Context: Gatorade is an American company that specializes in the manufacture of sports-related products and beverage. The company is a subsidiary of Pepsi Co. and has been in production since 1965 (Pepsico). Its consumable products are usually enriched with vitamins and are used for re-hydration during and after engaging in sports or physical exercises. They are also used in replenishing the athletes’ energy, which they burn during training, and in re-hydrating them with fluids that are rich in electrolytes.
Gatorade is one of Pepsi’s Pepsico’s largest brands. It accounts for about 80% of the United States market for Non-Aseptic Sports Drinks and a similar share for Sports Drink Mixes. Globally, the Gatorade drink competes with Powerade and Vitaminwater, which are manufactured by Coca-Cola. It also competes with MVP, Body Armor, Red Bull, Monster, and Lucozade Sport in the United Kingdom. Gatorade Co. classifies its products as sports drinks, proteins, bars and chews, and endurance products. The company has a wide variety of sports drinks, which include original thirst quencher, smooth finish + bold flavor, sports fuel drink, and organic drink. Its protein formulas are recover whey protein powder and recover protein shake. Its protein and chews are whey protein bar, fuel bar, and prime energy chews (Gatorade). Finally, its endurance products include endurance formula powder, endurance energy gel, endurance gatorlytes, and endurance carb energy drink.
Gatorade also sells sports equipment that complement its drinks, protein, bars and chews, and endurance products. The main products sold by Gatorade are classic coolers, sideline towel, and water bottles (Gatorade). All these products come in different varieties. Currently, the company has added a performance tracking mobile phone application, which its customer can use to monitor their progress (Fast Company). This app will increase the demand for the company’s products and strengthen its market presence.
Gatorade is currently facing a lot of intense competition from companies that manufacture of non-aseptic sports drinks and other sports products. The company competes with Powerade and Vitaminwater, which are manufactured by Coca-Cola. It also competes with MVP, Body Armor, Red Bull, Monster, and Lucozade Sport in the United Kingdom. Accordingly, there is intense competition for its market. The main benefit that Gatorade enjoys is that it operates in a monopolistic market since companies in this industry have branded their products. As a result, although many companies sell similar products, PepsiCo is the only custodian of its Gatorade brand. This market structure has enabled the company to avoid the fierce competition from its rivals. As a result, Gatorade dominates 80% market share for Non-aseptic Sports Drinks, and 80% market share for Sports Drink Mixes.
PepsiCo owns Gatorade, and most of its suppliers’ agreements are done at PepsiCo. Currently, the company has many suppliers who have different supply capacities. Additionally, most of its core supplies are made by more than one supplier. As a result, it is extremely difficult for the companies’ suppliers to increase the prices of their products. Noteworthy, although PepsiCo has adequate supply quantities, some occurrences beyond the control of the company can result in the costs of its items increasing (Wikinvest). For example, a shortage of rainfall in regions where some of its key suppliers are located can increase the cost of supplies. Overall, however, Gatorade suppliers have a low supplier power.
Gatorade’s customers have significant buyer power. Although the company operates in a monopolistic market, the switching costs are fairly low. Therefore, customers can easily shift to competitor’s products. Additionally, there are a lot of substitute products in the energy drinks and consumer products market.
Many companies make similar sports’ energy drinks and products as those manufactured by Gatorade. In this market, however, the demand for products is not strictly determined by the presence of a substitute since businesses have branded themselves. Accordingly, companies enjoy monopolistic control over their products. Therefore, despite the apparent presence of substitutes, there is a minimal threat on the substitution of Gatorade’s non-aseptic sports drinks sports drink mixes.
Gatorade faces minimal threats of new entry in its business. There is a combination of reasons including the high capital requirements, brand recognition, and market saturation that makes it difficult for new competitors to enter this industry. Firstly, any serious competitor entering this industry must use a lot of capital for warehouses, trucks, employees, and other establishment costs (Deichert et al. 6). This high capital requirement results in the reduction of potential competitors that may want to enter this market. Secondly, consumers mostly make purchases depending on an items brand (Deichert et al. 7). Thus brand recognition is essential in enabling competitors to enter the market and become significant players. As a result, very few new entrants can successfully enter into this market. Finally, the entire global beverage industry is almost saturated (Deichert et al. 7). Consequently, the profit margins in this sector have been significantly reduced, which has effectively decreased the attractiveness of this sector.
Gatorade products add a lot of value to athletes. In particular, these products are healthy and as such appropriate for replenishing athlete’s with essential vitamins and electrolytes during and after training. Unlike traditional beverages which are laced with sugar additives, Gatorade products are made with consideration of the sport’s person’s health. Additionally, the company sale of its sport’s equipment aims at enabling the athlete to organize his/her training properly. Accordingly, these equipment complement the company’s energy drinks, proteins, and bars.
Recently, there has been an emergence of many athletes’ energy drinks, which are manufactured by competitors. The most common ones are Powerade and Vitaminwater, which are manufactured by Coca-Cola. It also competes with MVP, Body Armor, Red Bull, Monster, and Lucozade Sport in the United Kingdom. Despite the presence of many competitors, the beverage industry is a monopolistic market, and accordingly, business’ sales are mainly driven by brand recognition. Therefore, these many competitors do not have a direct impact on the company’s market.
Due to increased levels of research and technology, it is quite easy for individuals to imitate Gatorade’s products. However, all the company’s items are patented, which protects them from counterfeits. Additionally, Gatorade makes most of its sales in the United States, where there is a high enforcement of anti-counterfeit and piracy laws.
Gatorade organizes its manufacturing and production process to maximize value. Firstly, Gatorade spends a lot of cash in research on the market trends and innovation for the development of new products. For example, at its initiation, the company only had one product, an energy drink. Currently, it has over 20 products ranging from energy drinks, proteins, bars, chews, and even sports equipment. Secondly, the company continuously uses innovative and effective marketing tactics, such as the use of star athletes. This tactic enables the Gatorade to attract most of the athlete’s followers. Finally, the company specializes in the production of products used in sports. This strategy helps it to concentrate on one market and ensure that its efforts can create maximum value to their customers.
Consumer: Gatorade’s target audience has always been very clear from the beginning, athletes. According to their website, the mission statement for the business states that their company “provides sports performance innovations designed to meet the needs of athletes’ at all competitive levels and across a broad range of sports” (Gatorade, 2017). Previously Gatorade was portrayed as a company tailoring to the needs of elite athletes, however in the more recent years the business is focusing on expanding its target market. Rather than just catering to the needs of an “elite” athletes, the company is now focusing on any athlete in general, regardless of the degree to which they workout. According to Dave Burwick, the marketing officer for PepsiCo, “The fundamental difference is that we’re going from a brand that speaks to really elite athletes to a brand that speaks for the athlete in everyone” (Zmuda, 2009). The broadening of Gatorade’s target audience has opened up the consumers that purchase its products. Rather than feeling like the brand is exclusive to elite athletic males in their twenties, more consumers ranging from high school student athletes to older average people have begun purchasing the company’s products. However, looking at current survey data on beverage consumptions, it appears that the average current Gatorade consumer is generally a “very high income, Hispanic, and upper middle age.” The data showed that gender does not play a huge role in purchasing decisions for these products, actually the consumption is almost similar for males and females. As stated earlier Hispanics are the largest ethnicity that purchases Gatorade followed by African Americans and then Caucasians. The most common age group for consumers is 45-54 followed by <24 and 35-44 and most of the consumers have claimed to have children. Education level along with income level do not play huge significant roles in the purchasing pattern and are actually fairly similar throughout. Information also shows that Gatorade products are more frequently during pantry stocking trips to the grocery store when many other products are also purchased. However, it is shown that competitors’ products are often bought at the same time, such as Powerade and Capri Sun. (InfoScout 2015) The psychographics of Gatorade consumers are goal oriented people who are focused on sports and training. The ideology of the average consumer falls under the achiever category of the VALS segments. Members of the achievers group are goal oriented, hardworking, and fully scheduled (Strategic Business Insights, 2017).
A factor that plays into the likelihood of consumers purchasing Gatorade products is the performance aspect of the line. Gatorade urges athletes to use their products to enhance their performance and optimize their workouts which then causes consumers to believe that they will have a much more effective, fulfilling, and overall successful workout. One way that this factor affects consumer purchasing decisions is by the newly added performance tracker app provided by Gatorade’s website. This addition made consumers feel as if they were making more progress by adding Gatorade products to their workout. The motivation aspect that the app provided boosted sales tremendously by simply providing the idea that if you use their products along with the app during workouts, you would literally be able to watch your progress daily. In fact, during the first three months alone of the progress tracker being added to the website, it attracted over 100,000,000 site views. This exceeded the goal by 60% and also resulted in 15,000,000 teenagers registering for the actual tracker (Wong E, 2010). Another factor that could influence the decision to purchase Gatorade products is the professional athlete endorsements that the company has. When you look at the broad spectrum of sports drinks when working out or playing a sport, the typical athlete looks at benefits that the product will have towards the success of their physical activity. More athletes are inclined to buy a product from a company selling items to optimize working out if there is an endorsement from a famous millionaire athlete, this portrays the idea that the consumer can also have similar results if they use the products the same way as advertised. Athletes ranging from Dwayne Wade, Usain Bolt, Michael Jordan, and Mia Hamm just to name a few have endorsed these products (Gatorade, 2017). From commercials, print ads, and social media presence, these athletes all make the formerly known “elite athlete” line seem as if any average consumer can reach their physical goals while working out using Gatorade products.
Company: Gatorade is a company dedicated to sports performance products geared towards all athletes. Gatorade was created in 1964 by Dr. Robert Cade and his team. The goal of Gatorade has always been to replenish athletes during games that were losing electrolytes while the engaged in physical activity. Gatorade dominates 80% market share for Non-aseptic Sports Drinks, and 80% market share for Sports Drink Mixes. The products offered varies from sports drink, protein, bars and chews, equipment and endurance products. Gatorade has a unique position in the marketplace, they are known as the sports drink that fuels bodies during rigorous physical activity. They have been the official drink of the NFL for over 40 years.
Who are the brand’s current direct and indirect competitors?
Direct competitors Powerade MVP (Wegman’s Brand) Body Armor
Indirect competitors Red bull Monster Vitamin Water
What are the market shares of the different direct competitors?
MVP Other sports drinks listed as 2.3%
Body Armor Other sports drinks listed as 2.3%
How old/new is the direct competitors in the marketplace?
Powerade Introduced in 1988 to go up against Gatorade. Powerade became the official sports drink of the Olympics. Owned by Coca-Cola.
Body Armor Launched in 2011. Owned by Repole who is co-founder of VitaminWater and SmartWater.
What are their revenue streams?
Powerade. Offering of 2 for $3 at convenience stores, bulk purchasing
MVP. Pricing mechanism to put item on Shoppers Club and offer discount to customers with card/key tag, bulk purchasing
Body Armor $1.00 off coupons, bulk purchasing
Who are their most profitable product offerings?
Powerade. Usually less expensive than Gatorade by .10, delivery to home offered
MVP. Offered at Wegman’s exclusively, lowest price of all energy drinks and sports drinks
Body Armor. Delivery to home offered, healthier alternative to Gatorade and other sports drinks
What are the various brands doing with regard to their positioning in the marketplace?
Powerade. New marketing plan to get to the soccer athletes.
MVP. Best choice for kids in sports
Body Armor. Endorsed by UFC people think they can protect themselves better by drinking this product
How is each of the brands differentiating themselves from their competitors’ brands?
Powerade. New flavor being introduced (Blue Raspberry Cherry), price less than Gatorade
MVP. Price is most competitive in the sports drink industry
Body Armor. Endorsements by several athletes, healthy alternative using coconut water
How much is being spent on the promotion by these direct competitors, and in which media are they focusing?
Powerade PGA Tour, NASCAR, NHRA, NCAA and the U.S. Olympic Team (except the U.S.A. Basketball and U.S. Soccer), athlete endorsements
MVP. Youth sports and schools, Wegmans website
Body Armor Golf, Basketball, Official sports drink of the UFC, athlete endorsements
What are the competing brands’ current brand identities (name, logo, symbol, packaging)?
Powerade “P” is the symbol, similar packaging to Gatorade, black background, white lettering, clear bottle
MVP same packaging as their fruit juices, packaging matches color of drink
Body Armor fruit on label, whole bottle is covering with colorful packaging, most attractive packaging
Strengths: Dominates 80% of market share for sports drinks, major focus on innovation. Gatorade Sports Science Institute backs products with proven stats, Celebrity & Athlete Ambassadors -Usain Bolt, Cam Newton, etc. , Strong brand image,
Weaknesses: Increase sodium in products leads to dehydration, too many variations of product confuses consumers, limited target markets(athletes), taste of products is not the best compared to competitors.
Opportunities: Many people are turning to alternative medicine, so finding a natural/organic Gatorade catered towards the yoga and meditation consumers.
Owned by Pepsi Co. They can leverage the brand and have financial means to promote.
Threats: Up and coming hydrating drink competitors (Wegmans MVP, FYFGA-a healthier option), Professional sports protests has viewership down in turn people not viewing ads during sporting events.
Survey Questions (1-7 Becca, 8-14 Susan, 15-21 Michelle, 22-28 Owen)
- http://web.a.ebscohost.com.brockport.idm.oclc.org/bsi/pdfviewer/pdfviewer?vid=2&sid=be48373e-869c-409f-b3ce-a8d6c23edbac%40sessionmgr4006 (Susan)
- https://drinkbodyarmor.com/ (Susan)
- http://www.athletepromotions.com/powerade-endorsements.php (Susan)
Diechert et al. Industry Analysis: Soft Drinks. 2006. Available from https://www.csbsju.edu/Documents/libraries/zeigler_paper.pdf.
Wikinvest. PepsiAmericas (PAS). 2017. Available from http://www.wikinvest.com/stock/PepsiAmericas_(PAS)/Raw_Materials_Manufacturing.