After refusing to cut prices, the PepsiCo-owned sports-drink leader was forced to reconsider after Coca-Cola Co.'s upstart Powerade dented its 2001 lead with aggressive discounts and promotions. While still a distant No. 2 in sports drinks, Powerade last year increased share 2.5 points to command 13.3% of the take-home channel; Gatorade lost that same amount, ending up with a 78.8% share, according to Beverage Digest.
Beverage insiders question the sustainability of Powerade's rise. But it's clear the move put PepsiCo, which last summer paid $13.8 billion for Quaker Oats Co. and its crown jewel Gatorade, on notice. Robert Morrison, PepsiCo vice chairman and former Quaker chairman-CEO, this month told analysts the company would give no quarter and even would cut prices if necessary. "We can afford to do whatever it takes to win in the category," he said. Mr. Morrison went on to say that despite "unusually strong pressure from a major competitor," Gatorade volume was up 6% in the fourth quarter and sales up 11%.
Powerade's move up came despite lower ad spending than Gatorade-the Coca-Cola brand received $6.5 million in measured media for the first 11 months of 2001, according to Taylor Nelson Sofres' CMR, compared with $11.2 million for Gatorade. But Powerade also underwent an aggressive relaunch last year with reformulated flavors, revamped packaging, new ads and additional media. With so much attention, "no wonder it gained share. You'd worry if it didn't," said one analyst.
The analyst, however, was skeptical that Coca-Cola can sustain the pressure on Gatorade given management turmoil and agency changes at the Atlanta beverage giant. Independent Wieden & Kennedy, Portland, Ore., retains Powerade despite Coca-Cola's consolidation of some brands at Interpublic Group of Cos.
Gatorade's current ads were created by Interpublic's Foote, Cone & Belding Worldwide, Chicago, although the brand is moving to the unnamed spinoff agency of Omnicom Group's DDB Worldwide, Chicago.
Sports drinks are important to beverage marketers because they are growing three times faster than carbonated soft drinks, which last year rose just 2%. As such, Coca-Cola was wise to try and seize share, though Gatorade is in no danger of significant dips, according to John Sicher, editor of Beverage Digest. "Gatorade is one of the strongest consumer brands," he said. "We should all be so fortunate as to have its problems."
contributing: stephanie thompson