PepsiCo Adding New Drinks to Gatorade Playbook

Gatorade is looking to pump up sagging sales with a new line of drinks targeting hard-core athletes.
The launch is expected to involve new drinks, dubbed Prime, Perform and Recover, formulated to be consumed before, during and after athletic activity, industry sources say. The line, expected to be unveiled early next year, would be marketed to athletes—a reversal of Gatorade's previous effort to broaden the brand's appeal by recasting it as a soft drink.
The Gatorade-as-soft-drink pitch helped turn the Chicago-based brand into a top performer for Purchase, N.Y.-based parent PepsiCo Inc. But sales growth hit a wall this year as the recession drove soft-drink lovers to cheaper options, and rivals such as Coca-Cola Co.'s Powerade stole marketshare. 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.
“Gatorade is extremely important to PepsiCo, and the company has tried to revamp Gatorade, but it hasn't worked,” says Philip Gorham, an industry analyst at Morningstar Inc. in Chicago.
Gatorade is hoping to persuade athletes—not Joe Consumer soft-drink fan—to guzzle its sports drinks more often. The plan is to offer unique benefits for different occasions, industry observers say.
Mr. Beck turned down requests for an interview, and a spokesman declined to discuss the new products 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.”
But John Sicher, editor of the New York-based trade publication Beverage Digest, expects PepsiCo to unveil early next year new products designed for consumption before, during or after exercise.
PepsiCo has filed for trademarks in recent months on names including Prime, Perform and Recover. While the new offerings could entice athletes to buy more Gatorade, analysts warn 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,” said Tom Pirko, president of California beverage consultancy Bevmark. “Once you start pushing new functions on existing brands too far, you run the risk of tarnishing the original concept.”
PepsiCo's financial reports don't break out sales results for Gatorade, but a spokesman says the Gatorade brand has $5 billion in annual sales. Beverage Digest estimates that Gatorade's sales volume fell 18% for the first half of 2009. 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 say.
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.”
The Gatorade spokesman says 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,” said Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management.
The Gatorade spokesman says sales trends have been improving. And he noted that G2, a low-calorie version launched in 2007, has grown sales more than 10% this year.
The spokesman also said the recession is “by far the most significant contributor to our sales declines.” He says Gatorade plans to focus on “our core user”—that is, “athletes who will pay a premium price for the proven functional benefits Gatorade offers.”
“Gatorade has quite a long way to go, and the next six months will be critical,” said Chris Mercer, deputy editor of Just-Drinks, a trade publication based in London. “They are going to define the brand, and how they do it could make or break its future.”