Getting a second wind

by Keith Nunes
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The sports nutrition market segment, specifically sports beverages that include market leading brands such as Gatorade and Powerade, have been challenged by the current global recession. While committed athletes remain faithful to the brands, casual users have reduced consumption and presented a quandary for companies focused on growing the brands.

“For the first two quarters of the year we have the market down 5.6% for the total category through all channels,” said Gary Hemphill, a senior vice-president for the Beverage Marketing Corp., New York. “Our expectation is the sports beverage market will end the year down but improve during 2010. Both 2008 and 2009 have been soft years for the market, which will make it a little easier in 2010 because they will be lapping some numbers that were not as good as in the past.”

The sports beverage market is at a stage where the focus is on finding new consumers while retaining existing ones. With new products and varieties being launched frequently, brands are fighting for both shelf space and consumer attention. The range of choices in terms of flavor, form, size and price is encouraging consumers to shift from product to product, trying tastes and other benefits.

Mr. Hemphill noted that PepsiCo’s Gatorade and Coca-Cola’s Powerade brands dominate the market and “as they go so goes the market.”

This past October, Richard Goodman, chief financial officer of PepsiCo, Inc., Purchase, N.Y., outlined the market position the Gatorade brand had found itself in at the end of the third quarter for fiscal 2009.

“Based on our most recent comprehensive consumer research, we know that today’s Gatorade volume is coming largely from the core athletic user,” he said in a conference call with financial analysts. “Importantly, this core user continues to be loyal to Gatorade, a brand that is second only to Nike, the world’s No. 1 sports franchise.

“Since the re-launch of Gatorade and the brand refresh initiatives over the past few months, Gatorade’s brand equity scores with the core athlete have improved substantially.”

Mr. Goodman emphasized the volume decline Gatorade has suffered is due to the economic downturn.

“… Research completed recently indicates that the issue is not lost penetration with the core user, but some loss of frequency and that’s very clearly related to consumer budget concerns,” he said. “To that point, about 60% of the occasion losses went to water, both tap water — which is free — and bottled water, and another 30% went to cheaper options like juice drinks. Less than 5% of the lost occasions went to so-called competitive offerings. Going into 2010, our plan is to keep Gatorade solidly in the athletic space, and to deliver targeted innovation to that athlete.”

Mr. Hemphill said there appears to be a lot of innovation planned by PepsiCo, Inc. In November, Crain’s said PepsiCo is planning to launch several new products to the sports beverage market called Prime, Perform and Recover. The products may target core athletes and provide benefits targeted toward specific occasions within the exercise regimen.

The Coca-Cola Co., Atlanta, also has been busy bringing innovation to its Powerade line of products. In 2008 the company introduced Powerade Zero, a zero calorie option. In addition, the company has extended the line with such products as Powerade Option and Powerade with Ion 4.

In a conference call with financial analysts on Nov. 17, Katie Bayne, chief marketing officer for Coca-Cola, said the company is receiving positive consumer response to the product line.

“The launch of Ion 4 has given us a nice share swing and Powerade Zero has fueled our share growth,” she said. “Our value is up over 2.4% at 3.3%. Powerade is also the fastest growing sports drink among Hispanics; plus 8% year-to-date and in several parts of the country, the leader.”

While the economy may have prompted some consumers to shift away from sports beverages, the health and wellness trend may play a greater role in bringing some back to the products. An increased focus on health consciousness and on issues such as obesity-related deaths may lead consumers to the sports beverage category.

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