Sports Drinks Score a Competitive Edge

June 1, 2006
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Sports Drinks Score a Competitive Edge
By SARAH THEODORE
Product segmentation, retail execution keep category growing

With nine of the Top 10 brands in sports drinks, Gatorade continues to hold on to its title as the undisputed category champion. But sales of sports drinks are up for the entire category, at 19 percent for the year ending April 16, according to Information Resources Inc., Chicago. Bottled sports drinks saw the biggest increases, at 21 percent, for a total of $1.4 billion in supermarket, drug and mass merchandise outlets, excluding Wal-Mart. A much smaller segment, powdered sports drink mixes nonetheless grew almost 15 percent for a total of $31.7 million in the measured channels.
PepsiCo’s Gatorade formulas account for almost 85 percent of bottled sports drinks, and the company’s flagship product gained another 1.2 percent market share during the past year, giving one brand nearly half of the entire category’s sales. The Coca-Cola Co.’s Powerade picked up a 20 percent sales increase in the measured channels, but lost a slight 0.1 percent share of market for a total share of 14 percent.
Not every Gatorade product is invincible, however. Gatorade Xtremo, its tropical-flavored variation, and Gatorade Ice experienced some of the only declines in the ready-to-drink segment, dropping 7 percent and 65 percent, respectively.
Power struggle
While Gatorade is the biggest name in the sports drink business, the big newsmaker this year has been Powerade, or more precisely, the battle between Coca-Cola distributors over how to distribute Powerade. Earlier this year, The Coca-Cola Co. and its largest bottler, Coca-Cola Enterprises, based in Atlanta, agreed to test distribution of Powerade through Wal-Mart’s warehouse delivery system rather than the brand’s traditional direct-store-delivery system. A group of more than 50 smaller bottlers filed suit against Coca-Cola and CCE to prevent the move, claiming breach of contract and breach of duty.
Through the suit, it has become clear just how much muscle the retail giant can flex in the industry. The Coca-Cola Co. has revealed in court documents that it feared the retailer would create and sell its own private label sports drink rather than Powerade if it did not change the distribution system, and that the retailer promised to double its purchases of Powerade under the new delivery system.
Top sports drinks by brand
BrandDOLLAR SALES % change vs. prior year Market Share % change vs. prior year
BOTTLED, NON-ASEPTIC
GATORADE$675,482,10024.548.11.2
POWERADE$197,137,00020.214.0-0.1
GATORADE FROST$136,205,00011.89.7-0.8
GATORADE FIERCE$103,879,5009.77.4-0.8
GATORADE X FACTOR$97,106,16027.56.90.3
GATORADE ALL STARS$93,834,32030.26.70.5
GATORADE RAIN$25,001,560NA1.81.8
GATORADE XTREMO$21,588,600-6.81.5-0.5
GATORADE ICE$16,522,010-65.41.2-3.0
GATORADE ENDURANCE FORMULA$13,238,780419.70.90.7
POWERADE OPTION$9,250,749NA0.70.7
PRIVATE LABEL$6,715,863-9.40.5-0.2
GATORADE MAINLINE$2,167,757NA0.20.2
ALL SPORT$1,900,120-44.40.1-0.2
SUNNY DELIGHT INTENSE SPORT$1,019,205NA0.10.1
CATEGORY TOTAL$1,403,448,00021.3100.00.0
POWDERED DRINK MIXES
GATORADE$23,996,46016.875.71.3
GATORADE FROST$4,634,61513.814.6-0.1
POWERADE$1,905,973-8.06.0-1.5
GATORADE FIERCE$797,903-14.62.5-0.9
SUPER C ENERGY$212,079NA0.70.7
PRIVATE LABEL$160,242NA0.50.5
ACCELERADE$5287.10.00.0
CATEGORY TOTAL$31,707,80014.8100.00.0
ASEPTIC
CAPRI SUN SPORT$26,035,570-25.370.0-0.7
GATORADE$4,822,591-25.413.0-0.2
GATORADE FROST$4,299,495-19.311.60.8
GATORADE FIERCE$1,039,777-43.32.8-0.9
PRIVATE LABEL$1,020,56222.02.71.0
CATEGORY TOTAL$37,218,000-24.5100.00.0
SPORTS DRINK CATEGORY TOTAL$1,472,374,00019.3100.00.0
Source: Information Resources Inc., Chicago. Total food, drug and mass merchandise channels, excluding Wal-Mart, for the 52 weeks ending April 16, 2006.
PepsiCo’s Gatorade is distributed through a hybrid DSD/warehouse system, and according to a recent Bear Stearns report, that has provided a competitive advantage. “PepsiCo is able to move more quickly, get new things to market, expand in-store inventory and displays, reduce out-of-stocks and drive annual turns, with higher margins for PepsiCo and its customers,” the company writes in its May 16 report on the brand.
The report contends that the power of the hybrid system was a surprise, even to the analyst community, which questioned Pepsi’s decision not to move Gatorade entirely into its DSD system when it acquired the brand. “PepsiCo resisted at the time of the Quaker acquisition from deploying Gatorade through its bottling network,” the report states. “At the time we recall wondering whether the company was making a mistake. Instead, PepsiCo was able to leverage its bottling direct-store-delivery infrastructure and warehouse delivery know-how to simply outmaneuver Coke in the energy drink category.”
New to the game
The Bear Stearns report also credits the increased segmentation of the sports drink category “to satisfy the re-hydration/reinvigoration ‘need-state’ of a broad spectrum of consumers” to its continued growth. Gatorade further differentiated its formulations during the past year with new Gatorade Rain, created to have a crisper flavor and less aftertaste than its original formula. The new variation is available in Lime, Tangerine and Berry flavors.
On the advertising front, Gatorade is breaking new ground by sponsoring Comcast’s Exercisetv, a new video on-demand network created by the cable company and “Body by Jake’s” Jake Steinfeld. The network will be dedicated to fitness, motivation and sports training, and the company will develop a new series of original on-demand sports training programs. According to the companies, brand messaging will be integrated into the network's content and will include product placement, branded graphic overlays and branded educational video segments.
Extending its line, The Coca-Cola Co. added Advance by Powerade, a new sports drink/energy drink hybrid beverage, last year in Berry and Cherry Lime flavors. The product contains caffeine, taurine and B vitamins to combine both the hydration and energy concepts.
It also rolled out low-calorie Powerade Option sports drink in Black Cherry, Strawberry and Lemon flavors. The product was formulated to contain electrolytes and B vitamins at levels comparable to regular Powerade, but with fewer carbohydrates and 80 percent fewer calories. It is sweetened with a blend of sucralose, acesulfame potassium and high fructose corn syrup for a total of 10 calories and 2 grams of carbohydrates per 8-ounce serving.
This summer, the company is adding to the line-up with the “Grape Collection.” Indicating that grape is one of the most popular sports drink flavors, Coca-Cola has added the flavor to the Powerade, Powerade Option and Dasani bottled water lines.
The market dominance of the major companies in sports drinks hasn’t intimidated newcomers to the category, who have rolled out a number of new formulations during the past year. Known to movie fans everywhere, Daniel “Rudy” Ruettiger launched Rudy Revolution sports drink this spring. Rudy Beverage Inc., Scottsdale, Ariz., was co-founded by the University of Notre Dame football player made famous in the movie “Rudy,” and the company introduced a product said to provide sustained energy and re-hydration with only 8 grams of sugar per 8-ounce serving “to keep everyone from the all-star high school athlete to the weekend warrior constantly energized." Flavors include Citrus Slam, Fruit Punch Blast and Orange Lift, and are available in 55-ounce bottles.
Firefighter Beverages, Norwalk, Conn., rolled out Firefighter brand EMS Hydro Energy supplement drink, calling it a three-in-one hydration-energy-vitamin beverage. The product is available in Lemon Lime, Orange, Wild Berry, Fruit Punch, Kiwi Strawberry, Apple Melon and Grape flavors. According to the company, "Hydro Energy is specially engineered to provide optimum hydration and maximum energy for intense physical activity in the most demanding conditions." It contains taurine, d-ribose, carnitine, arginine, glutamine and vitamins, and fewer calories per serving than regular sports drinks. The company donates a portion of net profits to national and local firefighter-related causes and charities.
Ingredient company Ajinomoto has its hand in finished beverages with Amino Vital Pro Advanced amino acid sports drinks. Available in two fruit flavors, Amino Vital is packaged in 20-ounce bottles, and is said to contain 3,600 mg. of amino acids per bottle. The company says the drinks provide a fast but steady rate of absorption, so fluid reaches body tissue when it needs it most.
The company also rolled out Amino Vital Puredge, a ready-to-drink product in Citrus Orange and Fruit Punch flavors. Puredge is said to provide 1,850 mg. of branched-chain amino acids and arginine and contains 50 calories per 8-ounce serving.
For active kids, Sunny Delight Beverages Co. offered SunnyD Intense Sport in Orange, Lemon Lime, Raspberry Ice and Cool Punch flavors. The products contain B vitamins, vitamin C, electrolytes, and are lower in sugar.
Hansen Natural Corp. rolled out Blue Sport under its Blue Sky brand of natural beverages. The product is available in Orange, Fruit Punch and Lemon-Lime flavors, and is said to contain six types of electrolytes — sodium, potassium, calcium, magnesium, chloride and phosphorus — as well as B vitamins. It is sweetened with sucrose and glucose for 45 calories per 8-ounce serving.
Putting a new twist on the sports drink is Culpepper Sales Inc., based in Dallas, which has introduced PowerSwirl, a frozen beverage served from a granita machine. The machines can be placed in schools, health clubs and at athletic events. PowerSwirl contains electrolytes and is available in LemonLime, Orange and Fruit Punch flavors. BI
Room for growth
According to a recent report from Bear Stearns, Gatorade is one of only three products since 1980 to hit the billion-dollar mark in wholesale revenues. That honor is shared with the Nestlé Waters line-up of brands and Red Bull energy drink. And the financial group thinks the potential exists for even more growth.
“We think 2006 should be a breakout year for Gatorade abroad, in no small part due to the World Cup,” the report states. Gatorade is a sponsor of the worldwide soccer tournament, which begins this month, and has featured the World Cup and the U.S. men’s team in its advertising.
“Just as Quaker understood that when a consumer reached for a Gatorade he wanted to ‘Be Like Mike,’ we believe that this year’s soccer World Cup could provide an interesting platform for tapping into the ‘aspirational’ spirit of the brand in international markets,” the report says.
Sports stats
$1.91 billion 
The value of the total U.S. sports drink market in 2000
$4.54 billion 
The predicated value of the market in 2010
$6.80 
Amount spent on sports drinks per capita in the United States in 2000
$14.70 
Amount per capita that will be spent in 2010

Source: Datamonitor, www.datamonitor.com

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