Gatorade Gets Back on the Field

Just like the athletes it has long claimed to support, Gatorade needs to get back in shape.

So it’s trying to say goodbye to that particular breed of thick-waisted suburbanite lazing on his back porch, and instead to join the young parent out for his morning run. It’s trying to say aloha to the jersey-wearing I-banker chomping his soft pretzel in the stands, and hello to his lacrosse-playing nephew. The fact is, those sedentary characters never should have been included in the Gatorade fold, says PepsiCo North America chief Massimo D’Amore. It was a fluke, he said, their interest in the brand the result of a handful of sweltering summers and a paucity of other healthy-seeming products. The run of double digit growth? The company knew it had to end.

They just didn’t expect it to be so fast. But as marketers and retailers increased their beverage options, the economy reduced consumers’ disposable incomes. Gatorade lost sales to direct competitors, indirect competitors and tap water. PepsiCo watched sales for its third-largest beverage brand plummet by 14 percent in 2009. A confusing re-branding cost the company momentum, while performance-oriented consumers looked to brands ranging from nutrition shop elixirs to more mainstream products like vitaminwater, as well as longtime rival Powerade, which now has a 20 percent share of the category.

But, even as Powerade has increased its share, the size of the category has shifted. Other functional beverages – particularly vitaminwater, which Coke acquired in 2007 for more than $4 billion – have created a new paradigm.

A November study from Deutsche Bank illustrated how the game has changed: when the investment bank polled consumers about brand preferences within a combined sports drink and enhanced water market, they chose vitaminwater nearly as often as they chose Gatorade, and more than 70 percent named rehydration as the reason they chose either one. The takeaway? The casual users who had fueled Gatorade’s growth were leaving the brand.

But so were the core users who had built the brand in the first place: Gatorade Chief Marketing Officer Sarah Robb O’Hagan (hired from Nike two years ago) recently told PepsiCo investors that Gatorade – the brand that laid the groundwork for commercial sports beverages – currently penetrates just 27 percent of the 68 million-strong “performance athlete” market. Among the 55 million consumers who stay active to keep in shape, the brand’s market penetration was an anemic 12 percent.