After outperforming all categories in percentage volume growth during 2008, the sports drink category needs to replenish its electrolytes.
Thanks in part to an exodus of health-conscious shoppers from carbonated soft drinks, isotonic beverages' unit sales spiked 7.4% in food, drug and mass channels (excluding Wal-Mart) last year, according to Information Resources Inc. But now the category is spent, and factors like limited discretionary income, poor marketing and in some cases bad weather, have led to declines.
The situation was dire enough for PepsiCo — maker of share leader Gatorade — to launch a major marketing push earlier this year. But its efforts missed the mark.
After simplifying the Gatorade brand name to “G,” adopting the slogan “That's G,” and reformulating an extensive line of drinks like Gatorade Tiger (renamed Gatorade Tiger Focus) by adding theanine to build mental acuity — dollar sales of non-aseptic Gatorade fell 13.1% in the food channel during the 52 weeks ending July 12, according to IRI.
Coca-Cola's Powerade, which holds the No. 2 share spot, fell 21%.
The poor performance is daunting since it comes on the heels of impressive growth.
Sports beverages gained 11 million new users between 2003 and 2008, penetrating 40% of the consumer market, according to Mintel, Chicago.
Many new users were part of a group of 15.6 million soda drinkers who fled the category for healthier options. Fewer than seven in 10 (68%) Americans drank soda last year, down from 76% in 2003.
Sports drinks focusing not only on physical fitness, but also address mental performance, outdoor temperature and even time of day, have helped draw mainstream consumers to a category once tailored exclusively to serious athletes.
“The category has been able to attract more fringe consumers who like the taste, they find them refreshing, they like the functional benefits and they're probably active in their own right,” noted Krista Faron, senior analyst at Mintel.
The beverages also appeal to those who sit on the sidelines.
Some shoppers at Big Y, for instance, don't exercise, but they opt for G2 — a low-calorie version of Gatorade — since they like the taste, Bill Eichorn, category manager for the Springfield, Mass.-based chain, told SN.
Consumers elsewhere are also enjoying the drink — G2's dollar sales almost doubled in the food channel, climbing 99.3% during the year ending July 12, according to IRI.
The drink's success hasn't been enough to carry the category at Big Y.
Although overall sports drink sales were up last year, interest has since fallen off.
“This year, sales have gone down dramatically,” Eichorn said.
He attributes the change to unseasonable weather in the Northeast, where Big Y has 55 locations in Massachusetts and Connecticut.
“Most beverage sales have been down because of the cooler and rainy weather we've had,” he said.
Indeed, weather conditions haven't exactly spurred the need for cold refreshment. The thermometer didn't exceed 90 degrees in much of the region until a couple of weeks ago, and in July there were 27 days of rain. The suboptimal conditions were too much for some beverages to endure.
Brands like Cadbury Schweppes' Accelerade — a protein-enhanced drink for endurance athletes — was cut due to poor performance.
Drinks like these that don't bear the Gatorade label already have a strike against them, noted Eichorn.
“Anything that comes in new has a very tough time because of Gatorade's strength,” he said. “You're talking over 80% penetration, so anything else people have a hard time trusting.”
Although the brand enjoys high loyalty, that means nothing if shoppers have a hard time identifying the brand they've become used to, or can't identify the specific variety to which they've grown accustomed.
Industry observers contend that Gatorade's logo and beverage name changes have left many shoppers scratching their heads.
“When I first saw it I thought it was confusing,” Eichorn said, “especially when it's calling its lower-calorie version G2. The G and G2 can get confusing.”
David Panter, who is category manager for Salt Lake City cooperative Associated Food Stores, which supplies about 600 independently owned supermarkets, is concerned that with its breadth of formulas, Gatorade may be offering shoppers too much choice.
“They may have oversegmented it a bit,” he said, referring to an extensive portfolio of drinks including Shine On (formerly Gatorade AM), Be Tough (formerly X-Factor) and Bring It (formerly Fierce).
Leah McGrath, dietitian for Ingles Markets, Asheville, N.C., doesn't think that hurdles which come between couch potatoes and sports drinks are necessarily a bad thing since they're often consumed for the wrong reasons.
Sports drinks contain calories and carbohydrates to help replenish the body after exercise, and when no exercise is performed, drinkers consume about 50 calories and 12 grams of carbohydrates unnecessarily.
“If people stick with the original purpose of these beverages as an electrolyte and fluid replacement beverage, I think they have their merits, but I see kids sitting in school for six hours a day drinking them,” McGrath said.
Ingles consumers are also voicing concern about beverages containing high fructose corn syrup presented as promoters of health.
Marketers have responded by switching to more natural ingredients.
“There has been a move away from high fructose corn syrup to cane sugar and agave nectar,” said Faron. “We see a lot of claims being made like no artificial preservatives, natural flavors, natural sweeteners so that seems to be an area of emphasis because these are [promoted as] healthy drinks.”
But not all consumers are wooed by claims like these.
Despite moves toward healthy beverages elsewhere in the country, McGrath related that soft drinks continue to be a big seller at Ingles Markets.
“Coke is pretty much the state drink of Georgia, so people down here aren't going to give it up,” she quipped. “I think it's part of the state motto.”
Cost concerns also seem to have put the breaks on sports drink growth.
To help save money on isotonic beverages, Big Y shoppers are bypassing cold cases of individual bottles, opting instead for multipacks.
Eight-packs of 20-ounce bottles are gaining momentum, according to Eichorn.
“The 32-ounce bottle has been the driver of the segment, but the multipacks are really where the growth is,” he said.
Consumers shopping stores supplied by AFS are managing tight budgets and choosing single serve and bulk powders that can be combined with water to create their favorite sports drinks at home. Items in the category are experiencing growth in the high double-digits, according to Panter.
“You can buy a 24-pack of water for $2.99 in this market, or 13 or 14 cents per bottle,” he said. “The economy of just adding powder is hard to ignore.”
When it comes to the single-serve packets of powder, vitamin-enhanced Propel is the best seller, followed by G2 and those used to create conventional Gatorade, Panter said. Gatorade is also the top seller when it comes to bulk bins of powder.
Sales of multiserve packs at AFS stores are also gaining steam. Panter said sales of eight-packs of 20-ounce bottles that retail for around $6.99 have increased a whopping 50%.