January 01, 2017
XS Energy: It’s the Experience That Builds the Brand
by Angela E. Soper
Founded: 2002; acquired by Amway in 2015
Headquarters: Ada, Michigan
Top Executive: David Vanderveen, XS Energy Brand Vice President and General Manager, Amway
Products: Energy drinks, energy snacks, sports nutrition
Most in the world today would probably agree that having enough energy to accomplish everything you need and want to do every day is difficult. Energy and sports nutrition drinks and snacks are proving to be the products of choice for more and more people to help them solve this problem.
XS® Energy, launched in 2002 and acquired by Amway in 2015, is capitalizing on a growing demand for energy boosters—and doing so with a fierce determination to give consumers and entrepreneurs not only effective energy drinks but healthier energy options via an opportunity that offers a work + fun environment.
According to Euromonitor International, the global energy drink segment was a $41.7 billion business in 2015 and is expected to be more than $58 billion in 2020—an impressive 40 percent growth. Global research firm Mintel states that in the United States the energy drink market is expected to grow by an estimated 52 percent from 2014 to 2019.
For XS co-founder David Vanderveen, who now serves as Vice President and General Manager for the XS brand, XS Energy is all about giving people an authentic, valuable experience that includes healthier, great-tasting energy products along with a compelling business opportunity.
“I’m a big believer that you have to constantly add value to people’s lives if you want them to come to you,” says Vanderveen, who learned at a young age the benefits of building a direct selling business. He became an Amway Independent Business Owner (IBO) in 1994 because he wanted to be an entrepreneur, and maintained his association with the company even as he later worked in other industries to help turn around companies’ growth and profits.
Vanderveen had witnessed firsthand the burgeoning interest in energy drinks when he was charged with promoting a dot-com business at trade shows in the late 1990s. He hit on the idea of giving away a highly popular energy drink to people who visited his booth—individuals dragging from long days and late nights. Later, while working with a nutrition company, he discovered it had created a low glycemic but “boring” energy product. He envisioned creating an entirely new experience when it came to energy drinks—something that would ignite a “Wow!” response when people sampled the product. Plus, he wanted to create a product for people who didn’t want to drink sugar-loaded brands well known for offering a burst of energy, only to be followed by a quick crash.
“Our goal was to get the simple sugars and starches out of people’s diets, give them some complex carbs and other things so they could perform,” explains Vanderveen. “We were trying to change the experience of energy [by] using a mega dose of B-12… we were the first ones to do that. We were the first ones to be sugar-free. We were the first ones to really do any flavor assortment, and, in my opinion, we’re still the only one that tastes good.” Even though competitors have since picked up on certain elements of their formulations, Vanderveen feels XS is still the only one who “puts it all together in one package.”
A Growing Category Segment
The emphasis on offering a sugar-free product touched on a growing demand in the marketplace. According to Transparency Market Research, consumers are consciously cutting down on their consumption of sugar-sweetened drinks, and diabetes is on the rise worldwide. The research firm feels that, due to the obesity pandemic, low-calorie energy drink sales are likely to increase.
According to Amway Chief Sales Officer John Parker, the forecasts for the energy category are all very strong and the company feels it will grow globally at a significant rate. This growth also is driven by a growing consumer focus on health and fitness, especially among women consumers, reports Grand View Research. Those at the research firm also believe a growing health consciousness and hectic lifestyle among consumers will drive the energy product category over the next seven years.
While XS initially focused on the under-35 age group and still targets that demographic, Vanderveen quickly discovered during early product sampling that their product had wider appeal; XS was converting 20 percent of the foot traffic to purchase in a grocery store when only 8 percent of consumers were even buying energy drinks. And it was often moms who were buying the product by the case, says Vanderveen—busy individuals who need energy and want healthier products for their families.
Searching for Ideal Disruption
Vanderveen and his partners knew they needed an effective way to market their new product, which took them to Amway. “We were looking for an alternative distribution channel so we could be disruptive,” says Vanderveen. In 2003 Amway became the exclusive distributor for the brand, offering just two SKUs. “Amway was a perfect choice for us… it’s exceeded our expectations and their expectations for how much we could do together,” adds Vanderveen.
To attract a younger segment, Vanderveen knew he had to create an experience that was instantly appealing—both with the quality of the product and the excitement of the opportunity. “Brands need to create total experiences, particularly lifestyle brands… where it gets them to ask you questions that you want to answer,” says Vanderveen. He feels this means giving people a sensory experience that elicits responses like “Wow, this tastes great and I feel great,” which can lead to questions about more products and even the business opportunity, which now extends into Amway as a whole.
“We are selling XS Energy drinks, but more importantly, we’re using the XS brand to create an experience in the Amway business for customers and for IBOs that is different than the experience Amway has created through other product brands,” says Parker.
One caveat about this younger demographic XS has attracted is that although Vanderveen understands the value inherent in the entrepreneurial spirit of millennials, a person’s actual age is irrelevant to him. “We don’t believe in youth as a demographic per se,” he explains. “[XS] is for people who think they’re young. It’s a psychographic. It’s an attitude, a behavior. We’re as young and as old as we want to be… our age is all [in the mind].”
Amway now hopes to infuse the rest of its portfolio with the energy, authenticity and customer experience that has made XS so successful, while maintaining its traditional focus on entrepreneurship. Amway leadership sees its acquisition of XS Energy as a way to strengthen the company’s efforts in the future. “According to our research, no demographic is more positive about entrepreneurship than those younger than 35, which is the precise target group for the XS brand,” says Amway Chairman Steve Van Andel.
Social Media Is Driving the Future of Direct Selling
Acquiring XS also enables Amway, as one of the first and largest direct selling companies in the world, to steer through the roiling waters of an ever-evolving marketplace. The old ways of conducting business, whether as a traditional or direct selling model, are rapidly going by the wayside. Today IBOs are likely to share their stories, business opportunity and product information via a smartphone or tablet while on the go.
Social media platforms play a huge role in this shift. More and more companies realize that to be successful today—in any business—they must be savvy about social media. Social media platforms are ideal for the direct selling channel since it is fueled by people building strong relationships. According to the U.S. Direct Selling Association, two in five Americans learn about new brands and products from social networking sites. Understanding and effectively using social media is something XS Energy manages very well. “We have literally the most successful mobile applications in Amway and we have the most aggressive social media at Amway right now,” says Vanderveen.
“The future of direct selling needs to be driven by social media and mobile applications,” he adds. “That is very hard for a big legacy business to shift toward but it is essential. I think Amway is making great strides across the board at making that shift.” Hand in hand with this philosophy is effectively combining the strength of the brand with the strength of the corporation.
Life Freedom Starts with Economic FreedomCompany events also are pivotal to XS Energy’s success. Its launch in Ukraine—shortly after the country’s tense political upheaval in 2014—demonstrated to Vanderveen how important a product and opportunity like XS could be to people who were literally fighting for their freedom. The company’s launch was scheduled shortly after the tensions arose and thousands of distributors came from across the country despite the difficult political situation. Vanderveen firmly believes that if they can’t help people make that first circle of economic freedom work, none of the other freedoms—social, political, religious—matter. A “pirate mentality” is another interesting part of the XS experience. Inspired by Kester Brewin, author of Mutiny! Why We Love Pirates, and How They Can Save Us, who says “Pirates come to us in an act of radical self-determination,” Vanderveen feels pirates are an icon for healthy disruption. He says that they represent “disruption of ownership in an enterprise where common people can essentially mutiny against the system.” Once people adopt this pirate attitude, Vanderveen feels, they can then become alive to the world they choose to create. “And that’s what we’re very interested in… helping people break free from systems that aren’t supporting their progress and their success, and giving them options and hope for a better future where they connect their work and their rewards,” he adds.
Experiencing the Southern California LifestyleAnother way XS offers its IBOs an authentic, valuable experience is through its Center for Fun in Laguna Beach, California. Here people can enjoy the “total brand experience” and join Vanderveen and his team as they surf, visit local artists, mountain bike, hike, or simply watch the breaking surf from the deck of their hotel—activities designed to help people feel as if they are experiencing the Southern California lifestyle “in every can” of XS energy drinks.