Grabbing Bull by tail

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Pepsi-Cola Co. and Snapple Beverage Group are hoping to hobble the charging Red Bull.

Pepsi is weighing a Mountain Dew energy-drink extension, while Cadbury Schweppes is introducing its own entry for its Elements line, Venom, a lightly carbonated product packaged in a Red Bull-like slim can. At the same time, it's breaking a multimillion dollar ad campaign for the Elements line.

Both competitors are aiming to blunt the success of Austrian import Red Bull, which, despite being available only in 40 states, last year controlled 65% of energy-drinks, a turbocharged segment of the soft-drink category.

Led by Red Bull, that segment has lurched from a standing start to an estimated $200 million-plus business this year. While tiny compared to the $45 billion carbonated soft-drink industry, nutrient-enhanced drinks are thriving and gaining attention from everyone from the bar crowd, students and athletes to marketers and federal regulators.

According to several insiders, PepsiCo's Pepsi-Cola is tinkering with testing its own lightly carbonated Mountain Dew energy drink by the end of the year. A company spokesman said only that Pepsi already is in the category and "right now, SoBe is our entry." Pepsi bought SoBe last year.

Although Mountain Dew is the country's leading non-cola, "Red Bull is taking a lot out of Mountain Dew's hide," one executive familiar with the situation said. Another pointed out that the more-established Mountain Dew and anti-establishment SoBe have different audiences; therefore if there were cannibalization, Pepsi would rather compete against itself than outsiders. Mountain Dew's agency is Omnicom Group's BBDO Worldwide, New York.

Although Hansen Beverage Co. was a distant No. 2 in the segment with 20% share, according to Beverage Marketing Corp.'s latest figures, SoBe predicts it soon will supplant Hansen.

Although Venom won't get its own ads, the entire Elements line, marketed by Cadbury's Snapple Beverage Group, will join Red Bull on the airwaves with its first TV effort later this month on MTV. Interpublic Group of Cos.' Deutsch, New York, produced four 30-second black and white cartoon spots that pledge "natural energy for an unnatural world." Guerilla efforts also support.

Maura Mottolese, VP-marketing at Snapple Beverage Group, said that even though the category might be a fad, Snapple must participate regardless of its longevity "We always have to keep up with the trends and ... recognize that our products may not have a 10-year life cycle, but consumers demand them," she said.

It's uncertain if Red Bull can maintain its lead or will go flat once moneyed competitors such as Anheuser-Busch Cos., Coca-Cola Co. and Pepsi and their prolific distribution networks dig in, said analyst Bill Pecoriello of Sanford Bernstein, a division of Alliance Capital.

A-B last year launched 180, and Coca-Cola launched KMX. Both recently named ad agencies-Shaw-Marconi Creative, St. Louis, for 180 and Cliff Freeman & Partners, New York, for KMX. Print and radio advertising for KMX will break next month.

A Red Bull spokeswoman said attention from competitors reinforces its vision. "Now that there are other energy drinks on the shelves, our category is validated," she said.

Marketers, however, could be heading into a minefield with alternative beverages. Because of suggested or implied health benefits and increased marketing, the U.S. Food and Drug Administration is looking at the category.

Last week, the FDA said it sent Hansen and two other companies warning letters, adding that more companies would be contacted this week. The agency declined to identify the businesses it was targeting but said it is concerned they are using additives-ginkgo biloba, echinacea and Siberian ginseng-that might be unsafe. The FDA said the companies might be asked to prove their ingredients are safe if they persist in touting them.

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