Innovation spotlight: Starbucks’ Iced Energy Drinks

Welcome to Innovation Spotlight! Each month we’ll spotlight a brand that’s capitalizing on a current consumer trend with a new product innovation.

This month we researched Starbucks’ Iced Energy Drinks, a line of new sugar-free energy beverages released this summer. Read on to get our analysis of the product's in-market potential, the audiences it appeals to, as well as what you can learn from it to innovate smarter.

Known for their wide range of coffee beverages, Starbucks has announced the release of something new: A line of energy-fueled fruity drinks that offer a fresh alternative to iced coffee.

These new Iced Energy Drinks are only available in a venti size (24 fl oz) and contain 140 to 205 mg of caffeine — which is comparable to a Starbucks grande cold brew beverage. 

They come in the following three flavors: 

• Melon Burst Iced Energy: With flavors of melon and cucumber balanced with bright Passion Tango® tea, served over ice.  

• Tropical Citrus Iced Energy: With flavors of passionfruit and citrus, balanced with green tea, served over ice.  

• Frozen Tropical Citrus Iced Energy with Strawberry Puree: With flavors of passionfruit and citrus balanced with swirls of strawberry puree.

While the first two flavors are available in stores around the US year-round, the Frozen Tropical Citrus Iced Energy with Strawberry Puree beverage is only available exclusively on the Starbucks app, for a limited time. 

Energy drinks have taken off in the last few years, particularly among younger adults, and popular quick service restaurant (QSR) chains are jumping on the bandwagon. Dutch Bros, Dunkin’ and even McDonald’s have released energy drinks of their own, so we were curious to see how these new Starbucks Iced Energy Drinks might land. 

The release of the new energy drinks comes at an interesting time, as Panera had to discontinue their Charged Lemonade after multiple lawsuits involving the levels of caffeine in it. The Starbucks drinks have less caffeine but are still more punchy than the energy drinks its competitors have to offer.

1. If done successfully, innovation is a powerful tool to drive incremental penetration for your brand. Brands should balance innovating close enough to their portfolio to credibly leverage their expertise but far enough to be able to attract new audiences.

2. Ensure you consider how your innovation might also be incremental for your core consumer. Understand the role it plays vs your core offerings and the different occasions it might be catering to beyond your core to drive greater overall brand engagement among existing consumers to minimize cannibalization.

3. When launching a range of products or menu items featuring different flavors, variants or formats it’s crucial to understand the appeal of each, which in turn will help determine distribution and marketing strategies to maximize growth.

What’s the potential?

Starbucks’ Iced Energy Drinks score in the top 20% of all QSR innovations we have tested in the US market on breakthrough potential (46) and are in line with the average QSR innovations when it comes to trial potential (81).

The drinks sit in the ‘seed and grow’ section of our potential quadrant, which means they are seen as highly unique and distinctive but may not necessarily appeal to a mass audience. 

The positioning of Starbucks’ new Iced Energy Drinks on our potential quadrant makes sense given the go-to caffeinated beverage for consumers in the US is coffee, which Starbucks is best known for worldwide. While some people might still want to stick to their coffee, the largest coffeehouse in the world was looking to offer consumers a different and unique way to get their caffeine fix with these Iced Energy Drinks. 

Regardless of caffeine preferences, almost 60% of respondents said they would be likely to order Starbucks’ Iced Energy Drinks, which is in line with the average QSR innovation in the US (order likelihood T2B: 59.4% vs 59.2% norm). When respondents found out how much the beverages cost, order likelihood only drops by 4% — which is a good indication that consumers are prepared to pay for them or believe they are fairly priced. 

Among a Gen Z and Millennial audience, the drinks were seen as significantly more appealing. Consumer trends reveal that Gen Z are growing increasingly fond of iced beverages, with Starbucks CMO even stating to investors back in November 2022 that “the younger you go, the colder the beverage.” 

To top it off, both Gen Z and Millennials have also helped boost the growth of energy drinks given their increased consumption over recent years. Looking at the response from 18 to 36 year olds, 74% said they would be likely to order Starbucks’ Iced Energy Drinks. When asked whether they would be willing to pass another quick service restaurant to get to Starbucks to try these new Iced Energy Drinks, 2 in 3 said they would.

Those who typically get their caffeine fix through energy drinks were also excited by the new additions to the menu, with 81% claiming they would order compared to only 41% of those who don’t consume energy drinks. Almost two thirds of them agreed they would order more often at Starbucks if the Iced Energy Drinks were available (impact to parent brand order frequency T2B: 65.3%). 

Furthermore, 87% of those who already order from Starbucks at least every 2 to 3 weeks are significantly more likely to want to try the new energy drinks (order likelihood T2B: 87.3% vs 59.2% norm). While already ordering quite frequently from the brand, over three quarters of them said they would want to order even more frequently if the Iced Energy Drinks were available (impact to parent brand order frequency T2B: 75.8%).

The range of drinks offered two iced beverages which are set to be available across stores in the US all year round and one frozen beverage which is exclusively available to order through the Starbucks app for a limited time. Interestingly, it’s the limited edition frozen beverage that drives the most traction from respondents. When asked how likely they would be to order each variant, 61% said they would be likely to order the Frozen Tropical Citrus Iced Energy Beverage with Strawberry Puree, while 54% and 51% said the same about the Tropical Citrus Iced Energy and the Melon Burst Iced Energy respectively. 

Perhaps the goal was to increase app usage given the interest shown for the frozen drink; however, Starbucks might have benefited from making this drink available to order in store as well, even if for a limited time. It’s one they may want to consider bringing back in the future. 

When it comes to breakthrough potential, we look at two key measures to determine this:

1. How different (distinctiveness) a product is

2. How superior (advantage) a product is vs what’s already available in market 

Starbucks’ Iced Energy Drinks are seen as highly distinctive, performing significantly above the average for a QSR innovation in the US (distinctiveness T2B: 71.9% vs 66.2% norm) and driving the strong breakthrough potential score. The fact that Starbucks is best known for its coffee makes these drinks stand out. Despite having other iced teas and refreshers, these energy drinks are a first for Starbucks focusing on the caffeine content outside of their coffee portfolio. 

In terms of advantage, the beverages score directionally above the norm but not enough for there to be a significant difference when compared to the average QSR innovation (advantage T2B: 55.9% vs 50.7% norm). Overall, just under half of the audience felt like the Iced Energy Drinks couldn’t be easily substituted by another item or product (substitutability T2B: 49.6% vs 47.4% norm).

Nevertheless, the groups of people who were more likely to want to try Starbucks’ Iced Energy Drinks saw them as significantly superior compared to what’s already available with other QSR innovations. Almost two thirds of adults under 36 and people who typically drink energy drinks believed the Iced Energy Drinks are better than other items currently available, and 78% of those who order regularly from Starbucks said the same.

We’ve seen across our dataset that the correlation between advantage and trial is significantly greater than that between distinctiveness and trial. While both distinctiveness and advantage drive the breakthrough potential, perceived superiority has a greater influence on people’s likelihood to try your innovation.

What do they like about it?

The standout feature that consumers appreciated the most was the variety and appeal of the flavors the Starbucks’ Iced Energy Beverage range offers. They loved the fruity flavors, the different options to choose from and the fact that they visually look very appetizing. 

The ice element of the drinks were praised, they look refreshing and the fact that they have high caffeine content makes people feel like they will get a nice energy boost from them. Instead of going for a coffee or standard energy drink, they offer a different way to get your caffeine fix. Many respondents also mentioned the sugar-free nature of the drinks as a positive.

Here’s what people said they loved about Starbucks’ Iced Energy Drinks:

• "The flavors offered. I like the presentation of the drink. I also love that three different teas are used in the main variant. And last but not least the drink has as much caffeine as a grande. And the size is venti."

• "The strawberry flavored drink sounds very good, I like the fact that it's an energy drink. It would be a great drink to have on the go. The other two favors I would also try."

• "They look good in the picture. I like the different flavors. They have about the same amount of caffeine that coffee has with a different taste."

• "I like that they are sugar free, provide energy, and sound like they would have a good taste."

• "They look very refreshing, and in the summer I sometimes prefer to get a cold drink other than iced coffee and this looks like a nice substitute."

• "It offers a different and unique option regarding a drink with a boost of energy. It seems to also be a healthier alternative."

Naturally, not everyone is drawn to caffeinated drinks or might even be looking to cut back on their caffeine intake so the caffeine levels were a negative point for a minority. The fact that the drinks are sugar-free was also slightly polarizing as some respondents questioned whether this would mean they might have artificial sweeteners. The remainder of the dislikes were attributed to the overall Starbucks brand with some people feeling like it’s generally overpriced and not for them. 

Despite these watch-outs, the drinks are promising and have landed at a great time in the heat of summer!

With these new Iced Energy Drinks, Starbucks offers a fresh, energy-fueled alternative to getting your caffeine fix this summer! What did you think? Let us know by interacting with our coverage of the product on LinkedIn.

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