Panera Bread may have dropped its Charged Lemonade drink, but restaurant chains are just getting started with energy beverages.
Starbucks later this quarter will start selling what CEO Laxman Narasimhan called a “hand-crafted energy platform,” effectively bringing the country’s second-largest restaurant chain firmly on an increasingly large energy bandwagon.
This follows the likes of chains like Dunkin’, which introduced its Sparkd’ energy drink in February. Sonic Drive-In, which first introduced a Red Bull Slush in 2019, added Rechargers in October. Jersey Mike’s began selling Celsius beverages last year.
Meanwhile, a host of rapidly growing chains have thrived in part by offering a selection of energy beverages aimed at younger consumers apparently needing an afternoon pick-me-up. None is more prominent than Dutch Bros, which generates a substantial portion of sales from its Rebel line of energy drinks.
But if you really want a sense of the demand for such beverage, simply walk into your local convenience store and take a glance at the cooler.
Energy beverages are huge at gas stations and other convenience retailers. Sales of such beverages grew 14.6% last year, according to data from Circana and Restaurant Business sister company CSP Daily News.
C-stores sold more than $14 billion worth of energy drinks last year, generating more sales than either carbonated beverages or smokeless tobacco. Much of their coolers are now filled with all kinds of energy beverages. Good luck finding something that won’t keep you up until 4 a.m.
Panera theoretically wanted a piece of the energy drink action in 2022 when it introduced its Charged Lemonade and then used it to market a promotion for the Summer Solstice that year, saying it helps customers “stay charged for the longest day of the year.”
The beverages contain about as much caffeine as a cup of Panera’s dark roast coffee, yet it was blamed for the deaths of customers in a pair of lawsuits. The company, currently working on a menu overhaul, has now dropped the beverage.
Nevertheless, the market remains robust. Just ask Dutch Bros, one of the country’s fastest-growing chains.
Dutch Bros gets about 24% of its sales from Blue Rebel, more than any other type of beverage it sells. Sixteen percent of its sales are in iced coffee, for instance. That has helped Dutch Bros generate more sales in the afternoons. Sixty percent of Dutch Bros’ sales come after noon, according to SEC documents.
The energy drink maker Celsius has been expanding its work with foodservice brands. The company works with Pepsi, a major investor, which has given the brand access to more restaurants. Celsius has high hopes for its work with restaurant chains.
“That’s a huge unlock that we’re working on,” CEO John Fieldly told analysts in November, according to a transcript on the financial services site AlphaSense.
Specifically, he said, restaurant chains that add Celsius beverages generate incremental sales when they do so. “Within foodservice, we have a hypothesis that our consumer is actually getting water or not getting a beverage because they’re ordering from the delivery dudes or another platform where they’re not getting the fountain drink.”
That’s a major point for restaurant companies that have been losing beverage sales for years. Growing sales through delivery and other takeout channels mean customers can bypass restaurants’ typical beverage selection for whatever they have at home.
Operators are eager to rebuild those sales, and energy drinks could be one solution. Indeed, it was one of the considerations when Subway renegotiated its beverage contract and ultimately chose Pepsi over Coke: The company and its operators want to boost beverage sales that have been languishing for years.
So far, according to Fieldly, it’s been working. “Initial feedback has been that we are incremental to these eateries and fast-casual restaurants,” he said.
All of which is why Starbucks, which is struggling with suddenly weak sales, is now looking into the energy drink business.
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