5-Hour Energy: A Success Equal Parts Caffeine, Chemistry and Meditation

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5-hour energyThe United States is now the world's largest consumer of coffee, collectively chugging 400 million cups per day. But since 2004, Americans have had another option for satisfying their caffeine craving -- 5-Hour Energy, a two-ounce drink which promises 300 minutes of stimulation without an enervating "sugar crash" later. And the country has embraced it: The company that makes the mini-drink, privately-held Living Essentials LLC, grossed more than $600 million last year on $1 billion of retail sales, according to Forbes. 5-Hour is also said to have 90% of the so-called "energy shot" market, which it largely created.

One 25-year-old in marketing research who preferred to stay anonymous told DailyFinance she loves 5-Hour Energy, which she uses "when I want to stay out later on the weekend," adding, "This is so sad, I know." Another young art museum staffer (who also asked that we not use her name) said she usually only drinks 5-Hour "on weekends when I'm out late and in need of an energy boost. Since they're small, I can easily carry one out with me. Weekdays, I stick to coffee 5-hour energysince it's cheaper, tastier, and more professionally acceptable."

Taste, it seems, is not one of the energy shot's selling points. Olivia Scheck, 24, likens 5-Hour's flavor to "poison." Now a research analyst at a New York City law firm, she once tried the drink while pulling an all-nighter during her senior year of college. "I took one sip and ran for the toilet gagging," she said.

Standing behind this tiny dynamo of a product -- which, in spite of its taste, fuels millions upon millions of hectic days and nights -- is an enigmatic Indian man who spent his twenties "traveling between monasteries owned and tended by an ashram called Hanslok," Forbes reports, cultivating stillness of the mind through work and meditation.

Manoj Bhargava, 58, denies any contradiction between consuming his caffeine-infused creation and seeking inner tranquility. "5-Hour Energy is not an energy drink, it's a focus drink," Bhargava told Forbes in his first ever press interview. "But we can't say that. The FDA doesn't like the word 'focus.' I have no idea why."

5-hour energy

A High-Energy Drive from the Beginning

Bhargava was born into affluence in Lucknow, India, thriving capital of the northern state of Uttar Pradesh. His family left their comfortable villa to move to America in 1967 so his father could pursue a doctorate at the University of Pennsylvania's Wharton School of Business.

Their new residence -- a third-floor walkup in West Philadelphia that rented for $80 a month -- offered a potentially dispiriting contrast to life in Lucknow. But young Bhargava was, if anything, inspired, using his talent for mathematics to win a full scholarship to The Hill School, an elite private academy.

When he was 17, Bhargava became an entrepreneur, purchasing a Chevy dump truck for $400 and removing debris from demolition sites in poverty-stricken North Philly. He banked $600 over a summer, then resold the truck for what he'd paid for it. This was his first taste of profit, and he liked it -- no matter the squalor that surrounded the enterprise (rats larger than cats, murders taking place nearby).

Bhargava made it to Princeton in 1972, but what he found -- a snobbish social scene and insufficiently-challenging math courses -- didn't agree with him. He left after one year, moving back in with his parents, who had relocated to Fort Wayne, Ind., where his father had a PVC plastics company.

The country was in the economic doldrums, and Bhargava was adrift. He began to read about a Hindu saint whose life had been spent on a spiritual quest; it struck him as a worthy pursuit. By 1974, he was back in the country of his birth.

Meditation Is Hard, but Chemicals Are Simple

Bhargava wasn't, strictly speaking, a monk, but "it's the closest Western word," he says, for what he did in India. He spent 12 years on and off in ashrams, trying to learn to "still the mind," but came back to the U.S. from time to time, where he took odd jobs such as cab driver. Once he returned to America to stay, he obliged his parents, who had been rather upset about his dropping out of Princeton, by going into the family business.

Despite having absolutely no interest in plastics, Bhargava became something of a turnaround artist. By 2001, the company had become a serious success, with $25 million in annual sales. Financially secure, he moved to Michigan, where his wife's family lived, and declared himself retired.

But Bhargava had learned an important lesson from his time in PVC manufacturing: "Chemicals are really simple," he told Forbes. "You mix a couple things together and sell it for more than the materials cost." He applied that simple idea in the spring of 2003, after attending a natural products trade show in Anaheim, Calif. There he encountered a booth whose attendants were hawking a 16-ounce elixir that purported to raise productivity for hours. Bhargava drank it, and was impressed. "For the next six or seven hours I was in great shape. I thought, Wow, this is amazing. I can sell this."

But not exactly that. Sixteen ounces was too much -- too much like the recently-released Red Bull, and sure to have to compete head to head with Coke and Pepsi. So Bhargava looked over the ingredient list, and cooked up his own, much lower-in-volume version.

The formula
: "a blend of B-vitamins [like niacin], amino acids [such as taurine] and nutrients," and "about as much caffeine as a cup of premium coffee," according to 5-Hour's website. But as Forbes reports, a 2010 independent analysis by ConsumerLab.com determined that 5-Hour contained levels of vitamins "thousands of times higher than recommended daily allowances," as well as "207mg of caffeine -- a massive amount per ounce, but less than the 260mg in a Starbucks tall coffee." Still, it clocked in at only four calories and contained no sugar at all -- major selling points featured prominently on 5-Hour's diminutive, shrink-wrapped bottle.

From Selling It to Killing It

It took Bhargava only six months, from the time he sipped that inspiring potion, to get 5-Hour into stores. Then his sales team went to work, convincing GNC (GNC) to carry it, then Walgreens (WAG), Rite Aid (RAD), and regional grocers like Sheetz.

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But his greatest triumph was landing 5-Hour in the Walmart (WMT) checkout aisle. (Every Walmart store in the U.S. sells all four flavors of 5-Hour; Sam's Club carries 24-packs.) "Getting it next to the register isn't hard," Rise Meguiar, Living Essentials's vice president of sales, told Forbes. "Keeping it there? Very hard. Anything that sells, the stores will try. To own that space is really hard."

"What we did wasn't rocket science," math whiz Bhargava told Forbes. "It's not the little bottle. It's not the placement. It's the product. You can con people one time, but nobody pays $3 twice."

The exact makeup of the product is still a secret. The manufacturer, Custom Nutrition Laboratories in Carrollton, Texas, sued Living Essentials in 2007 when Living Essentials tried to change suppliers. After two years of litigation, the disputants reached an undisclosed settlement.

Bhargava, though, is usually more successful in litigation: A bookcase in his office is decorated with plastic bottles of would-be competitor products, like 6-Hour Power and 8-Hour Energy. Lawyers for Living Essentials have successfully neutralized all of them. Bhargava marks them with tiny skull-and-crossbones monuments. (One competitor he beat without suing was Red Bull Energy Shot, which folded last summer after two years of failing to dent 5-Hour's market share.)

"I'm killing it," Bhargava told the Forbes reporter profiling him, displaying an immodesty somewhat at odds with the low profile he keeps. (Living Essentials told DailyFinance that they don't have press images of Bhargava, whose likeness could not be found on the Internet before he sat down with Forbes.) Bhargava may stay out of the public eye and live modestly, but he wanted America's foremost chronicler of wealth to know that he is "probably the wealthiest Indian in America."

Forbes wasn't sure about that claim -- for details, including an account of questionable charitable activities by Bhargava, read The Mystery Monk Making Billions With 5-Hour Energy.

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