last year, the demand for energy drinks remained.

Markedly, Christine Dang, category manager at online grocer Thrive Market, stated that the shift to energy drinks was noticed during the pandemic because more people needed to consume something to increase their productivity, as mentioned in a Progressive Grocer article. However, the article also cited Dang’s comments that people are becoming increasingly aware of the level of sugar in their energy drinks as well as caffeine content. This is prompting retailers to focus on products with a lower percentage of sugar and caffeine.

Energy Drinks Market Poised to Grow

Given the appeal that energy drinks have garnered, even during the stay-at-home scenario, it is no surprise that the energy drinks market is poised to grow in the future as well. Notably, a report by Mordor Intelligence stated that the energy drinks market is estimated to witness a CAGR of 9.12% from 2021 to 2026. Moreover, the report stated that various at-home exercise regimes led to the continued need for energy drinks. A recovery in sales in this category was noted at the year end with the lifting of strict lockdown measures around the world and reopening of fitness and sports clubs.

3 Stocks to Watch Out For

Energy drinks continue to be attractive, especially to the younger generations, who are substituting them over coffee and other caffeinated beverages, to carry out their daily activities. Hence, this seems like an opportune moment to look at companies that can make the most of this continued demand for energy drinks. Notably, we have selected three such stocks that carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Coca-Cola Company KO provides sparkling soft drinks; water, enhanced water, and sports drinks; energy drinks, and so on. The Zacks Consensus Estimate for its current-year earnings increased 0.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 12.3%.

PepsiCo, Inc. PEP introduced an energy drink line, namely, Mtn Dew Rise Energy, and the company also purchased the energy drink company, Rockstar Energy Beverages, last year. The Zacks Consensus Estimate for its current-year earnings increased 0.2% over the past 90 days. The company’s expected earnings growth rate for the current year is 9.6%.

Keurig Dr Pepper Inc. KDP operates as a beverage company and also has energy drinks, including the Venom Energy brand. Notably, Venom Energy also has low-calorie variants like the Venom Low Calorie Strawberry Apple Energy Drink, and so on. The Zacks Consensus Estimate for its next-quarter earnings increased 2.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.3%.

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