When PepsiCo announced it was buying Quaker Oats Co., I worried that the soft-drinks and snack-food company could screw up Gatorade just like Quaker had screwed up Snapple.
My concern was that PepsiCo would try to make Gatorade a mainstream brand by moving away from its almost mystical underpinnings.
"How will Pepsi bottlers handle Gatorade? By pushing it into every vending machine where Pepsi is sold-in malls, offices, schools, everywhere. Pretty soon Gatorade might become just another beverage, not a sports drink with a special mystique. Quaker lost the quirkiness of Snapple, and now PepsiCo could easily lose the mystique of Gatorade because the pressure is on to grow the brand to justify the $14 billion price tag for Quaker," I opined.
So far PepsiCo hasn't done any of that, probably because they don't own Quaker yet. But PepsiCo better take control fast because Quaker (with or without PepsiCo acquiescence) is doing something even worse. It's gearing up to expand distribution of a Gatorade energy bar and Gatorade bottled water. In other words, Quaker has fallen into the dreaded line extension trap, enunciated by Al Ries and Jack Trout 20 years ago in their classic book, "Positioning: The Battle for Your Mind" (McGraw-Hill). Al and Jack have just published an oversize anniversary edition, with comments and illustrations in the margins bringing their brand stories up to date. The original book, never out of print, has sold 500,000 copies.
When I told Al about Quaker's faux pas, he said the company should have extended the category, not the brand. Al wasn't so worried about demystifying Gatorade. Tequila started out as a niche category but is now the fastest-growing liquor segment (up 17% last year), he told me. And energy drinks such as Red Bull are going from niche to mainstream using the same quirky advertising.
So in Al's opinion what Gatorade should do is "keep their focus and expand the category." Besides, he said, the energy bar and bottled water Gatorades are "way too late for me-too products."
These moves lead me to believe that PepsiCo is already influencing Gatorade marketing because it is classic PepsiCo strategy. Instead of going head-to-head with Diet Coke, it tried to outflank Diet Coke with Pepsi One, and PepsiCo struggled with other line extensions such as Pepsi AM (extra caffeine), Wild Cherry Pepsi, Pepsi Kona (coffee-flavored), Pepsi Light, Pepsi XL, Pepsi Max and Crystal Pepsi.
"Crystal Pepsi is a good example of the difference between short-term stimulation and long-term depression," Al told me. "In the first month, Crystal Pepsi had 5% of the soft-drink market, an enormous share, much larger than Gatorade. A year later Crystal Pepsi was dead, taken off the market."
"In the short term, line extensions can stimulate sales," Al says. "Wow, a Gatorade bar. Wonder what that would taste like?"
"But in the long term, line extensions usually depress sales. What's a Gatorade? Is it a drink, water, a bar or what?"
The Gatorade Energy Bar, as it's called, might actually be a fiendishly clever way for Quaker to get consumers to drink more Gatorade. "What burns inside you?" is the slogan, and it might be the peanut butter or oatmeal-raisin varieties that require prodigious amounts of liquid to put
out the fire.
The bottled-water product, in regional distribution, is called "Propel Fitness Water from the makers of Gatorade." Yet according to Al, using two brand names is the worst of all possible worlds.
You drink Propel when you don't want the jock image and calories that Gatorade brings to the training table. It comes in different flavors and is fortified with six vitamins.
PepsiCo expects to take over Quaker late in the second quarter, and its first order of business should be to avoid the diversionary tactics that would embolden competitors to take a run at its new prize brand.