Dive Brief:
- PepsiCo's Gatorade brand achieved "phenomenal" growth in 2015, according to analysts on a conference call to discuss last year's earnings, and PepsiCo CEO Indra Nooyi said on the call that the company will "keep the pedal to the metal on innovation" to maintain the brand's momentum going into 2016.
- The three factors Nooyi pointed to in Gatorade's growth last year were the weather (it was hotter for longer), innovation in flavors and packaging, and its appeal to athletes.
- The sports drink market is flush with new competitors for Gatorade in the form of startups and smaller companies using natural ingredients, but the brand remains unfazed and poised to continue dominating the segment.
Dive Insight:
Much of Gatorade's innovation has been targeted at athletes. Gatorade introduced its new smart bottle, which tracks (through the athlete's sweat) and optimizes an athlete's hydration. The bottle uses a dozen different pods containing concentrated Gatorade doses with different formulas of carb, calorie, and electrolyte levels that maximize fluid and nutrient delivery.
Gatorade has also released new lines specifically geared for athletes like Prime and Recover, which are meant for athletes to drink before and after a workout or big game, respectively. Prime, a "sports fuel drink" that provides energy, also comes in energy chews, which are a new delivery system growing in popularity in the sports nutrition market.
With these technology and product innovations, Gatorade has been able "to far outdistance any emerging competitors" and "outpace newer sports drink brands that concentrate their efforts on price," Nooyi said on the call. While up-and-coming sports drink startups are entering the market, Gatorade is confident in its hold on the category (it made up 77% of the sports drink market in 2014) and the brand's continued growth and innovation.
One area Gatorade has not explored as much as its smaller competitors is using natural ingredients. Probiotics and plant-based proteins are appearing in sports drinks, which make the drinks more functional and appealing to health-conscious consumers.
But, major manufacturers are also exploring the sports drink market while soda falls out of favor. Coca-Cola's Powerade only held a 20% market share in 2014, but Dr Pepper Snapple also took a step further into the category by acquiring a minority stake in sports drink startup BodyArmor last year. With speculation growing that PepsiCo may soon come out of its acquisitions lull.