Energy Drinks: The Category Coke Had to Buy IntoThin moat

For a company whose moat rests on owning the most valuable beverage trademarks, the energy drink category is an uncomfortable exception. It became the industry's growth engine over two decades, and Coca-Cola did not own a leading brand in it — which is why it took a large minority stake in Monster rather than building a competitor from scratch.

That decision is worth reading carefully, because it is the clearest admission of a limit to the moat. Coca-Cola's system can distribute almost anything and its marketing can build almost anything — except, apparently, a credible energy brand, which required buying into someone else's. Energy drinks are bought for effect rather than for taste or nostalgia, which is precisely the kind of purchase where a century-old trademark counts for least.

The category keeps expanding, and it keeps expanding into Coca-Cola's places. McDonald's is adding Red Bull to its beverage line-up¹ — energy taking fountain and menu space in the chain most associated with Coke.

Watch what proportion of Coca-Cola's growth comes from categories it entered by acquisition rather than by building. The total-beverage strategy is sound, and a company that must buy each new category is paying for growth it used to create.