Amway solidifies position in energy drink market with acquisition of XS Energy brand
A big part of the company’s business is in nutritional products, including Amway’s longstanding Nutrilite brand. The company had already been selling XS Energy Drink, which bills itself as one of the first no-sugar energy drinks. The drinks rely primarily on B vitamins and caffeine (about 83 mg per serving) for their energy punch.
Amway spokesman Nick Wasmiller said bringing the brand fully in house will stimulate future growth. Amway already does a lot of its own manufacturing for its Nutrilite products.
“XS is currently available in 38 nations around the world, including Japan, United States, South Korea and Australia. The acquisition will serve as a catalyst for expansion to other geographic regions where Amway operates. XS Co-founder David Vanderveen is joining Amway as a vice president and general manager of the brand,” Wasmiller told NutraIngredients-USA.
Tailored message
Vanderveen said the brand’s no-calorie formulation seemed to resonate with consumers right from the start when the company did a lot of testing in grocery and big box stores.
“In 2001 and 2002, we found that we could convert approximately 20% of grocery store foot traffic to purchase a case of energy drink when only 8% of consumers were buying energy drinks,” Vanderveen said.
Vanderveen said the company achieved that success by tailoring its marketing to make sure the brand would be acceptable to the household members who hold the purse strings but would also attract the family members who are the biggest consumers of the products.
“We were selling to 'Mom'. Mom isn’t a gender to XS, it’s the person buying by the case for the home. She or he may be the decision maker, but they’re not the approver. XS markets to the approvers, the other family members, particularly teens and people in their early 20s,” Vanderveen said.
“Older people don’t mind hip / young brands, but younger people don’t want their parents’ brands - most of the time. XS’ goal was to bring new people into the category, not fight over the market leader’s customers. We saw that we were able to do that consistently,” he said.
Growing market
Wasmiller said the acquisition links Amway more directly to the rapidly growing energy drink segment, which expanded from a $3.8 billion global business in 1999 to a $27.5 billion business in 2013 and is expected to grow annually by 13% until 2018, according to Euromonitor and Research and Markets.
Amway has been the exclusive distributor of XS since 2003, during which time the brand has grown to $150 million in sales each year and is now in 38 markets around the world. Over the last decade, Amway said it has seen particular success with its events and lifestyle branding in key growth markets like Japan and North America, where half of the business owners registered in the past year are younger than 35.
"According to our research, no demographic is more positive about entrepreneurship than those younger than 35, which is the precise target group for the XS brand," said Amway Chairman Steve Van Andel.
