The Gatorade-as-soft-drink pitch helped turn the Chicago-based [image-nocss] brand into a top performer for Purchase, N.Y.-based parent PepsiCo Inc., said the report. But sales growth slowed this year as the recession drove soft-drink lovers to cheaper options and rivals such as Coca-Cola Co.'s Powerade took market share. A major push to rebrand Gatorade as "G" failed to stem the losses.
Now Gatorade chief Rich Beck is counting on the new drinks to reinvigorate PepsiCo's third-largest product line, the report said.
"Gatorade is extremely important to PepsiCo, and the company has tried to revamp Gatorade, but it hasn't worked," Philip Gorham, an industry analyst at Morningstar Inc., Chicago, told Crain's.
Gatorade is hoping to persuade athletes to consume its sports drinks more often. The plan is to offer unique benefits for different occasions, industry observers said, according to the report.
The company declined to discuss the new products with the publication except to say that they will represent a "significant innovation that will evolve Gatorade," and that they will be designed to "meet more needs of athletes."
John Sicher, editor of Beverage Digest, told Crain's that he expects PepsiCo to unveil early next year new products formulated for before, during or after exercise.
PepsiCo has filed for trademarks in recent months on names including Prime, Perform and Recover, the report said. While the new offerings could entice athletes to buy more Gatorade, analysts warned that extensions also can weaken a core brand either by blurring the message or cannibalizing sales.
"You have to be real careful about tacking too much stuff on it," Tom Pirko, president of California beverage consultancy Bevmark LLC, told the publication. "Once you start pushing new functions on existing brands too far, you run the risk of tarnishing the original concept."
PepsiCo's financial reports do not break out sales results for Gatorade, but a spokesperson told Crain's that the Gatorade brand has $5 billion in annual sales. Beverage Digest estimated that Gatorade's sales volume fell 18% for the first half of 2009, said the report. The decline is a significant shift for a brand that grew about 12% to 18% a year after PepsiCo bought Chicago's Quaker Oats Co. in 2001.
With an 80% share of the sports-drink market, the 42-year-old Gatorade brand still gives PepsiCo an edge over archrival Coca-Cola. But Atlanta-based Coke's Powerade has gained share this year via price cuts, analysts added.
In a July conference call with analysts, PepsiCo CEO Indra Nooyi asked for patience as the company repositions the Gatorade franchise "back to the core athlete." Chief Financial Officer Richard Goodman, meanwhile, signaled what's ahead: "We will be looking to increase both penetration and frequency with product innovations to be launched in 2010."
A Gatorade spokesperson said the rebranding of Gatorade as "G" early this year engaged "a broader range of athletes and active people in our brand." But others maintain the new packages and commercials confused consumers.
"Gatorade is an incredibly powerful brand, but the move in 2009 to move away from Gatorade and embrace this idea of 'G' will go down as one of the greatest marketing missteps of all time," Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management, told Crain's.
The Gatorade spokesperson said sales trends have been improving. And G2, a low-calorie version launched in 2007, has grown sales more than 10% this year, he tld the publication.
The Gatorade spokesperson also said that the recession is "by far the most significant contributor to our sales declines." He said Gatorade plans to focus on "our core user"that is, "athletes who will pay a premium price for the proven functional benefits Gatorade offers."
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