Gatorade ready to pump up marketing efforts

Gatorade President Todd Magazine can't wait for the new year.

The third quarter brought the sports drink brand's first sales decline since PepsiCo pep acquired it in the $13 billion Quaker purchase in 2000. The fourth quarter looks better, but the dip was a marketing call to action for the $5 billion brand. In the 2008 marketing plan:

• G2, a new, lighter version of Gatorade aimed at athletes off the field and the yoga crowd.

• A version of Gatorade's Propel water with caffeine.

• A five-year endorsement deal with golfer Tiger Woods that includes a Gatorade Tiger line.

• Pumped up ad spending leading off with a Super Bowl ad.

"With all the things we're doing, we are raring to go for '08," Magazine says.

Given Gatorade's 1.3% sales slide for the first nine months of 2007, neither can PepsiCo. As bubbly soft drink sales remain flat, products such as Gatorade's sports drinks and waters are key to growth plans.

A recent PepsiCo reorganization landed Gatorade in a new Americas Beverages unit led by Massimo d'Amore. At a recent Morgan Stanley analysts meeting, d'Amore stressed the importance of non-carbonated drinks and also said Gatorade's fourth-quarter sales growth has picked up at a double-digit pace.

But there's a longer-range concern that flagship Gatorade — the original sports drink concocted in 1965 for University of Florida football players — is showing its age.

Gatorade, made with electrolytes to ease muscle fatigue, has about 80% of sports drink sales, but those sales are up just 4% year-to-date, according to Information Resources. By contrast, sales are up 29% for enhanced water (with nutrition or energy additives) and up 11% for plain bottled water.

Brands from Glacéau ko waters to Red Bull energy drinks are encroaching on Gatorade's turf. "Competition is nothing new to us, and we take all of our competitors seriously," Magazine says. "The market has been somewhat explosive in our arena."

Sweating athletes still reach for sports drinks, but they're not always the pick for folks doing less intense health and fitness activities. Magazine will woo them with lighter products. "On the field, Gatorade has tremendous equity and loyalty, but our new products address changes in the marketplace."

John Sicher, editor of trade newsletter Beverage Digest, says this is smart. "People are experimenting with other kinds of beverages. Some of Gatorade's new products are going to be helpful to broaden the brand's appeal."

Gatorade's 2008 game plan:

•G2. The lighter sports drink has 25 calories per 8 ounces, vs. 50 for its full-bodied brother. It will compete for water drinkers.

"Today, athletes drink Gatorade on the field, and (off it), they're drinking bottled water," Magazine says. "Any time someone is hot and sweaty, it is share of throat we go after, and the No. 1 competition is water. We're going after athletes but on a different occasion."

•Propel. A mildly caffeinated Propel Invigorating Water will be marketed as a lower-calorie rival to energy drinks and as an enhanced alternative to plain water.

•New distribution. A deal with antitrust regulators in the Quaker purchase requires Gatorade to be distributed from its own warehouses.

But G2 and Propel will be distributed by Pepsi bottlers, whose merchandising skills and programs should help boost sales at convenience stores and gas stations — which generate about 11% of all soft drink sales.

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