How to Start an Energy Drink Business

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Our guide on starting an energy drink business covers all the essential information to help you decide if this business is a good match for you. Learn about the day-to-day activities of an energy drink business owner, the typical target market, growth potential, startup costs, legal considerations, and more!

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Start an energy drink business by following these 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your energy drink business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • What will you name your business?

Luckily we have done a lot of this research for you. Skip on ahead to the Business Overview for more detailed answers to all your questions.

Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your energy drink business is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4: Open a business bank account

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

STEP 7: Get Business Insurance

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

STEP 8: Define your brand.

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Business Overview

You may sell your energy drinks through vending machines, restaurants, grocery stores, and even bars. Branding it in such a way as to emphasize your home town or state can help foster community spirit (similar to how the name of Gatorade helps honor the University of Florida where it was developed), and your choice of ingredients may allow you to emphasize the healthy effects this drink has on its consumers.

Who is this business right for?

If you have a background (or outright skill) in fields such as chemistry or health, it may help you to develop an energy drink that is tasty, safe, and helpful for consumers needing extra energy. Any past sales experience may also help you sell your new product to the various distributors in your region and, eventually, at an international level.

What happens during a typical day at an energy drink business?

Your exact daily activities will vary depending on how you start your business. If you work with a beverage development company, you will spend much of your days raising funds and collaborating with various professionals on everything from the exact ingredients of your drink to its logo, brand name, and marketing. You will also help facilitate practical details such as the inventory and shipment of your products. If you want to maintain more direct control over your product, you may decide to work with a co-packer that emphasizes research and development rather than a larger consulting company.

What is the target market?

The typical demographic for energy drinks is young men between the ages of 16 and 24. This is the legacy of the original marketing for companies such as Monster, although you can tweak your ingredients, branding, and marketing to target a less-served demographic and develop a better niche.

How does an energy drink business make money?

An energy drink company makes money through the distribution and sale of its own brand of energy drinks.

What is the growth potential for an energy drink business?

The growth potential for this business is modest. The Monster Energy Drink company recently experienced a lower sales bump than expected (8.9% rather than double digits) even after being bought out by marketing juggernaut Coca-Cola. However, it should be noted that the sales bump they received is still a good indicator of market health and, as mentioned earlier, the market certainly has room for more energy drinks catering to different demographics than Monster.

What are some skills and experiences that will help you build a successful energy drink business?

A formal education in fields such as health or chemistry can aid you in creating the energy drink itself. Prior sales experience can help you set up the various distribution deals needed for your energy drink to thrive. While less likely, any direct experience you may have working with an energy drink manufacturer will be invaluable.

What are the costs involved in opening an energy drink business?

The costs involved in opening an energy drink business can vary. A Bloomberg report from 2012 estimated that it may cost $100,000 or more to break into this business. A quarter of that money may go to a beverage development company in order to get your drink to a prototype stage. It may cost another $25,000 to get the raw ingredients and other materials necessary to begin production, including the labels and packaging. You must then pay for the labor, inventory, and distribution of your initial products: depending on how many units you are producing, this could cost up to $40,000. Finally, it is worth investing at least $10,000 or more into your initial advertising push: you are entering into a crowded market, and it's important to let customers know how and why your product stands out.

Where can I find a business mentor?

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

What are some insider tips for jump starting an energy drink business?

Stand out from the competition by developing a specific niche. For instance, marketing towards those thirty and up can instantly distinguish you from the Monster demographic. Some form of community branding and community-based advertising can also help your drink take root in a specific region, with positive word of mouth allowing you to later expand. Finally, be very selective about the development of a logo: this will be the first thing customers see when they view your drink in a vending machine, and it must be vivid and distinctive.

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Growing Your Business

How to promote & market an energy drink business

Within your budget, it is wise to embrace multiple channels of communication. Regional advertising through radio and newspapers can help to initially establish your product in the eyes of different distributors as well as local consumers. Social media provides a very cheap way of engaging with your customers and further establishing your particular niche, and it remains the single best way to highlight the part you play within your community. Partnering with local businesses can also allow you to sell your drinks to your particular demographic via selected restaurants and bars.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

You may consider handing out free samples of your product at concerts or other events in order to literally give consumers a taste of what you have to offer. If possible, offering different flavors or formulas of your energy drink can give you a more diverse appeal to wider audiences. Retaining those customers is primarily a function of your drink delivering on its promise and enhancing energy and awareness in consumers.

How and when to build a team

Unlike some jobs, this will require a team very early on. Whether you are working with a beverage consulting company or a co-packing company, it will take a large team to bring your energy drink from concept to market.

Legal Considerations

Federal Business Licensing Requirements

There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate an energy drink business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

For information about local licenses and permits:

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

Open a business bank account

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.
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CORPORATE VEIL

To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Certificate of Occupancy

An energy drink business is generally run out of a factory. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to an energy drink business.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your energy drink business will be in compliance and able to obtain a CO.

Food Regulations

When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections

Earning Potential

How much can you charge customers?

As a product, energy drinks have a wide range of price points. For a 16-ounce drink, prices typically range from $1.99 for something like Full Throttle to $4.00 for something like Red Bull. Your own price will likely fall in-between these, though you want to be competitive within your region.

What are the ongoing expenses for an energy drink business?

If you are working with a beverage distribution company, your ongoing expenses are something of a double-edged sword: you will not have to separately manage aspects such as production, storage, and shipping on your own, and you won't have to personally pay for pricey business leases. However, all of these things factor into your production costs: if it costs $40,000 to produce, store, and ship a certain number of drinks in your first month, it will cost the same to ship that same amount next month. This cost will go up or down depending on the quantity of drinks produced.

How much profit can an energy drink business make?

The exact profit you can make is hard to determine, but things look pretty good: the energy drink industry has seen a five percent boost since 2013 and is overtaking soda as the drink of choice for many consumers. Sales of Red Bull amount to over $3.4 million each year and Monster Energy Drink sells over $3 million. While it will take your own drink longer to establish itself, there is great potential for profit.

How can you make your business more profitable?

Be sure to price your drinks competitively, but don't be afraid to increases the price as need be: even a small bump can lead to a big shift in profits. Use your social media to advertise the other potential uses of your energy drink: a good model is Red Bull, who helped make Red Bull and vodka a preferred drink for many club goers. Finally, make sure your advertisements always highlight your community roots. This helps establish you within your region but also positively distinguishes you from bigger companies, making your drink look more artisinal and, therefore, more appealing.

Next Steps

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