Pepsi, Gatorade Want to Dominate $20B Sports Nutrition Market

Gatorade has plans far beyond sports drinks

   

Gatorade is one of the most iconic drinks in America — from traditional coach-drenchings to the ubiquitous plastic bottles at little league games and fitness centers.

But after embarking on a rebranding campaign beginning in 2009 — starting with a relaunch as “G,” and ultimately resulting in reformulating the beverage into the three-tiered line of drinks — parent company PepsiCo (NYSE:PEP) seems to be messing with a good thing.

But 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 their labs and 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 Lay’s potato chips, Quaker granola bars, Cap’n Crunch cereal, Aunt Jemima syrup and Rice-A-Roni — to name a few.

Gatorade currently 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 (NYSE: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 hang-up 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 for PepsiCo if it can successfully compete in an ever-growing sports nutrition market. But if the effort flops, it’s going to not just be 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 editor@investorplace.com, 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.


Article printed from InvestorPlace Media, http://investorplace.com/2011/11/pepsi-gatorade-pep-sports-nutrition-market/.

©2014 InvestorPlace Media, LLC

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