Monday, May 13, 2013

Genre Analysis: Does MLM and Energy Drink mix well?

Monster Energy
Monster Energy, one of dozens of Energy Drinks
on the market  (Photo credit: Wikipedia)
EDITOR'S NOTE: Genre Analysis is my personal opinion on a particular genre of network marketing, like MLM + penny auction, or MLM + daily deals, and so on.  

You can mix MLM with almost any business that needs a lot of consumer-level marketing, and energy drink is no exception. There are a ton of energy drinks on the market, Red Bull being the original, but there's plenty like Monster, Rockstar, and bazillion more. It's gotten so popular that all the major beverage companies (Coca-Cola, Pepsi, etc.) bought themselves into the market, and there are bazillion small scale imitators, including 5-hour Energy, chomping at the bits from the outside. 

So does it make sense to combine MLM with energy drinks? Yes, to a certain extent. Energy drinks are almost pure profit. It's sugar water, like soda pop, albeit with slightly more exotic ingredients (gurana! ginseng!) and sells for twice the price of same size of cola/pop. So it can support a high-margin operation like MLM, where roughly 50-70% of the cost are paid out back to the affiliates as commission. 

The main problem with Energy Drink MLM is that it is in a heavily saturated market with plenty of traditional retail crowding out any more competitors, unless you have something really unique. 

If you walk into a supermarket, you'll see Monster and Rockstar and some brands you probably never noticed before. All energy drinks. If you went into a discount store like Smart and Final, or Big Lots, you'll find brands that you never even heard of, Rush, Zapp, Bolt, NOS... All energy drinks too. People are already surrounded by energy drinks. You'll really need something really special to stand out and justify its premium price.

Furthermore, there are concerns over the health effects of energy drinks. HuffPost had an article last year about deaths that may be caused by energy drinks. The concern is high enough that San Francisco city attorney is asking energy drink makers to reduce amount of caffeine in the drinks and stop marketing to minors. Monster Energy was so furious, it SUED the San Francisco city attorney. Other counties and such are already banning sales of energy drinks to minors. 

Thus, energy drink market's growth potential is low. There's just too much competition out there. There are already a dozen different MLM Energy Drinks out there. Deepak Chopra's Zrii is probably the best known MLM energy drink. There are many others. AND they're competing against retail energy drinks with much better retail presence and name brand recognition. 

Which brings us to one related specific question... Does PureNRG FX make any sense? 

PureNRG FX is marketing an exclusive brand: the Playboy Energy Drink, which actually launched back in 2009, and even had a national bus tour, complete with "Playboy Energy Girls" and party events and all that. However, it pretty much died in 2011 when PlayBev (Playboy Beverages) went into voluntary bankruptcy, having failed to meet the minimum sales requirement as specified in the licensing contract with Playboy Enterprises. The company emerged from bankruptcy in 2012, and promptly sued Playboy Enterprises to prevent it from giving the license to some other company. Playboy tried to get the suit dismissed, but so far the lawsuit is still there, with several of Playboy's motion to dismiss denied by the judge. 

I don't know where is PureNRG FX going to get its drinks from, the original PlayBev or whatever new company Playboy is going to give the license to.  And if you don't know, perhaps you shouldn't be joining this thing. At least not buy any for resale until the situation is resolved. 

If that is resolved, then you have to evaluate what sort of distribution can this brand achieve, and can you get local stores to stock it, or do you have to sell it from your car's trunk in ice chests?

Personally, I think this would probably work better as a franchise (where you get X sellers per city) instead of MLM, or even work through existing drink distributors, but then, that's just me. "Your mileage may vary."
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