As Gatorade approaches its 60th anniversary, the brand remains dynamic and is expanding into new categories, from unflavored water to energy drink mixes.
Since its founding in 1965, Gatorade has been the dominant sports drink. It accounted for 63.5% of the U.S. sports drink market in 2023, according to Euromonitor International.
owner PepsiCos Arch rival Coke ties for second and third place with Powerade, a perennial No. 2 pick behind Gatorade, and Bodyarmor, a more recent addition to its portfolio. But combined, the two Coca-Cola brands only account for about a quarter of the U.S. sports drink market. Last year, Pepsi reorganized its portfolio to combine Propel, Muscle Milk and other fitness brands under the Gatorade name.
But Gatorade’s dominance doesn’t mean it can rest on its laurels. As more and more competitors enter the market, the brand has tried to reinvent itself.
“There have probably been more changes in the industry in the last five years than in the previous 20 years,” said Rabobank beverage analyst Jim Watson.
Pepsi’s competitors are trying to steal market share from it by moving into new products. Unilever bought beverage mix company Liquid IV for an undisclosed amount in 2020; Gatorade’s individually packaged hydrating powders are similar to those of the upstart. Nestle Health Science bought hydration tablet maker Nuun in 2021, the same year Coke bought Bodyarmor.
With the acquisition of Bodyarmor, Coke bought a brand that was able to price its sports drinks at a higher price thanks to its marketing as a healthier option. Coca-Cola’s other sports drink, Powerade, is typically cheaper than Gatorade and appeals to consumers looking for a bargain.
“That means they can tell retailers a different and better story by trying to get more shelf space and taking some of that away from Gatorade,” Watson said. “This is where Gatorade needs to come up with all sorts of new innovations so they can tell a new story to retailers so they can keep all of their shelf space.”
Even smaller brands without the clout of Coke or Unilever are putting pressure on Gatorade. PepsiCo CEO Ramon Laguarta called influencer Logan Paul’s Prime Energy a brand stealing share from Gatorade.
“It’s true that Prime’s rise in this category has cost some of Gatorade, [though] “less than other brands in the category or less proportional to the size of the brand,” he said on the company’s third-quarter earnings call in October, adding that Prime’s market share declined as summer turned to fall.
According to a February note from Citi Research, Gatorade’s market share is expected to improve this year, but is still expected to decline compared to last year.
Gatorade President Mike Del Pozzo told CNBC that competition is good for the category overall – and shows his brand’s own strength.
“There are a lot of loud voices right now trying to make a name for themselves,” Del Pozzo said. “This is a competitive business and because we are in the sports business, we love competition. Clearly, we’re winning, and I think a lot of them are spending more time talking about us and less about their own brand in the consumer approach.”
For its part, Gatorade has been thinking about its own advertising to consumers. Del Pozzo said the line between hydration and wellness is blurring and more consumers are focusing on hydrating throughout the day, not just during exercise.
They now like low- or no-sugar drinks, “functional” drinks that tout health benefits such as improving immunity and alkaline water, he said.
Gatorade responded by introducing new products: Gatorade Zero Sugar, tablets with vitamin C and zinc to support the immune system, a Pedialyte-like product called Gatorlyte, a caffeinated spinoff called Fast Twitch and its first unflavored alkaline water, which launched nationwide in February came onto the market.
“It’s a great start so far, but we’ve been very patient to get it right,” Del Pozzo said of Gatorade water, which contains about a fifth of the electrolytes found in classic Gatorade.
Year-to-date, Gatorade is gaining market share in every hydration category in which it offers products, according to market research firm Circana. And Propel’s annual sales are expected to exceed $1 billion for the first time this year, Del Pozzo said.
According to Rabobank’s Watson, Gatorade’s long history has given the brand the opportunity to expand into new categories and blur boundaries.
“This is one of the brands with the best marketing campaigns, such great brand equity, consumer awareness and consumer love,” he said.
The classic Gatorade remains the brand’s best seller for the time being.
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2024-04-06 12:00:01
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