Gatorade Niko Vergis
Business Analysis • Intro to Marketing Research• March 7, 2012
Table of Contents 3 Brand History 4 Products 5 Manufacturing 5 Packaging 5 Sales 8 Pricing 8 Current Brand Marketing Strategies 9 Current Brand Advertising Budget and How Allocated 10 Current and Historical Creative Executions 11 Target Audiences 11 Psychographic Information 12 Demographics and User Profile 13 Media Demographics and Usage 13 Media Consumption 14 Category Brands/ Consumption Patterns 14 Competitors- Vitamin Water 14 Marketing Strategies 15 Sales Volume 15 User Profile 16 Competitors- Power aid 17 Product Life Cycle 18 Bibliography
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Brand History Gatorade started back in 1965 at the University of Florida near the medical school. Scientists wanted to formulate a drink that would stop second half fatigue that the Gator football team had been experiencing. The researchers at the medical school came up with a drink that prevented severe dehydration caused by fluid and mineral loss during the University of Florida football games in Gainesville. This new formulated drink shaped the sports drink industry and allowed Gatorade to launch its new product nationally and globally to dominate the sports drink market for decades. After the scientists at the University of Florida developed Gatorade, the rights to produce and sell throughout the U.S. were acquired by Stokely Van-Camp. Stokely initially marketed Gatorade by word of mouth in the sporting world. To increase sales and public knowledge of this new sports drink, Stokely promoted and marketed this not only as a sports drink, but as a health drink product as well. In 1983, Quaker Oats bought Gatorade from Stokely for $220 million dollars. Gatorade expanded its international distribution under Quaker Oats ownership. Quaker expanded Gatorade throughout the eighties and nineties. Gatorade was sold in 47 countries and was the market leader throughout North America and much of Latin America. Gatorade owned the sports drink market when Quaker acquired it. Net sales had been $90 million in 1982, but Quaker would nearly double this in a couple of years by creative marketing strategies. Quaker brought the brand’s marketing to a higher level. Quaker Oats past success in marketing Gatorade to the public has achieved such a dominant position for their vastly popular sports drink that the brand name has almost become a generic term for the category. In December 2000, PepsiCo, Inc. acquired
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Gatorade from Quaker Oats in a stock deal worth thirteen billion dollars. In 2004, sales associated to Gatorade were 1.22 billion dollars, estimated at 75% of the market share among sports drinks. Product Gatorade is available in 80 countries, with more than 30 flavors available in the United States and more than 50 flavors available internationally. They have many product lines designed to please most sports drinkers. No matter what your gender, your occupation, or your age, they make a drink that you can enjoy. Gatorade has many different product lines within their Thirst Quencher Series. They distribute Gatorade Rain, Frost, Lemonade, Original, X-Factor, Xtreme, and Fierce. Each of these different categories comes in many different fruity flavors. Gatorade also has a line of fitness water called Propel. Propel also comes in a wide range of flavors similar to those found in the Gatorade Thirst Quencher Series. Gatorade also introduced the Gatorade Performance Series products. This series of products has specially formulated nutrition and hydration features in order to help the most intense athletes in their performance. Each product is designed with nutrition in order to replace the electrolytes lost by each athlete through exertion. Gatorade also has an energy bar that comes in 2 different flavors, chocolate chip and peanut butter along with a nutrition shake. The nutrition shake product comes in the flavors, chocolate, strawberry, and vanilla. Gatorade recently has gone through product development and created a whole new line of products. The company calls the new product line “G Series� and features a brand new logo for the company. This G Series line is advertised to get the attention of
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athletes who train hard and need nutritional supplements before, during, and after their workouts to keep their performance and hydration levels up. Manufacturing PepsiCo produces flavor concentrates at their manufacturing plants all over the world. Packaging is outsourced and sent to the manufacturing plant to be inspected and sanitized (Pepsico, 2006). This process allows the company to control the quality of outsourced goods. The packaging materials are then shipped with the flavor concentrate in airtight containers to independent bottlers. PepsiCo has representatives on site to monitor the bottling process. PepsiCo adheres to extensive quality control measures to ensure control in the manufacturing and distribution process. Packaging The product is packaged in clear plastic sports bottles and is shipped in cases of 24 from the bottling center to the retailer. Pepsi first sends the concentrated syrups to the bottling center where they are mixed into the correct syrup-water ratio and then bottled and made ready to ship out to retailers. Semi-trucks make the delivery from bottling plant to the retailers. Sales According to corporate reports, PepsiCo’s well-known sports drink brand, Gatorade, is the largest non-carbonated beverage brand of the company. It has been estimated that Gatorade represents approximately 18% of PepsiCo's total beverage revenue and 9% of the total company. Ultimately, Gatorade is a North American brand, in which North America represents roughly 80% of global brand revenue. The hype of the sports drink category slowed down after the late 1900s and early
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2000s, and the hype of Gatorade did so accordingly. Recent studies show that the cause is the need for future growth prospects. Therefore, PepsiCo took action by aggressively rebranding Gatorade. In 2009, it was rebranded as “G,” which is intended to be more modern for the high school athlete. As Gatorade was in the rebranding process, they realized that the one of the mistakes made by the brand in the mid-2000's was that it became too positioned for the mass market, losing focus on its existing demographic and loyal customers. In 2010, Gatorade relaunched “G” to “G Series.” The solution of “G Series” was to return to its origin as the core athletic brand. Rather than repositioning the brand altogether, Gatorade expanded their demographic. Instead of just athletes in general, they used the G Series to focus on targeting the professional athletes or “performance” athletes as well as the more casual fitness athlete. The initial results of the year-over-year sales of G Series in 2010, compared to Gatorade sales before the G Series launch, were somewhat positive. In June 2010, the growth in tracked channels turned positive and spiked to 24% by August 2010 before moderating into the fall. Results from PepsiCo reports showed that Gatorade grew volumes, that it was the first quarter of positive volume growth within two years, i.e. mid-teen demographic. The reason for positive results is questionable, whether recent branding efforts were enough or if the results are dependent on other factors. The factors that cause skepticism are weather, direct and indirect competition. The weather during this period, which was above-average temperatures through much of the U.S. market this summer, could have helped increased volume since the average temperatures were up year-overyear for the first time since 2006. To gain full potential success, brands must pay
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attention to their competition, both direct and indirect. The most direct competition, Powerade, may have played a role considering their pricing strategy. Average Powerade prices declined nearly 2.5% over the last 12 months, while average Gatorade prices only declined 1%. There was a relative price gap expansion on Gatorade volume loss since early 2006. Besides direct competition, indirect competitors may have also played a role. These competitors are the hydration & performance beverage category, namely energy drinks (e.g. Monster Energy, owned by Hansen) and functional water (e.g. Glaceau’s Vitaminwater, owned by Coke). The competition’s strategies attract new consumers & create different consumption occasions through competitive branding and tactics such as promoting energy ingredients, including electrolytes, vitamins, minerals, and/or amino acids. One of PepsiCo’s weaknesses is the marketing management team's oversimplification of competition assessment. They view water as the drink of “no carbs, no electrolytes, and no game.” PepsiCo has ignored the details of why the hydration and performance beverage category has been expanding in recent years. Is it expanding through the growth of sports drinks? No, the volume share is negative. Is it expanding through the growth of energy drinks and functional water? Yes, the volume share is positive. Why? This brand category targets the same demographic, which is the young and athletic. Individual brands also have specific focuses, for example Glaceau appeals more to females and energy drinks to males. Meanwhile, Gatorade is losing relative share of consumption in both men’s and women’s performance beverages. As a result, the expectations for Gatorade in U.S. growth are modest. To revitalize the brand's image, Gatorade needs to take further action and is considering the following
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strategies. Firstly, Gatorade needs more intensified A&P (architecture & planning). The marketing and advertising expense behind Gatorade has been reduced by PepsiCo. The marketing spending declined over 40% in measured channels 2005-2009, as well as the advertising dollars spent. Also reduced is the brand’s share of voice among direct competitors from 75% to 50% over the four years. If all fails, price discounting may be recommended, in reference to the direct competition Powerade's pricing strategy. Pricing With regard to Gatorade, PepsiCo uses Value-Based Pricing, which is a pricing strategy that prices products in which companies first try to determine how much their product is worth to the consumer. The product's price is actively dependent upon its demand. The challenge is to avoid setting prices much higher or lower than customers are willing to pay. Currently, Gatorade prices vary from retailer to retailer but the standard 250ml sports drinks price varies from $1.29 to $1.59, which are lower then its competitor Powerade which varies from $1.79 to $1.99. PepsiCo is very careful about the amount they charge the members in the distribution channel. They need to make sure that they receive a profit, as well as all the others down the distribution channel. Current Brand Marketing Strategies Gatorade uses two main brand-marketing strategies. One strategy is the use of professional athletes as brand ambassadors or opinion leaders, and the other is a wide product line, which appeals to many different target markets. The use of professional athletes to endorse the brand is very powerful. They use athletes in an array of sports. Some of the professionals that have been involved were, Michael Jordan (Basketball), Tiger Woods (Golf), Derek Jeter (Baseball), Eli Manning (Football), Kerri Walsh
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(Volleyball), and Serena Williams (Tennis). These athletes are the most well known and/or the best at what they do which makes them iconic. Gatorade marketers know that many people look up to these professional athletes to help influence their decisions about certain products. They do print ads and commercials with almost forty athletes in their lineup including, Dwyane Wade, Serena Williams, Peyton and Eli Manning, Derek Jeter, just to name a few. These athletes are used to appeal to all five senses in order to really influence the consumers into believing they can be, or feel like a pro if they drink Gatorade. Gatorade is also regularly used at every sporting event. During timeouts, athletes are shown quenching their thirst with a cup or bottle of Gatorade. The cooler, which carries Gatorade’s logo, conveniently catches the eye of the camera throughout nationally broadcasted games. Also, Gatorade towels are a commonly used item to build brand awareness along with the seat cushions that the athletes sit on, while various Gatorade advertisements are played in the stadium. With its phenomenal job of placing the product at sporting events, brand awareness is built with the viewers. Current Brand Advertising Budget and How Allocated According to an article on Pepsi-Co, they have decided that they are going to increase their advertising spending approximately 30% overall. $60 million dollars was to be spent on product placement into Simon Cowell’s music competition X Factor. According to an article in Ad Age in 2012 they are going to be adding millions of dollars to their advertising budget. In order to compensate for that budget, they will be laying-off thousands of employees. They recently announced that they would be spending $500$600 million dollars more to advertise the Pepsi-Co brands. Up to $100 million dollars is going to go towards in store displays. Approximately $113 million dollars was spent on
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measured media in 2010 and in 2004 they were said to have spent $141.6 million dollars for Gatorades marketing alone. Pepsi-Co spends less than $2 million dollars advertising their products compared to their biggest competitor Coca-Cola, who spends nearly $3 million dollars advertising their products. Current and Historical Creative Executions Gatorade has created many successful campaigns for the advertising purposes of their brand. A few of the most historical and creative executions have been the “Like Mike” campaign, the G series launch, and the dumping of the Gatorade coolers. The “Like Mike” campaign consisted of a commercial that displayed some of Michael
Jordan’s highlighted moments compared to little kids. The G series launch was a creative execution because it re-invented the look of Gatorade and gave it innovation. It introduced new lines of Gatorade that were scientifically improved. New ads, product presentation and commercials displayed the improvements and innovation, which caused a 6.5% volume increase in 2010. This was a great
improvement from the 13% decline the previous year.
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The dumping of Gatorade coolers over coaches’ head’s after a huge victory has become a historical activity. The exact incident that started the whole dumping is not known, but is usually credited to Jim Burt. Jim Burt was the defensive tackle for the New York Giants football team in 1985. The dumping wasn’t planned by Gatorade, which makes it free advertisement. This activity became very iconic and is still done today. At many sporting events you will see huge coolers with the Gatorade logo. Target Audience Active Athletes; Men & Women; Ages 18-24 The primary market targeted by Gatorade is physically active men and women between the ages of 18 and 24. As stated by Cook (2002), “the core message behind the Gatorade brand: the sports drink purports to replenish the vital fluids lost during intense physical exercise and help you perform your best” (Cook, 2002, para. 2). The drink was designed for athletes and their needs during rigorous activity. Non-Active to Moderately Active, Men & Women, Ages 18-30 The secondary market consists of non-athletes. A new line of Gatorade named G2 has fewer calories and sodium than the traditional Gatorade beverage. This product is taking advantage of the trend of consumers moving towards a healthier lifestyle. G2 also helps maintain customer loyalty by bringing the full taste of the traditional flavors back on the market. Psychographic Information Breaking down the demographics of Gatorade users, you will find that the biggest users are usually men with an index of 136. This is a significant amount of Gatorade users compared to the index of women which is a mere 67. Men dominate the consumer
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market for Gatorade. The most common age for Gatorade users are adults ages 1834. These users mostly work in natural resources, construction, and maintenance. These numbers make sense since those types of jobs are usually manual labor, which means that they would need Gatorade to rehydrate themselves during work. The most common household income for Gatorade users is between 20,000 to 29,000 dollars. An index of 144 is found in the North East, 100 in the South, 70 in the Midwest, and 94 in the West. Most users are found in the North East area. More advertising should be done in the Midwest since they have the lowest index out of the four areas. Finally, the most common race found among Gatorade users are African Americans with an index of 178. There is a higher index of 250 for the ‘other’ races, but if we were targeting a specific race, African Americans are the biggest users. Demographics and User Profile The typical user of Gatorade is larger in the male demographic. When it comes to education, males that did not graduate high school are the most frequent users with an index of 182. The primary consumer has never been married and has a child between the ages of 12-23 months. Looking at these demographics, you will find men using the product more. Single parents with children are also an important demographic to concentrate on. We also try to focus on people with lesser household income since they are high users as well. These things are important when looking at who we try to advertise towards, since these are our most valuable customers that continue coming back to Gatorade.
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Media Demographics and Usage It seems through MRI data that Gatorade users listen to broadcast radio weekdays between 7 PM and midnight. Along with that, they also most frequently visit MSN Movie Websites, watch Feature Film Primetime TV and MTV Tr3s cable, and read Ski Magazine. Media Consumption The main types of media that is used by Gatorade users are magazines, television, and internet. Looking at MRI data the main types of magazines that are popular among users are sports magazines (with the highest index of 182), male oriented magazines, fishing/hunting, automotive, and health magazines. Some popular specific magazines include Sunday magazine/newspaper, Sports Illustrated (with the highest index of 196), readers digest, and USA weekend carrier newspaper. Television is also an important type of media for Gatorade users. Users watch television most often during the daytime. Specific television shows that are popular for Gatorade users include Syfy, Spike TV, Nickelodeon, MTV, ESPN news, Discovery Health Channel (with the highest index of 165), and BET. The most popular television types are Football (pro-weekend) (134 index) and Football pregame shows (164 indexes). Finally an important media tool for Gatorade users is the internet. An index of 126 use Internet Quintile IV and specific internet sites used are AOL mail, ESPN.com (with the highest index of 179), YouTube, and iTunes.com. Advertisers could use this information to help promote the Gatorade product to these types of media users.
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Category Brands/ Consumption Patterns Seasonality is very important when looking into marketing strategies. Knowing when the best time to advertise Gatorade helps create a larger profit for the company. Since Gatorade is a sports drink, sports seasons are important to the product. Luckily for Gatorade, no matter what season it is there is always a sport going on. Football season goes from fall to winter, basketball season goes from late fall to late spring, baseball season goes from late spring to fall, and soccer season goes from early summer to fall. So whenever the season is, Gatorade will always be needed. Some other important times to consider are also big events that Gatorade will benefit from if they are involved. Some examples include marathons (both training for the run and the actual event itself), and large sports events. Each sport always has a large ending to their season. Some notable sports events include the Superbowl, NCAA men’s basketball championship, the World Series, and the FIFA World Cup. Having Gatorade sponsor are involve their time in these events will help promote the brand and sell the brand to consumers. Competitors -Vitamin Water VitaminWater was introduced in 2000 in New York. In 2007 Coca-Cola bought Glaceau for 4.1 billion, which included VitaminWater, Smartwater, vitamin energy and fruit water. Marketing Strategies In March 2010 Gatorade launched a new flavor named “Connect�. The label on the bottle had an image of the Facebook logo and had references on the bottle driven towards social networking. Having over 3.1 million Facebook subscribers, the idea lead
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to a connectivity trend and was the most successful “crowd-sourced” product launched for a brand. VitaminWater typically markets their products on their health benefits. Showing witty and pragmatic descriptions on the products label which state exactly what the main vitamins are added into the flavor that was purchased. It has reached a good effect on the consumer. A campaign VitaminWater did was putting USB ports next to their advertisements inside bus shelters in New York, Los Angeles, Chicago and Boston. This campaign was a way of promoting their new “Energy” VitaminWater so people could plug and charge their mobile devices while waiting for transportation. Rapper “50 Cent” was VitaminWaters strategy to enhance the brands coolness with young adults. “50 Cent” was featured in advertisements, produced his own variant in the VitaminWater product line and used VitaminWater in his lyrics. His net-worth for being the company’s first major spokes person was an estimated $100 million. Also Shaquille O’Neal, Tony Parker and Kelly Clarkson endorsed the brand by being loyal brand users and directly target and encourage young adults to purchase the product. Sales Volume After Coca-Cola bought Glaceau the company’s U.S. volume grew 133% in 2007 and the enhanced flavored water segment made up of 34% of the company. User profile VitaminWater targets young adults with an average age of 15-24 years old and make up 34% of the functional drinks marketing in the US. The main consumer is African American women ages 18-34 that have graduated college. These women are in a professional and related occupation with an income of $75,000 – $149,000 and mostly
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are located in the western region of the United States. Most women that use VitaminWater are engaged, have a child 6 years of age and are living in a home valued at $500,000 and above. Competitors -Powerade In 2008, PowerAde Zero, a zero-calorie sports drink with electrolytes and no carbohydrates was released. PowerAde Option was subsequently discontinued. In 2009, PowerAde was relaunched as PowerAde ION4, a formulation that contains four key electrolytes in the same ratio that is typically lost in sweat. PepsiCo sued The Coca-Cola Company; after ads were released claiming that Gatorade was an incomplete sports drink, since it only contained two of the four key electrolytes. The presiding judge ruled in favor of Coca-Cola, for a number of reasons: the ads were no longer running, Gatorade had made similar claims about their Endurance line, and Pepsi failed to show any harm or damage caused by the ads, which were only designed to run for sixty days. As of now Powerade is made and owned by Coca Cola, a partner in GlacÊau who runs Vitamin Water. Powerade has as of now two celebrity endorsements, Chris Paul from the Los Angeles Clippers, and Derrick Rose from the Chicago Bulls. Powerade Ion4, a brand of The Coca-Cola Co., Atlanta, topped the list of food and beverage brands in SymphonyIRI’s 2010 New Product Pacesetters list. The sports drink reported $190.5 million in dollar sales across food, drug and mass channels, excluding Wal-Mart, according to SymphonyIRI.
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Product Life Cycle Gatorade falls within the maturity stage of the Product Life Cycle. In order to be in the maturity stage, the product must have a mass market of consumers. Gatorade qualifies because they have millions of consumers. The competition is intense and their growth has slowed down, but their profits are still strong. They aren’t as strong as they were in the growth stage, but are still significantly strong. They defend their product against competitors. Water is the most mentioned product when addressing the health of athletes. Gatorade costs have remained stable and their prices are reasonable. If it’s too expensive to buy each drink individually, bulk is available in grocery stores or wholesalers like Costco. Gatorade’s customers are very brand loyal mainly because they were the only specialty sport drink during 1965, which is when it was created. Then, they didn’t have to worry about winning their consumers from customers of a similar product because they were the only one on the market. All the athletes and athletic trainers wanted this drink and became hooked on it after seeing the effect it had. By the time other brands came out everyone knew Gatorade and trusted its products. Most consumers would rather purchase a product they know works than try a new product that claims to do what everyone already knows Gatorade does. It’s obvious that Gatorade has brand loyalty, which is another way in which we know Gatorade has reached the maturity stage. Although they have made it to the maturity stage, they still have more growth to fulfill. As long as Gatorade continues to produce new products, they will continue to grow.
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Zmuda, Natalie. "Gatorade: We Axed Tiger Line Before Scandal Broke." Advertising Age. 08 Dec. 2009. Web. 15 Feb. 2012. <http://adage.com/ article/adages/gatorade-axed-tiger-line-scandal-broke/140960/>. Image Links http://4.bp.blogspot.com/_Xd7W6OPSCuI/SDw43yw6XFI/AAAAAAAAAh0/ OHxx7BI4V2g/s400/jordan_gatorade.jpg http://cdn.bleacherreport.net/images_root/gallery_images/photos/001/218/978/1 36326281_crop_450x500.jpg?1325479539 http://faithfulprovisions.com/wp-content/uploads/2010/06/G-Series-Pro.png
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