Is Gatorade Losing its Charge?

You know the door well – it’s been in your store for a good five or six years now, with only the occasional tweak in Flavors and brands, but an ever-evolving series of packages.

If you’ve ever had a door who’s performance is as good as its looks, this is the one: it’s your Gatorade door. It’s had strong marketing behind it, both in-store and over the airwaves. There haven’t been significant competitors; the product owns its category more completely than any other.

But how much longer can it command the space? Are sports drinks starting to slide? Will Gatorade need a little more fuel to win the race?

It’s a long way off, we suppose, but consider this: recently, a survey from Morgan Stanley showed that sports drink consumption had dropped among teen consumers – the key growth demographic for that product line for generations. What’s growing? Younger categories like bottled water, energy drinks, and enhanced water have the cooler appeal for kids these days, and as enhanced water begins to edge more towards the rehydration function, the entire sports drink category could find itself benched even further. The brand’s marketing strength may finally be dated, passed by extreme sports and a new generation of celebrity superstars.

Meanwhile, a bevy of new products are entering Gatorade’s airspace, including several well-funded, well-advertised brands attached to some pretty big names. The brand itself has been around more than 40 years, and despite its success as the first “functional” beverage, it could be coming to a point where it’s pushed the growth envelope as far as it can go – while Gatorade has had a minor success with adding one or two new use occasions, particularly its A.M. product for early-morning exercisers, some of these competitors seem to be coming directly at Gatorade’s basic premise as a mass market source of hydration, but with more refined pitches suitable to a narrowcasting world.

Will Gatorade ever have to face a time when it’s the number 2 product in its category? Probably not, unless it falls behind its own Propel “Fitness Water,” which, with its low calories but high electrolyte count, has the allegiance of a massive cadre of former users of the core product. But the day may not be that far off when the brand is a percentage of what it once was, its monolithic structure chipped away by competing brands and competing functions, while its core customers age out of the category altogether. Already it is trying to shape up market share, announcing recently that a “diet” version will launch for “nonathletic pursuits” in the coming year.

Gatorade’s success was built on its ability to win and retain drinkers because it mixed function with cultural relevance. It’s that second half of the winning formula where the brand is most vulnerable: Gatorade made all of the right moves to grow into the behemoth it is now – it hitched its wagon to the perfect set of stars and leagues, largely eschewing Major League Baseball for the world of the NFL and, most particularly, the NBA. The acquisition of Quaker Oats by PepsiCo kicked the brand’s distribution into high gear just as iconic spokesman Michael Jordan started pocketing NBA titles. The product became the everyday drink of a generation that was raised watching his every move. From functional underpinnings that gave it a boost in the athletic arena, Gatorade grew into a cultural phenomenon.

Unfortunately for Gatorade, and for sports drinks overall, that cachet is being grabbed by functional products with which consumers feel closer identification, specifically, Glaceau’s Vitaminwater. While Gatorade grew Sin an ESPN world, Vitaminwater and other functional beverages are You- Tube. Rather than have one highlighted function, consumers can now dial into dozens. Sports icons aren’t the only ones who are capable of selling functional products, and Glaceau has a formidable roster from across the celebrity spectrum. Along with energy drinks, which realized early on they needed to poach extreme athletes who might once have endorsed Gatorade, there’s a whole new breed of heroes out there, and what they drink doesn’t necessarily come with a lightning bolt.

Said one recent college graduate, “The Vitaminwater would just disappear around campus.”

Meanwhile, the number of viable, mainstream competitive products aiming for a share of the sports drink side of Gatorade’s success is growing. First off the bench is PowerAde, which has signed up the latest star billed as Jordan’s heir, LeBron James. While the last NBA Final didn’t rate with television consumers, James may be just coming into his own when it comes to moving product. PowerAde has also been priced aggressively by Coke in recent months, building share more than 25 percent by slashing its cost to distributors.

New to the party are two performance-oriented products that seek to chase Gatorade not from the perch of a GNC or Vitamin Shoppe, but from a mass market position. Cadbury Schweppes rescued long-suffering drink mix Accelerade from obscurity, turned it into an RTD product, and is now pushing its 4-1 carbohydrate to protein ration with a reported $55 million ad campaign aimed squarely at the category leader. FRS offers a slightly less direct challenge in terms of sporting performance, but comes with a roster of heavy investors and industry expertise, as well as the influential face of bicyclist Lance Armstrong. With a proposition that it offers cancer-fighting nutrients and a bit of caffeine, FRS is an all-in-one functional proposition that might turn the heads of some consumers who are ready to graduate from Gatorade.

Also trying to carve off a piece of the big Gatorade bird are an increasingly large number of natural products made with coconut water – the electrolyte of choice for the crunchy good-lifer. Other organic Gatorade knockoffs are channel-specific, to be sure, but that organic channel gets bigger every day, with consumers who are dedicated to the organic lifestyle.

So what does that mean for your Gatorade door? Well, it’s still going to be there for awhile. But Jordan retired a long time ago now, and he’s been awfully quiet ever since. If the category slows down to his pace, you might find yourself wondering the same thing about that door as you did about Jordan – what was all the fuss about in the first place?