CNBC Looks at Gatorade’s Strategy for Entering New Categories

NACS SOI data shows the packaged beverages category continues to grow.

April 09, 2024

PepsiCo’s brand Gatorade is approaching its 60th birthday, and as it does the brand is expanding its offerings, branching into new categories ranging from unflavored water to energy drink mixes. CNBC dove into the brand’s strategy.

According to CNBC, the brand accounted for 63.5% of the U.S. sports drink market in 2023, citing data from Euromonitor International Data.

Last year, PepsiCo shifted its portfolio, moving Propel, Muscle Milk and other fitness-related brands to sit under the Gatorade name. With that, the brand has continued to innovate and reinvent itself in the market.

“There’s probably been more change in the industry in the last five years than there was 20 years before,” said Rabobank beverage analyst Jim Watson.

With Gatorade comfortably leading the pack, Powerade and Bodyarmor are No. 2 and No. 3 in sports drink market. According to the article, when Coca-Cola acquired Bodyarmor, it “bought a brand that could price its sports drink higher, thanks to its marketing as a healthier option. Coke’s other sports drink, Powerade, is typically cheaper than Gatorade, appealing to consumers looking for a deal.”

The combo of Bodyarmour and Powerade “means they have a different and better story to tell the retailers to try to get more shelf space and to take some of that from Gatorade,” Watson said. “That’s where Gatorade has to come up with all kinds of new innovations so they have a new story to tell the retailers.”

Gatorade President Mike Del Pozzo told CNBC that the competition is good for the category overall, and shows his brand’s own strength.

As the market continues to evolve, Gatorade continues to think about its pitch to consumers. Del Pozzo said that “the line between hydration and wellness has blurred, and more consumers are focused on hydrating throughout their day, not just during exercise.”

They now like low- or no-sugar drinks, “functional” beverages that tout health benefits like improving immunity and alkaline water, he said to CNBC.

Gatorade’s new products include Gatorade Zero Sugar, tablets with vitamin C and zinc for immune support, Gatorlyte, a caffeinated spinoff called Fast Twitch and its first unflavored alkaline water, which launched nationwide in February.

Data released at the NACS State of the Industry Summit last week showed that in 2023, the packaged beverages category accounted for 18% of inside sales and 21.6% of inside gross margin. Moreover, even as overall inside transactions slowed, packaged beverage units sold ticked up slightly, registering a 0.1% increase.

Energy drinks continue to grow in importance, with 19.6% year-over-year growth in sales.