Regulatory Changes on the Horizon for Energy Drinks

Energy drinks, which have been available in Canada for 17 years, are included in new proposed Health Canada regulatory changes for supplemented foods. 

There is currently no regulatory framework for supplemented foods in the Food and Drug Regulations and Health Canada has been using temporary marketing authorizations to permit the sale of these products on a case-by-case basis and under specific conditions. 

Supplemented foods are prepackaged foods containing one or more added supplemental ingredients, such as vitamins, minerals, amino acids, caffeine, and herbal ingredients, which have historically been marketed as providing specific physiological or health effects. The Canadian Beverage Association has some concerns regarding the proposed new regulations.

The Canadian Beverage Association notes that 88 per cent of the 600+ supplemented foods and caffeinated energy drink products currently approved by Health Canada and have been consumed for years would now, with the new regulations, require a caution identifier front-of-pack. 

“The Canadian Beverage Association supports the modernization of regulations and the way food and beverages are regulated. However, what Health Canada has suggested are sweeping changes to the way that many beverages have been sold, marketed and purchased by Canadians for 10, sometimes 25, years,” says Jim Goetz, president, Canadian Beverage Association. “This includes what we would view as extreme restrictions on what beverage products and companies are allowed as far as their claims are concerned. As well as the labelling that Health Canada is suggesting being onerous to manufacturers, we believe it will be confusing to consumers.”

Goetz says while the association has no problem with Health Canada updating the regulations, there are concerns over the current proposed amendments.

“Caffeinated energy drinks that have a medium level of caffeine would have to have a label stating they are high in caffeine when products that are high in caffeine, like actual coffee, are being consumed two or three in a day with no warning labels,” said Goetz. “Health Canada has wanted to update the regulations for 10 years and during those 10 years, the temporary marketing authorization process has been in place, which has regulated and allowed products to be sold safely. We would like to see the regulations more directly relate to the rules that have already been in place for 10 years.”

Goetz also states that the Health Canada proposed changes are inconsistent with how similar products are labelled in the jurisdictions that are Canada’s major trading partners, such as the United States, United Kingdom, Australia, New Zealand, and the European Union.

“These jurisdictions have had rules in place on supplemented beverages and caffeinated energy drinks for many years,” says Goetz. “They have had no issues with the way they are regulated and we would like to see some consistency between those jurisdictions and Health Canada.”

When energy drinks first hit the Canadian market, they were successful with consumers because they were independent, says Andrew Drayson, CEO and managing director, DD Beverage & Nutrition, which is re-introducing Beaver Buzz Blackcurrant flavour this year. 

“They had functionality, which is another key component, but the independence of the beverage brand is what really attracted consumers and now, with the pandemic, consumers want to support anything that’s local business versus big corporate products even more,” says Drayson. “I’m very proud that our energy drink, Beaver Buzz, turns 17 in June 2022. It has performed this long in the ultra-competitive energy drink category and is now a legacy brand.”

Coke Canada Bottling notes that more of the energy drinks they provide in Canada are now made here.

“In 2020, we announced a capital investment of $17 million into our Weston plant, which allowed for the installation of new equipment to meet the growing demand for many of our carbonated beverages, including energy products,” says Tara Scott, vice president, commercial growth strategy and execution, Coke Canada Bottling. “Some of these products, such as our partner brand, Monster Energy, were produced in the United States. With this investment, we were able to bring more production to Canada. The investment has also resulted in a reduction in emissions of over 1.25 million kilograms of C02.”

As an independent, family-owned business, moving to a more streamlined, local production was a priority,” says Scott.

“We have seen incredible growth from our energy portfolio, including Monster, NOS, Full Throttle, and Reign,” says Scott. “As Canada’s local bottler, we are committed to our mission to create a better future and deliver optimism for our employees, customers, consumers and communities. Investing in our manufacturing facilities so that we can produce more energy drinks in Canada is one of the ways we’re doing that.”

The energy category has done extremely well, seeing faster growth, in the pandemic, says Carl Goyette, president and CEO, GURU Organic Energy Corp., which recently launched a new flavour: GURU Guayusa Tropical Punch, made with guayusa combined with passion fruit, guava, jack fruit and a hint of clementine.

“There is no doubt that people are still consuming a lot of energy drinks, even if they’re working from home,” says Goyette, “Unlike most energy drinks that are made with artificial ingredients, GURU is made with plant-based, organic, natural ingredients. Lately, we’ve been introducing new plants, such as matcha and yerba mate.”

GURU launched an exclusive national distribution agreement with PepsiCo in October 2021.

“2021 was a remarkable year for GURU and I am proud of what we have achieved since going public and launching the next phase of our company’s growth ambitions,” says Goyette. “We generated strong net revenue growth of 37 per cent, increased our points of sale by 59 per cent, raised additional capital, signed a game-changing distribution agreement with PepsiCo in Canada and invested in our brand. We rolled out new product innovations and, late in the year, began to deploy what will be a sustained marketing effort and investment in our brand in key markets to drive awareness to support our expanded product distribution.”

GURU will be coming out with two more flavours in the spring as well as launching a four-pack format.

“One thing that has accelerated over the pandemic, is people are making fewer trips to the store,” notes Goyette. “Multi-packs have grown significantly so we are expanding the distribution of our four-pack, which is four 355 ml cans, nationally. The other thing we are doing is offering larger formats. GURU used to be only available in 250 ml and 355 ml but now 45 per cent of the industry is being consumed in the 473+ ml size. Consumers are looking for the larger format. They are not looking for the quick energy shot. They’re consuming their energy drinks over the course of the morning, like coffee. We will be launching a 500 ml format in the spring in Quebec and then in the rest of Canada later on.”

The energy drinks category is a huge industry that keeps growing, notes Goyette.

“Convenience stores should stay focused on this category but they should know that it is no longer one size fits all,” states Goyette. “The days of two brands dominating the whole space are over. Consumers have different needs now. There is legacy energy but there is a new category that is performance energy and the huge potential is with better-for-you, organic products. Our view is that the energy drinks industry is going to transform over the next decade as consumers switch from artificial ingredients to more natural in everything they consume.”

Energy drinks need to be well-placed in the cold beverage section with brands being given enough space to be noticed by consumers, said Goyette, with another, secondary display located somewhere else in the store. 

There is a growing consumer demand for beverages that meet functional needs, like energy and performance, says Patrick Tremblay, director of marketing – energy, PepsiCo. 

“Retailers need to ensure they are providing consumers with access to brands they recognize and trust,” says Tremblay. “Brand recognition is extremely important. When consumers see the iconic Rockstar logo, they can be confident that they are getting a quality beverage that provides the boost of energy they are looking for and that tastes great. We also know that innovation and variety are important to the convenience store customer. They are more likely to try new flavours and innovations from a brand they already know and love.”

Energy drinks are now number three in the liquid refreshment beverage category and have seen tremendous growth year over year, says Tremblay.

“Since the onset of the pandemic, we continue to see a greater demand for beverages with more functional benefits, like energy and performance,” says Tremblay. “We expect the energy drinks category to continue to expand and accelerate.”

Consumers, now more than ever, are looking for healthier alternatives to conventional beverages, says Mitch Jacobsen, founder and CEO, Rviita Inc., which launched its’ fifth flavour, Cherry Black Cherry, a blend of dark cherry juice, golden organic honey, and black tea, in August. 

“Rviita Energy tea is a delicious, natural energy beverage that will leave you feeling incredible without the crash,” says Jacobsen. “Our bullseye customer is a 20-55-year-old health-conscious shopper who is looking for healthier alternatives to a traditional energy drink. Our natural, hand selected blend of ingredients and durable low carbon footprint packaging makes us different. We worked with food scientists for over two years to develop a proprietary formula that uses natural caffeine from tea and guarana seed. Containing only six grams of sugar from organic honey, Rviita is also one of the lowest calorie options on the market and does not use any artificial sweeteners or preservatives. We officially launched to stores in January 2020 and have since grown to over 750 stores across Canada.”

Better-for-you products are the way of the future, says Jacobsen. 

“Recent market data is showing that the natural and organic segment of the energy drink market is anticipated to be the fastest growing product type in the category,” states Jacobsen. “I believe COVID-19 has accelerated consumer awareness of health and wellness and now, more than ever, consumers are looking for healthier and natural alternatives to their favourite snacks and beverages.” 

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