5-Hour Energy Founder Looks to Boost His Billion-Dollar Brand

Manoj Bhargava seems an unlikely billionaire, a man who pads around his office in New Balance sneakers, once ran the family plastics company, and dreams about making the world a better place.

Except that the 58-year-old Michigan entrepreneur came up with the idea for 5-Hour Energy a decade ago, established a crucial "first mover" advantage by creating the energy-shots category, and has held off Coca-Cola, PepsiCo and Red Bull on the way to turning his enterprise into a $1-billion brand at retail last year.

By finally creating a public profile, the once-reclusive Bhargava hopes to gain attention for other business ventures that include technologies for water desalination, hydroponic farming and optimization of diesel power. And he's already made the world a much better place with the donation of $10 million to $12 million to charities, much of it to hospitals in India.

In the meantime, Bhargava told brandchannel, he's finally considering some brand extensions to add to the familiar 2-ounce plastic bottles of 5-Hour Energy and its ubiquitous yet lame TV ads.

"We are working on something, but I can't say right now what it is," Bhargava said. "When we come out with something, though, it'll be a slam dunk. It won't be a line extension that doesn't do anything; it's got to do something. If someone in my family, for example, wouldn't be interested in using the product, then I'm not going to sell it."

Bhargava's company, 5-Hour Energy, has come out with new flavors, and new varieties such as extra-strength and decaffeinated, over the years. But the only product remains 2-ounce shots, a format that has frustrated incursions by some of the biggest names in the beverage business and has allowed 5-Hour Energy to claim about a 90-percent share of the shots category.

The company has been pondering line extensions for a while. "I've been pitched every kind of extension known to man," Bhargava said. "Lip balm. Tobacco chews. Powders. Gum. I look at it this way: Why would a consumer buy any of those? My answer has been 'no.' [5-Hour Energy shots] are really convenient. Three seconds to drink it and you're done. Why would you do something else? Unless we can bring something else out that delivers value, we won't do it — it'd just be a gimmick."

Bhargava said that his company talked a few years ago with Nestle about a possible cooperation. And some observers of the category believe that eventually Nestle or some other purveyor of energy shots with "natural" ingredients could make a strong play for business in the format.

5-Hour Energy is likely to keep on dominating the business with its command position by cash registers in American convenience stores, Walmarts and supermarkets, and with its deliberately mundane TV ads on multiple U.S. cable channels that address the "2:30 feeling" in a straightforward way. They're produced completely in house.

"People at ad agencies say you have to engage the customer and entertain them," Bhargava said, philosophically. "But we're not in the entertainment business. We're in the business of letting the customer know about the product, and what it does, and selling the product to them. Our ads are not entertaining."

In fact, Bhargava likes to let visitors know that he's in on the joke: A plaque prominently displayed in the lobby of the company's Farmington Hills, Mich., headquarters cites some wag as having named a 5-Hour Energy commercial the "second worst TV ad of 2010."

What finished "first"? Bhargava smiled and said, "A Jamie Lee Curtis ad for Activia."