Expanding the active thirst occasion

by Keith Nunes
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The sports beverage category underwent a makeover in February when Gatorade, a brand owned by Purchase, N.Y.-based PepsiCo, Inc., and the category leader, introduced its G Series, a line of beverages designed to meet the needs of athletes before, during and after a workout or athletic event. The introduction represented a repositioning of the Gatorade brand away from the average non-carbonated beverage consumer and back to athletes, the brand’s original core customer.

“Before the re-launch, Gatorade had really expanded beyond its core user: the athlete and the active thirst occasion,” said Gary Hemphill, managing director of the Beverage Marketing Corp., a New York-based beverage marketing and consulting firm. “They broadened the brand out beyond that occasion and are now working to rein in and refocus on their core target.”

Athletes, whether they are professionally trained or weekend amateurs, are becoming more familiar with the three stages of nutrition in exercise that are included within the G Series line of products. Pre-exercise nutrition often includes fluids for hydration, such as Gatorade Prime, as well as an assortment of easy to digest foods such as bananas, peanut butter, bagels or Greek yogurt. During an event or workout it becomes important to hydrate and replenish nutrients lost to perspiration. Most athletes turn to sports beverages like Gatorade or Powerade, a brand owned by the Coca-Cola Co., Atlanta, or gel packs, which are gels featuring concentrated nutrients in 1-oz or 2-oz portions. Post workout nutrition often includes beverages and foods specially designed to help muscles recover quickly and with a minimum of soreness.

Gatorade’s introduction of the G Series, and the subsequent multi-million dollar marketing campaign that followed, has brought consumer awareness to the various segments of workout nutrition and shined a light on differentiated market segments within the sports beverage category.

Overall, both Gatorade and Powerade dominate 95% of the sports beverage market, with Gatorade controlling a 75% market share and Powerade with a 20% market share, according to the Beverage Marketing Corp.

“If you look back historically, the Gatorade brand was actually very fragmented,” Mr. Hemphill said. “And that is why the category experienced slower growth or declined in 2009. In effect what they have done is overhauled the brand and fine-tuned the approach to targeting the athlete.

“Their efforts have begun to pay dividends. They are seeing growth and the category is seeing growth. Gatorade’s results, in particular, have been better in the second half of 2010 when the new innovation and the re-launch really took hold.”

Mr. Hemphill added that Coca-Cola’s Powerade has not seen the same level of success recently as PepsiCo’s Gatorade. Powerade, however, has not undergone a brand repositioning as Gatorade.

Trying to stand out

Other companies that have attempted to establish a position in the sports beverage market include Chicago-based Abbott Laboratories, through its EAS brand, and Attitude Drinks, Palm Beach Gardens, Fla.

“There are a handful of other brands in the market, but they are either regional or very specialized,” Mr. Hemphill said.

In August, EAS introduced its Peak line of products to the market. In a twist to how Gatorade is marketing its products, the Peak marketing campaign focuses on a single beverage providing the nutrition to push, through increased workout

capacity; perform, due to sustained energy release; and protect, by reducing muscle breakdown. The product is able to achieve all of those benefits through what EAS describes as its P3 technology, which is essentially an ingredient combination of beta-alanine, an amino acid that may help muscles delay fatigue; isomaltulose, which provides the sustained energy; and H.M.B (beta-hydroxy-beta-methylbutyrate), a proprietary ingredient the company claims will slow the breakdown of muscle protein.

The EAS Peak line hit a stumbling block in October when it initiated a voluntary recall of its products due to quality concerns relating to the third party that manufactured the product.

In January, Attitude Drinks Inc. introduced its Phase III beverage line. Phase III is a milk-based, ready-to-drink product that competes in the post-exercise recovery category. In October, the company added a second s.k.u. (stock-keeping unit) to the line with introduction of a vanilla flavor.

“For Attitude Drinks, adding a second s.k.u. will enable larger retailers and distributors and others in the beverage industry to place significant orders, and help further our penetration across the U.S. beverage marketplace,” said Roy Warren, chief executive officer of Attitude Drinks.

The Phase III line is formulated around a 1:1 protein to carbohydrate ratio. The vanilla flavor has 35 grams of protein and 34 grams of carbohydrates, respectively.

Mr. Warren added that the company plans to introduce additional flavors to the market in 2011.

Looking to the future

Canadean, a global beverage marketing firm based in Basingstoke, England, said in its “Global Sports Drinks” report, published this past October, that 2009 represented the second year of contraction for sports beverages. The market category had declined approximately 2%. But the research firm said demand in the marketplace is expected to recover and projected the market will experience compound annual growth rate approaching 5% between 2010 and 2015.

“Sports drinks are a good fit with the health conscious consumer, but the category is under threat from bottled water, particularly functional water, still (non-carbonated) drinks, filtered water and tap water, all of which offer instant refreshment at a lower price in difficult economic times,” Canadean said.

The research firm added that despite the growing health and wellness trend, sports beverages are often seen as a discretionary spend and tend to suffer during difficult economic times, because they may be easily substituted.

But Mr. Hemphill, of the B.M.C., said the growth his company has seen in the latter part of 2010 may be an indication of better things to come.

“Over the next five years we believe the category growth will be 5% annually on a volume basis,” he said. “That could be relatively conservative based on what we have seen.”

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