Sports Drinks Score a Competitive Edge
By SARAH THEODORE
Product segmentation, retail execution keep category
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.
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
||% change vs. prior year
||% change vs. prior year
|GATORADE X FACTOR||$97,106,160||27.5||6.9||0.3|
|GATORADE ALL STARS||$93,834,320||30.2||6.7||0.5|
|GATORADE ENDURANCE FORMULA||$13,238,780||419.7||0.9||0.7|
|SUNNY DELIGHT INTENSE SPORT||$1,019,205||NA||0.1||0.1|
|POWDERED DRINK MIXES|
|SUPER C ENERGY||$212,079||NA||0.7||0.7|
|CAPRI SUN SPORT||$26,035,570||-25.3||70.0||-0.7|
|SPORTS DRINK CATEGORY TOTAL||$1,472,374,000||19.3||100.0||0.0|
|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
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
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
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
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.
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.
The value of the total U.S. sports drink market in
The predicated value of the market in 2010
Amount spent on sports
drinks per capita in the United States in 2000
Amount per capita that will be spent in 2010