Easy Energy

article by Susan Wright
Business Development Director: Michael Raunegger
Headquarters: Warsaw, Poland
'06 sales: approximately $80 million
Employees: 25
Goals: Nationwide distribution within the U.S. and continued international expansion

Seven years after the launch of XL Energy Drink, the Polish company is now selling more than a 100 million cans a year, with 2006 sales estimated at $80 million dollars. XL Energy has a 10% share of the energy drink market in Poland, Germany, and France, and in Israel they are the market leader with a 35% share. They're distributed in over 40 countries, including a number of European countries (Denmark, Greece, Cyprus, Sweden, Hungary) as well as countries in Central America, South America, Africa and the Middle East. 

"We aren't newcomers to the energy drink market," says Michael Raunegger, business development director for XL Energy Drink. "We've had 7 years to grow while we've been getting to know the market."
Now XL Energy is making a big push into the U.S. market. XL Energy Drink is made in two filling plants, one in Poland and one in Holland and they are shipped to warehouses in New Jersey and Fort Lauderdale, Florida. Michael Raunegger came to New York in July of last year to head up a team of four sales people; his background is in business development in entertainment and casino businesses in the U.S. 

"Our strategy is not to sell directly to bars and restaurants, we only sell to distributors," says Raunegger. "We were fortunate to get Manhattan Beer in New York City, and that's going well with their 25,000 accounts. Now we're working with distributors on the East coast with at least a few hundred accounts, and in the south, which is a year round market. We'll work our way west carefully choosing our distributors." 

The owner of XL Energy is Peter Klose, who grew up in the energy drink market in Austria, where it all started. Klose doesn't have a background in the beverage industry, but he did work in the U.S. for CNN for a time in the 90s before moving back to Europe. Klose put up the money for the venture himself, but instead of launching his company in Austria and go head-to-head with Red Bull, he established his business in Poland because the market was bigger. 

"Our goal was to have the same taste as the energy drinks that originated in Thailand 30 years ago," says Raunegger. "And even better in the aftertaste." 

XL Energy is lightly caffeinated with a citrus flavor that is pleasantly sweetened with sugar rather than corn syrup. Much like other energy drinks, its active ingredients are taurine, caffeine, and vitamins from the B group, but XL Energy only has 45 calories. In the sugar-free version, saccharine is used as the sweetener. In 2005, the company received a kosher certificate that confirms that all production processes, substances and formula are kosher-parve. 

"Our other goal was to be almost half the price of other energy drinks," says Raunegger.
"Our marketing is built into the price. The distributors like this product because it's inexpensive and good, so they try it out. Consumers like it because it tastes like they expect but it costs less."
XL Energy Drink currently sells 6-7 containers a month in the U.S. with "high hopes" of completing 2007 with 150 containers sold. At 2,750 cases a container, that's almost 10 million cans. 

"Other energy drinks have come and gone because they've spent too much money going directly after the consumer," says Raunegger. "For us to do the same would be a waste. We know the demand is out there, and the price is set very high. We don't need to sell much to break even, so we can afford to go step by step." 

XL Energy believes their longevity as an international company gives them credibility. Because so many energy drinks are launched every day, it's important that they can show they've been on the market successfully for years. 

"We know the energy drink business, and we know that every state is different," says Raunegger. "The U.S. is easier for regulation because I can get FDA approval for the whole country. For the same size market in Europe, I have to go to 20 different regulators and deal with different languages for each country. Because of that, we are experienced with different markets, languages, and mentalities."
They support their product with marketing activities and promotions; attending shows to spread the word about XL Energy, and providing sales material, t-shirts, posters, and stickers to their distributors. They've learned to treat each distributor on an individual basis, relying on their knowledge of their customers.
"As we are small in the U.S. compared to other energy drink companies, we're still looking for distributors and employees to help us get a piece of the cake," says Raunegger. "We also need more quality employees who are enthusiastic and know the market." 

The company isn't going into consumer marketing and sponsoring events until next year when XL Energy Drink is distributed more widely. "We're thinking of going into the music industry in the U.S.," says Raunegger. "Many other energy drinks mostly sponsor sporting events, so it's a waste of money in my opinion to compete for attention with them when they're doing a great job already." 

XL Energy is going after a younger market: 15-to-25 year olds who are looking for a "good mood for fun, adventure, and mind work while saving them some pocket money," says Raunegger. The company notes the rise in their sales during the school examination seasons and during summer when consumption of cold drinks is the greatest. 

"XL Energy Drink is also perfect for bars because it tastes like people expect, but costs half the price," says Raunegger.
To catch the consumers' attention, XL Energy relies on their price and their red, blue and silver packaging. The colors are very similar to Red Bull for both their regular and sugar-free products.
"People pick up the can and see that it's reasonably priced so they try it," says Raunegger. "When they find out XL Energy gives them the energy they need with a good taste, they come back for more because of the price." 

XL Energy comes in four packaging formats including the traditional 8.4 ounce can. They offer an 8.4 ounce glass bottle, and plastic bottles in 16 ounce and 34 ounce sizes currently in Europe. The cans are also available as 6-packs. Their focus for the U.S. market will be their regular and diet cans rather than their bottles. 

"We are considering launching our 16 ounce can this year," says Raunegger. "In the U.S. we need to have a bigger can because the market is developing in this direction. 30-40% of the market will be the bigger can." 

Along with their push to gain U.S. distributors, XL Energy continues to look for new markets. "We get requests every day from countries like Turkey, Albania, Australia, etc.," says Raunegger. "We're not in Mexico yet, but we're looking into it now. There's a lot of potential for expansion with our energy drink."