Game On: As the Country Grapples with the Pandemic, Sports Drinks Begin to Rebound

Even at a time in which sports are largely absent from the national landscape, sports drinks are having a moment.

The COVID-19 pandemic has presented obvious challenges for all CPG categories, but also unique opportunities to adapt to shifts in consumers’ shopping habits and dietary preferences that are likely to endure in the months and years ahead, and sports drinks are no exception to that rule. While experiencing a surge in retail and online sales, sports drinks have had to contend with the closure of gyms and fitness centers and the suspension of professional sports leagues, one of the category’s most important marketing platforms. The pandemic has also impacted the way in which consumers think about health, wellness and fitness, all of which are set to influence product development and brand communication for sports drink makers as they seek to connect with the next generation of athletes.

At the same time, the category as it has been traditionally defined — as primarily the domain of isotonic drinks — is in the process of being reshaped. Spurred by strong consumer interest in new functional ingredients that align with fitness lifestyles, upstart brands are embracing innovation to keep ahead of the competition, which is increasingly coming from energy drinks, enhanced waters and other categories. Now, it’s not longer about what your beverage has less of, such as sugars, artificial colors or flavors; it’s about what it has more of, including things like branch chain amino acids, CBD, creatine and immune-boosting adaptogenic herbs.

Whether those trends continue into the months ahead is yet to be seen, but they are actively shaping the sports drink category in the U.S. even as we speak.

Despite the major challenges for CPG brands of all types in operating a successful business during a pandemic, the sports drinks category is on relatively solid footing. According to data from IRI, total U.S. multi-outlet sales (including C-store) for both liquid and powder mix sports drinks were up 9.3% over a 52-week period ended on June 30, surpassing $7.3 billion. That’s a slight increase from year-over-year numbers through April 22, when the category was up 9%.

Notably, though, sales have continued to accelerate as states have moved through various phases of lockdown since the start of the pandemic. After slowing to 3% growth over a 12-week period ended on June 13, the category has picked back up, growing sales 12.6% over the four week period and 21.3% over the two weeks, according to Nielsen data, with volume up 14.1% over the two weeks. That span has seen significant jumps for both Gatorade — moving from 0.5% growth over the 12 weeks to 18.5% over the two weeks — and Body Armor, which has gone from 27.2% to 55.4%. Powerade’s recovery has been slower, but the brand is trending in the right direction, going from down 7.7% to up 6.2%. Out of the three leaders, Powerade has seen the biggest average price increase at 7%, with Body Armor declining by slightly less than 1% and Gatorade growing 1.2% over the 12 weeks.

Broken down further, the market shows a different picture in terms of growth by channel. Based on data from SPINS, in the natural channel (excluding Whole Foods), isotonic sports drinks grew 11.9% year-over-year through June 14, up to just over $16 million in sales, while coconut-based isotonics jumped by 68.1% to around $3.1 million. Over the 24 week period ended on June 14, isotonics were up 18.4% in natural, before falling to 13.2% over the 12 weeks and decelerating to 8.5% over the four week period. Growth-wise, coconut-based isotonics fared even better: over the 24 weeks, those drinks were up 74%, though the total dollar sales and volume still lag far behind.

Interestingly, some of the biggest growth has been happening within naturally positioned sports drinks sold in conventional retailers: over the three week period ended on June 14, sales of those beverages increased over 2119%, and have sustained four-digit growth over the course of the last several months. Though coming from a relatively small starting point of around $3.4 million, the segment is up 780% to over $30 million in sales year-over-year.

Furthermore, within specialty and wellness positioned sports drinks, the 24 week period has seen isotonics rise 12.7% in MULO sales and 21.2% in the natural channel. Those numbers have decelerated over recent weeks, though the segment is up 9.3% in MULO and 13.5% in natural year-over-year. In comparison, naturally positioned sports drinks generated just over $3 million in the natural channel, with year-over-year growth at 5.7%.

The shift towards pantry-stocking has been one of several changes in consumer behavior that have come up as a result of the pandemic, but they could be just one indicator of further disruptions to come.

The new buying behavior has had a significant impact on C-stores and particularly velocities for single-serving packages in the cold case. According to Nielsen, an increase in pantry stocking and a decrease in store trips pushed total beverage dollar sales in the channel down 4.3% for the 23 weeks ended on June 6. Though sports drinks, a top-three beverage category in convenience, have not been as negatively impacted as bottled water and energy drinks, it still represents 9% of beverage dollar sales in the channel.

Changing Consumers, Changing Category

When it comes to responding to the changes in consumer behavior that have arisen as a result of the pandemic, there’s no clear blueprint for sports drinks (or any other beverage category, for that matter) for how to proceed. Instead, the key may be rather to let those consumers set the course. “As people’s daily habits changed, we saw a shift to more at-home and fitness occasions,” said Brent Hastie, president of BodyArmor.

Some of the ways in which BodyArmor has moved to adapt to that change started before the pandemic; in February, it introduced Sport Water in 6-packs of 20 oz. bottles at select retail partners. The company’s strategy of offering “a range of better-for-you hydration options,” Hastie said, has been consistent throughout, and the pandemic hasn’t forced any changes in the brand’s product release schedule for this year. Driven primarily by growth from its flagship line of “superdrinks,” Body Armor has also seen solid performance from its zero sugar Lyte line, up nearly 65% to around $76 million through June 14.

Body Armor continued to see its dollar share of the category grow during the first months of the pandemic. According to Nielsen, the brand’s all-channel sales were up 53% over the last 52 weeks, with dollar share hitting just under 13% in the two week period ended on June 25.

At the same time, the disruption of professional sports leagues across the U.S. also has implications of the major sports drink brands that sponsor them. The NBA G League, a developmental league that has been sponsored by Gatorade since 2017, suspended its 2020 season in March. But other sponsored events and competitions that have been pushed back because of the pandemic — UEFA’s Euro 2020 soccer tournament, the 2020 Summer Olympics — are set to have an even bigger impact in terms of global media exposure and viewership. The sports drink brand is also in the final year of a three-year pact with European soccer body UEFA to sponsor its Champions League competition, which is set to conclude its 2019-2020 edition in Portugal in August after play was halted in February. While Major League Baseball and the NBA are set to complete abridged seasons in the weeks ahead, the fate of the upcoming football seasons, both college and professional, remain dubious.

Elsewhere, the situation looks a bit different. BodyAmor, which inked a deal to become the official sports drink of Major League Soccer last September, and which also sponsors the Ultimate Fighting Championship (UFC), has seen both those competitions resume in abridged formats as of July.

Though still firmly entrenched in the category’s top spot, recent results for Gatorade have varied depending on the product positioning. According to IRI, the brand’s core line (18.7%) and sugar free G-Zero line (148.5%) have each seen year-over-year increases in sales, while Gatorade Perform (down 5.7%) and Frost (11.4%) both fell. The brand also saw an encouraging first year from its most recent function-forward innovation, Bolt 24, which uses a watermelon base and contains sea salt, antioxidants, and vitamins B3, B5, and B6 with no artificial sweeteners. The line brought in around $21 million in sales in its first 12 months on the market.

In PepsiCo’s Q2 earnings report released in July, the company noted that a low single-digit increase in volume for Gatorade helped offset losses in juices and ready-to-drink teas. Over a 12 week period ended on June 13, non-carbonated beverage volume fell 8%, with Gatorade down by mid-single digits. During the earnings call, CEO Ramon Laguarta noted that the company is focusing on supporting products associated with “healthier” callouts, using reduced sugar products from Gatorade, as well as Pepsi and Mountain Dew, as examples.

Notably, Pepsi seems to be backing Gatorade for further growth. The company named its flagship sports drink as one of the first beverage products to be offered through its online store PantryShop.com, which went online in May. Attempting to thread the needle between pantry stocking and ecommerce, the site offers Gatorade as part of a “Hydration Pack” that also includes flavored Propel waters.

That support applies to marketing as well. In its 2019 full-year earnings report released in February, the company noted that it planned to retreat on ad spending after a year in which it increased by 12% and during which the CPG giant built a robust in-house marketing team backed by data and analytics. But earlier this spring, Gatorade debuted a new campaign called “G.O.A.T. (Greatest of All Time) Camp” featuring a lineup of international sports superstars including Usain Bolt, Lionel Messi, Serena Williams and Michael Jordan. However, spending will likely be down from previous levels; in 2018, Pepsi spent over $100 million in advertising the brand.

Though it may now be sharing the spotlight with BodyArmor within Coca-Cola’s sports drink distribution portfolio, Powerade underwent a slight pivot in packaging and positioning at the beginning of this year, and early indications are that the approach is proving successful. In January, the brand announced, in addition to completing its first brand revamp in 13 years, the introduction of two new zero-sugar lines: Powerade Ultra and Powerade Power Water. Available in three flavors, the former contains creatine, a supplement popular with weight lifters, as well as electrolytes (50% more than in the core line) and vitamins. Meanwhile, Power Water — which is sold in Berry Cherry, Tropical Mango and Cucumber Lime flavors and enhanced with electrolytes — is aimed at casual athletes and fitness enthusiasts.

When compared against BodyArmor’s lineup, there are clear points of crossover; the New York-based sports drink maker also markets a reduced sugar line (Lyte) as well as an enhanced water (SportWater, which is not flavored). Take a step further back and the landscape becomes even more crowded, as products from vitaminwater and smartwater also tap into consumer interest in both new functionalities and specific use occasions. However, whether there is enough room for these products and brand lines to co-exist and thrive remains a bigger question. After a splashy rollout in 2018, vitaminwater pulled the plug on its three-SKU sports drink line, Active, last year.

With the pandemic looking likely to stretch well into the second half of this year and beyond, consumers are taking a more cohesive, longer-term perspective when it comes to health and wellness. The spike in interest in products with immunity supporting properties has been well recorded; over a 12-week period ended on April 19, food and beverage products positioned for “immunity” experienced significant growth in both natural (175.6%) and MULO (127.6%) sales compared to the same period last year.

Whatever the exact callouts are, better-for-you and “healthy” claims may be the field upon which the battle for the future of sports drinks will be fought. In March, Gatorade successfully argued before the National Advertising Division (NAD) that BodyArmor should drop its claims of being “The More Natural Sports Drink,” “More Natural Ingredients than Gatorade Thirst Quencher & Gatorade Zero,” and “The Most Natural Low-Calorie Sports Drink.”