Why Gatorade Is Losing Its Zip

Category Leader Has Been Losing Share to Upstart Rivals

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NEW YORK (AdAge.com) -- The story of Gatorade is one for the marketing history books. Fueled by iconic advertising and legendary pitchmen such as Michael Jordan ("Be like Mike"), the brand that created the sports-drink category continued to reinvent it with new products and strategies that kept it sprinting past rivals.

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Industry watchers note that Gatorade's message hasn't been consistent.

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But lately, the $3 billion-plus Gatorade brand has been getting winded. While it controlled 82% of the category last year, that's down more than 10 share points from two decades ago, when it owned 93% of the market. It's getting more volume out of existing consumers but losing a nearly equal amount to rivals at the same time. And while sports-drink volume gained 2.5% last year, volume for the Gatorade family was up just 1%, according to Beverage Marketing Corp.

What's going wrong?

Beverage-marketing experts pin much of the blame on aggressive rivals. The "hydration category" has seen more than 200 new brand introductions in the past two years, according to Deutsche Bank analyst Marc Greenberg in a report. "Gatorade retains strong metrics in terms of consumer loyalty and purchase frequency," Mr. Greenberg said. "The growth slowdown in an expanding category ... reflects competitive losses, not only to direct substitutes like private label and Powerade but newer enhanced-water products like Vitaminwater."

All over the field
That's not to say Gatorade hasn't had its own stumbles. Some believe it moved too far off its core athletic positioning with an everything-but-the-kitchen-sink plethora of products under the brand banner. Today it markets a "performance series" (consisting of energy drinks, energy bars and nutrition shakes); a "thirst quencher" series (Rain, Frost, Fierce, X-Factor, Xtremo, A.M. and Tiger, in addition to the standard formula); Propel Fitness Water; and G2 (for off-the-field hydration).

Gatorade declined a request for an interview in advance of parent PepsiCo's first-quarter earnings report, which will be released on April 24, other than to say, "The Gatorade brand continues to build on our leadership position in the hydration category."

However, industry watchers note that Gatorade's message hasn't been consistent, and several said there were few advertising messages in the first quarter around the brand's core functional competencies. "They've kind of wavered a little bit," said Bob Goldman, exec VP at Technomic. "But at the same point in time, competitors aren't ... doing anything that's all that memorable."

Tom Pirko, president of BevMark, pointed out that Gatorade is moving further into the mainstream. "In some ways, it is the one beverage that immediately comes to mind that is going against the strong trend of functionality," he said. "With the Gatorade brand, they're trying to make it more and more general. They're trying to create a brand that is an alternative to soft drinks."

Lost message?
While Mr. Pirko thinks that is a good thing, others said Gatorade might be losing its historically strong messaging around its authenticity as a sports drink as a key point of differentiation at a time when the beverage aisle is becoming increasingly crowded.

"Certainly the high-growth years of the '90s and early 2000s were driven by helping people understand [the difference between Gatorade and competitors]," said one former PepsiCo executive. "Everybody is looking for healthier beverage choices today. ... There's more going on in the beverage marketplace today than ever before, and that creates some confusion and requires people to solidify what they're all about."

Gatorade also has had difficulty attracting new customers. According to Mr. Greenberg's report, its brand loyalists are drinking 7.7% more Gatorade by volume, but another 8% of its volume is being lost to rivals. Only 0.4% of its volume growth is coming from new users.

And the lifeblood of many of these brands, young consumers, has been a challenge for Gatorade, according to the former PepsiCo executive. "The risk to the franchise was at the younger end -- kids who were just starting to play sports and didn't know that Gatorade was first, best and only," the executive said, adding that the brand put youth marketing programs in place to counteract that.
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