Starbucks Enters Energy Drinks: Could Baya Become a New Growth Driver?

This is an English adaptation of a FoodBud historical article originally published on January 27, 2022.

Starbucks planned to launch a new energy-drink line called Starbucks Baya Energy, built around three fruit-flavored ready-to-drink products.

The line was developed through the North American Coffee Partnership, or NACP, Starbucks' ready-to-drink beverage partnership with PepsiCo. The products were expected to become available through U.S. retail and online channels, with Starbucks planning to stock them in U.S. Starbucks stores from March 1.

Starbucks and PepsiCo established NACP in 1994 to bring Starbucks coffee to consumers in ready-to-drink formats. Over more than two decades, NACP's annual sales grew to more than $2.8 billion.

Why energy drinks?

After coffee chain Dutch Bros listed in 2021 and performed strongly in the public market, some analysts suggested Starbucks could learn from Dutch Bros by entering energy drinks. Dutch Bros' Blue Rebel line included 34 energy-drink products and accounted for nearly one-quarter of its revenue.

For Starbucks, energy drinks looked like a potentially meaningful incremental market. In its official release, the company said it had been listening to customers and watching emerging market trends, including steady growth in energy drinks.

According to Euromonitor International, the U.S. energy-drink market reached $18 billion in 2021. Globally, Research And Markets projected the functional beverage market would grow at a compound annual growth rate of 8.66% to reach $208.13 billion by 2024, or roughly RMB 1.3 trillion.

A large market, but not an easy one

The prize was large, but Starbucks faced a competitive category with meaningful entry barriers.

Technomic's David Henkes said the energy-drink market was dominated by a small number of players with highly loyal consumers and strong brand recognition. In North America, those included Red Bull, Monster, Coca-Cola's newly acquired BodyArmor, and PepsiCo's Gatorade.

Henkes also noted that well-known brands can launch energy-drink versions of existing products, but consumers may not necessarily accept them. Red Bull was the clear category leader, while Monster and RockStar also had strong positions.

Coca-Cola had already tried to capture energy-drink share with Coca-Cola Energy, introducing it to North America in early 2020. The product did not gain much traction. Beverage Digest data showed Coca-Cola Energy held only 0.7% of the U.S. energy-drink market in 2020, compared with 25% for Red Bull and 15% for Monster.

Coca-Cola withdrew Coca-Cola Energy from North America in 2021, just over a year after launch. In the second half of 2021, it instead spent $5.6 billion to acquire a controlling stake in BodyArmor.

Another route into the category is to create a new brand and product from scratch, but that requires significant capital and time. Henkes argued that any new entrant needs to be clearly differentiated.

Starbucks hoped Baya could stand out through a combination of caffeine and fruit flavors. Alongside Starbucks Baya Energy, the company also planned to launch its first ready-to-drink product containing oat milk, expanding its plant-based portfolio. Starbucks said this would support its target of cutting carbon emissions by 50% by 2030.

Note: Forward-looking market forecasts, store rollout plans, IPO/public-market context, acquisition figures, and 2030 targets are historical references from the 2022 source article.