Gatorade shakes? Pepsi reinvents the sports drink
The beverage brand's parent looks to dominate the $20 billion fitness nutrition market with a new line.
Gatorade is one of the most iconic drinks in America, appearing in traditional coach-drenchings and ubiquitous plastic bottles at Little League games and fitness centers.
But after embarking on a rebranding campaign in 2009 -- starting with a relaunch as "G" ultimately resulting in a reformulating of the beverage into a three-tiered line of drinks -- parent company PepsiCo (PEP) seems to be messing with a good thing.
Lest consumers think the flow chart of Gatorade drinks is the end of the reinvention, an in-depth BusinessWeek report reveals this is only the beginning of a shakeup to the iconic sports drink. Chews, bars, shakes and other products are all in development, and Gatorade is using big-name athletes like NBA All-Star Dwyane Wade to test the products in labs to see if they work under real-world conditions.
It's all part of the PepsiCo vision to diversify its product line. Consumers might not be aware, but investors should know by now that the company is far more than just soft drinks. PepsiCo is the parent of Lays potato chips, Quaker granola bars, Cap'n Crunch cereal, Aunt Jemima syrup and Rice-A-Roni -- to name a few.
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Gatorade is one of the biggest players in the $7 billion sports drink market. But if you look beyond beverages to the broader category of sports nutrition -- protein bars, supplements and the like -- there is a marketplace about three times the size. If PepsiCo can dominate stores like GNC (GNC) the way it dominates grocery aisles, the sky is the limit for sales.
Making the Gatorade brand palatable to consumers this way is a tall order, however. The three-step drink plan of "Prime, Perform and Recover" has been panned by many industry insiders who think PepsiCo overcomplicated its product line in a grab to boost sales. The initial push was a flop, with sales of Gatorade sliding 11% after the initial G rebranding in 2009 and barely squeaking up at all in 2010.
Hence the return to the lab, the testing of new products with star athletes and what is sure to be a resultant marketing push that takes Gatorade back to consumers with "evidence" of its performance-enhancing abilities. If it works for Dwyane Wade, it surely will help you run the floor in a pick-up basketball game, right?
The only hangup is that PepsiCo doesn't have a very good track record when it comes to rebrandings like this. Pepsi's five worst branding disasters include a redesign of the Tropicana orange juice carton that resulted in a 20% sales decline in 2009, and more infamously the 1993 launch of Crystal Pepsi that was quickly killed about a year later.
Gatorade could be a cash cow if PepsiCo could compete in an ever-growing sports nutrition market. But if the effort flops, it's going to be not just another embarrassing black eye for the company but a serious drain on the balance sheet as Gatorade -- er, I mean G -- struggles to regain its once-dominant position on sidelines and in gyms around America.
Jeff Reeves is the editor of InvestorPlace.com. Write him at firstname.lastname@example.org, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. As of this writing, he did not own a position in any of the aforementioned stocks.
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Do they really think anyone is going to walk around with 3 different bottles of any drink? People who exercise assume Gatorade is as good or (hopefully) better than water - tastes ok - and is most likely more nutritious than any other non-water drink. Period.
No one really thinks their sports drink is going to much of anything - only that it's better than nothing. So to think one will consciously drink from bottle #1 before bottle #2 and, of course, before bottle #3 has been sitting behind a desk for too long
Same thing happened with Hamburger Helper. At that time, Kraft owned them and wanted to make more market share. So they took the old tried-and-true brand and added a bewildering variety of new flavors, like Mac 'N' Cheeze and French Onion. Consumers were overwhelmed by the variety and their sales dropped by a third. Since then, Hamburger Helper has trimmed their offerings to just three or four, but their sales have never recovered. You can only mess so much with an icon. How many New Coke and Pepsi Crystal disasters do we need to prove this? Heck, Pepsi should know better because not only did they screw up Pepsi, but they already tried the Hamburger Helper fiasco with Rice-a-Roni. Same story, same results. I don't drink Gatorade anymore, unless I can find the older brand. I don't like the taste of the high fructose corn syrup, which was exactly why I never used to drink Powerade either. Now they taste the same.
I'm sorry to inform you that Hamburger Helper (a Betty Crocker brand) still sports 40 varieties of Hamburger Helper. They're divided into the following categories, with several flavors under each variety:
Helper Complete Meals
Whole Grain Helpers
Most stores probably don't carry the full line -- but they exist and I love all of them!
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