Gerry’s Insights: Sports Drinks

Are we approaching a golden age for sports drinks? It’s possible we are, and I think we have Body Armor to thank. Though some entrepreneurs I chat with express resentment or jealousy at the ability of the Body Armor team to simply spend their way to prominence behind a sports drink they view as only a modest upgrade over category kahuna Gatorade, I often respond that they have two reasons to be grateful to the brand. For one, it was the first to reveal cracks in the foundation of Gatorade’s hegemony, after literally scores of other entrants spanning a couple of decades had failed to make any appreciable headway. True, most of those short-lived challengers were undercapitalized startups, but not all of them: Cadbury committed as much as $50 million to launching a challenger that harnessed the Accelerade name back in 2007, only to see it quickly sputter out. Second, if Body Armor does not qualify as a breakthrough product, then it leaves opportunity for other entries to carve out their own niche, whether as a truly all-natural or organic entry, or via some alternative mix of carbohydrates and electrolytes, or maybe just via packaging and positioning that captures active users’ imaginations.

As I write this there are any number of elegantly crafted entrants trying to find their footing. The New York-based entrepreneur behind Bulldog Gin has launched a brand called Halo, and a group out of Cincinnati is pushing a brand called Hoist. Chicago is home to several isotonic plays, among them a coconut-water-based brand called Coco5 that was devised by the trainer for the Blackhawks hockey team and that earlier this year recruited former MillerCoors CMO David Kroll to figure out an effective path forward. There are a range of non-RTD hydration plays beyond Nuun, including brands like Liquid IV, Drip Drop and SOS. Overall, it’s a striking contrast to the days, not long ago, when the only entries showing any success as alternatives to Gatorade and Powerade were bottled waters like Smartwater and plant waters like Vita Coco.

By now, Body Armor’s story is fairly familiar. It was created back in 2010 by serial entrepreneur Lance Collins, familiar from his successes creating beverage brands like Fuze and NOS, in association (we later were told) with Glaceau’s former No. 2, Mike Repole. To me, Collins is a classic “tinkerer,” who delights in exploring where he can take the right combination of trademarks, packages and formulas in disrupting the beverage category. Bound by a three-year non-compete after selling Fuze Beverage (including both the Fuze tea brand and NOS energy brand) to Coca-Cola in 2007, Collins relentlessly tinkered around the fringes of the RTD beverage segment, exploring items like Mexican-style beers and sweeteners that wouldn’t incur a challenge from Coke. I’m not sure any of them got very far, but by the time the clock struck 3, Collins was ready to re-enter the RTD category with Body Armor, initially positioned as a “super drink.” (He’s since gone on to launch Core Water and, as I write this, the performance energy drink Adrenaline Shoc.)

If I may digress a moment, I learned a valuable lesson from the launch. Just before the non-compete elapsed and it was finally OK to hit “go,” Collins turned up in New York with some prototypes for me to try. He described the array of functional ingredients, which numbered well over 30, and then invited me to take a sip. “Pretty good,” was my verdict. I realized later that what I meant was, “Pretty good considering all the horrendous-tasting ingredients you have in here.” For it didn’t taste good at all, and ended up failing pretty quickly in its launch market, Los Angeles. So, lesson learned: when seeking feedback on a new beverage, have your guinea pig try it first for an unvarnished flavor reaction, before you offer the info on what’s in it.

As I said, Lance is a tinkerer, and so is his partner, Mike Repole, then still behind the scenes, and after realizing the brand wasn’t working they stripped down the challenging-tasting product to a handful of ingredients like coconut water and electrolytes (you can’t market 30 ingredients anyway, I remember Repole telling me) and repositioned it overtly as a new-generation sports drink. I wasn’t the only one who wondered whether it was wise to poke the sleeping giant, Gatorade, as Body Armor increasingly began to do in its marketing, but the doughty Body Armor team (fortified by Kobe Bryant as both an investor and creative force) relentlessly banged away at the notion that Gatorade has had a good run but is yesterday’s news. Though velocities remain spotty (Body Armor still doesn’t seem to have truly clicked in New York), it has steadily built momentum while also wicking away the moderate growth Gatorade had been enjoying. Dr Pepper Snapple worked the brand well, and when its new owner Keurig declined to pony up, Body Armor transitioned to a Coke system that seems grateful to have a more compelling entry alongside Powerade.

As I said, in disrupting a previously locked-up category, Body Armor has opened up all sorts of possibilities for other entrepreneurs. And I daresay it’s possible that Body Armor has done Gatorade a favor, too. Maybe its gains have caused enough of a fright to finally coax the category leader into stepping up its innovation, beyond a Gatorade Organic extension that was never a very credible player. Pepsi’s year-old Gatorade Zero extension seems off to a good start, and as I write this it’s been launching Bolt24, like Body Armor harnessing a modicum of plant water (in this case watermelon) and sea salt. The brand, whose name references Gatorade’s bolt symbol, seems to go Body Armor one better with a cleaner recipe. On Pepsi’s earnings call in early July, its new ceo, Ramon Laguarta, talked down the significance of the launch, pointing to Zero as far more influential, but that could be because Bolt24 is at least in part a repudiation of Gatorade and the ingredients it relies upon. In any case, the official announcement of Bolt24 described it as “the first product in a new platform for the brand,” so maybe Laguarta was simply playing possum. It’s still very early days, but it’s possible that if these new brands succeed in reeling in a significant number of new or lapsed consumers, Gatorade will have Body Armor to thank, too.

Longtime beverage-watcher Gerry Khermouchis executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.