With mounting pressure from competitors like enhanced waters and functional juices, sports drinks will refocus their sights in 2010 from casual gym goers to the serious athletes that made their brands famous, analysts say.

“Enhanced waters and protein drinks have really started to encroach on sports drinks’ territory,” says Sarah Theodore, an analyst at Mintel International, Chicago. “For a long time, sports drinks were all about hydration, and it was all about finding the right balance of liquids and carbohydrates to hydrate the body as quickly as possible.”

The industry is more segmented now, primarily between casual exercisers who do not want to consume additional calories and intense athletes who are looking for protein to build muscle, Theodore says.

Total sales of non-aseptic sports drinks fell by 8.8 percent to $3.3 billion for the 52 weeks ending Feb. 21, in U.S. food, drug, gas, convenience and mass merchandise outlets, excluding Wal-Mart, according to SymphonyIRI Group Inc., Chicago.

The sports drinks category is not anticipated to recover much in 2010, Mintel reports. Sports drinks are expected to grow volume about 1 percent, Theodore says. From 2010 to 2013, the research firm predicts annual growth between 0.2 and 0.3 percent.

Overall, The Coca-Cola Co., Atlanta, which owns Powerade, saw sales of its non-aseptic sports drinks stay flat at about $653.8 million for the year ending Feb. 21, SymphonyIRI says. Purchase, N.Y.-based PepsiCo’s Gatorade represents nearly 80 percent of the total market for sports drinks, and the company’s sales fell by 10.7 percent during the same time period, SymphonyIRI reports.

Gatorade’s category dominance comes largely from being first to market, Theodore says, but is aided by strong marketing that includes marquee athletes across multiple sports.

“Any time you talk about sports drinks, obviously, Gatorade is the main player there,” she says. “They’ve really done a lot of work to reposition that brand toward core athletes. … They’ve kind of decided that they’re going to go after those really serious athletes who are really looking for several different kinds of benefits from sports drinks.”

Although Gatorade is far and away the market leader, Powerade made a push last year with its reformulated Powerade Ion4. Now, The Coca-Cola Co. has launched its first global integrated marketing campaign for the Powerade product online at the 2010 FIFA World Cup, an international soccer tournament. The “Keep Playing” campaign will feature Powerade on the sidelines of the soccer pitch during the World Cup and in a series of YouTube videos that show what happens in the human body during different physical and mental scenarios of a soccer match.

Sports drink revolution
In addition to new marketing campaigns, sports drink makers are introducing new innovations. In March, PepsiCo announced at its shareholders meeting the company’s plans to overhaul its Gatorade line with a three-step system of workout drinks in both a regular and professional series. Previously, PepsiCo offered its G Series Pro pre- and post-workout drinks only to professional athletes.

The pre-workout drink, Gatorade Prime 01, packs carbohydrates into a 4-ounce pouch. Gatorade Perform 02 includes Gatorade Thirst Quencher, reframed within the G Series, and the low-calorie G2. Gatorade Perform 02 products are designed to rehydrate athletes and replace electrolytes during workouts. Packed with protein and carbohydrates in a 16.9-ounce bottle, Gatorade Recover 03 will help muscles recover from a workout, the company says.

The company also has reformulated the sweeteners it uses in Gatorade Thirst Quencher and G2 and introduced natural versions of both drinks at select Whole Foods Markets.

The company also announced another new product, G Series Pro, a more intense version of the G Series available exclusively through GNC stores beginning this month. The Pro formula, which debuted on the sidelines of the Super Bowl, previously was available only to professional athletes, but now will be available to the public.

“Up to now, we have kept these products in the locker room, but the compatibility between G Series Pro athletes and GNC customers persuaded us that this is a product line of genuine interest to those looking to go pro,” said Sarah Robb O’Hagan, chief marketing officer of Gatorade, in a statement.

The release of the G Series and G Series Pro line of sports drinks will better leverage the company to compete with fortified beverages and protein drinks, says Alison Lipson, market analyst for Euromonitor International, Chicago.

“Pepsi is still really focused on marketing,” she says. “They’re still introducing new products, and they’re trying to encourage consumers to return to the category and focusing on their core users. … Their core users – the athletes and people who are more active – are helping to sustain some of the growth.”

The shift in focus comes after a year of rebranding that “confused customers” and ultimately hurt Gatorade’s bottom line, Lipson says. Last year, Gatorade rebranded its main lineup as G and G2 for a lower calorie option.

“I think a lot of consumers were confused about the G and G2 rebranding, but even though consumers have started to shy away, I don’t think the company has given up on it,” Lipson says. “I think especially in difficult economic times, people aren’t always accepting of change. They’re looking for things that are more comforting and more familiar.”

Gatorade also discontinued its Tiger Focus sports drink late last year, citing its plans to streamline its brands in 2010. The drink, named after golfer Tiger Woods, placed on SymphonyIRI’s list of top food and beverage brands of 2009 as it accumulated about $65 million in sales in food, drug and mass merchandise retailers, excluding Wal-Mart, the market research company reports.

The increase in competition for casual exercisers likely pushed PepsiCo to pursue changes to its Gatorade line, Mintel’s Theodore says. “They’ve realized that they are really about the serious athlete,” she says.

Coconut water also is emerging as a competitor to sports drinks because it is an all-natural alternative that provides some of the same re-hydration properties and electrolytes as traditional sports drinks, Theodore says.

One Natural Experience, Los Angeles, is set to release its Active line of coconut water-based sports drinks in June. The drink, which is formulated with coconut water and natural herbs and minerals, will come in three varieties: Grape Berry, Lemon Lime and Cranberry Grapefruit, the company says. It will be packaged in 16.9-ounce ready-to-drink Tetra Pak cartons with twist caps.

“I think coconut water is kind of one of the hot beverage categories that we’ll be seeing this year overall,” Theodore says. “But also within sports drinks, I think that it’s really going to appeal to a lot of the same people who already are looking at sports drinks.”

Low cal, high sales
Lower calorie options that picked up steam in 2010, such as Gatorade’s G2 and Powerade Zero, will continue to gain market share, analysts say, as health-conscious consumers turn to those options over higher calorie sports drinks.

“I think it’s going to be greater emphasis on health and wellness as well as renewed focus on some of the core products to help consumers return to the category that may have left because of the economy,” Lipson says.

Facing competition from low-calorie functional waters, Lipson says sports drink makers are highlighting the benefits of their products with renewed vigilance.

“They’re calling out some of the vitamins that are in there, some of the benefits of the electrolytes, that help consumers understand why it’s good for them or why it’s a choice that they want to make,” she says. “I think that sports drinks can compete. I just think it will be a little different than in years past because there are so many new products out there that they’re competing with.”

G2 saw sales increase 15.8 percent to $368.3 million, but it still remains a fraction of the company’s flagship Gatorade line, which brought in $1.2 billion, in the year ending Feb. 21, SymphonyIRI reports.

Powerade Zero sales increased by about 50 percent to about $98.6 million during the year ending Feb. 21, SymphonyIRI reports, and Powerade Ion4, the reformulated flagship product for Powerade, saw sales jump to about $416.6 million.

Losing weight or maintaining weight is likely the biggest reason that people give for exercising, Theodore says. “I think there’s a real opportunity for sports drink makers to really kind of go after that group that is really exercising to maintain their weight or even lose weight,” she says.

To capitalize on the growing calorie-conscious demographic, Gatorade plans to lower the number of calories in G2 from 25 to 20 per serving, Lipson says.

“G2 was the bright spot and actually helped overall sales improve because it was new and consumers were looking for healthier options and finding products that would meet their replenishment or active needs as well as being lower in calorie or lower in sugar,” Lipson says. “I still think there’s a market out there for the core athletes that aren’t as concerned with lower sugar or lower sodium, but I think the average users who are kind of non-core athletes – people who just like the taste or people who are just looking for a different kind of beverage – probably will help grow the lower calorie brands like Powerade Zero and G2.”

In that vein, Lipson says that some sports drink makers have changed the sweeteners they use in drinks and have lowered sodium and sugar content. Lipson predicts sports drink makers will use more stevia, cane sugar and other low-calorie sweetener alternatives.BI

Related Links:
Feb. 2010 Category Focus: Protein appeals to the masses
Oct. 2009 Category Focus: Spending declines drag down bottled water
News: Pepsi kicks off G Series marketing