Joanna Cosgrove09.30.10
Worth an estimated $1.6 billion dollars, the sports drinks segment can currently be characterized by three thematic terms: recovery, natural and functional. While sport drink guzzlers will always reach for a beverage to quench their thirst after working out or competing, they are now more picky, opting for lower calorie products with less sugar that promise to do more than just replenish their electrolytes.
To date, there have been 107 sports drink SKUs launched this year in the U.S., following last year’s bumper crop of 151 SKUs—a dramatic boost considering there were only 41 SKUs launched in 2008, according to Product Launch Analytics from Datamonitor.
Mintel International Group Ltd. confirmed that the market for sports drinks increased 44% during 2004-2009. “The number of adults and teens drinking sports drinks remains at just under 40% during 2004-09. One way to overcome this is to develop new products with all-natural ingredients to appeal to a healthier sports-oriented crowd,” stated Mintel’s “Non-alcoholic Beverages: The Consumer—U.S. March 2010.” “A few products, such as coconut water, are meeting this need. However, under present conditions, Mintel expects the market to grow 2-3% annually after adjusting for inflation during 2009-14.”
The report also advised that formulators pay closer attention to the needs of mature consumers to help diversify the category and to ensure continued gains. “Two major brands, Gatorade from PepsiCo and Powerade from Coca-Cola, make up the entire category,” the report said. “The segment faces competition from a myriad of other beverages positioned as thirst quenchers. These include enhanced water, fruit juice and RTD tea. The biggest impediment to growth is the lack of growth in the consumer base.”
Tom Vierhile, director of product launch analytics for Datamonitor, said sports drinks that go beyond simple electrolyte-fortified soft drink-like products to more functionally positioned drinks high in ingredients like protein, branched chain amino acids and CoQ10 are in higher demand, as are products sweetened with stevia and even those formulated with natural coconut water—such as O.N.E. Active Coconut Water and C2O Pure Coconut, which are considered to fall under the heading of natural sports drink.
“Another emerging trend is toward ‘recovery’ drinks,” he said. “It would seem that this type of drink might work well for an aging population that may be more worried about the after-effects of exercise than the need to stay hydrated during exercise.”
There has also been a noteworthy crossover by energy drinks into the sports drink realm. Mr. Vierhile pointed to standout new launches like Rockstar Recovery and Pro-Ade Performance Protein Drink as examples of this trend. “It does not look like this is a huge trend at the present time based on the number of launches going in this direction, but it could be an interesting one for the future,” he said. “Product launches in energy drinks topped out at 672 new product SKUs in the USA in 2008 and dropped to just 440 new SKUs in 2008. 2010’s numbers for energy drinks suggests further contraction as 226 new product SKUs have been reported through September 15th of this year. Maybe product makers in this market see some additional opportunities and perhaps more stability and opportunities in sports drinks.”
Keeping Pace with PepsiCo
As previously mentioned, the sports drink segment is dominated by PepsiCo’s Gatorade, which Mintel pegged as owning 80% of the total market sales. But when one company is that large of an entity, any blips can create a market-wide ripple effect. In fact, Mintel said the nearly 6% overall sports drink segment loss was “a reflection of the company’s declining sales.”
A big reason why the overall category numbers for sports drinks have been favorable so far this year, is due to the heavy buzz surrounding Gatorade’s revamp and relaunch of its G and G2 lines. Gatorade’s G2 picked up 13.8% in sales, reaching $221 million, Mintel reported, however growth in this line extension “came at the expense of core brands and other line extensions.”
Citing a July article from The Wall Street Journal, which reported that Gatorade’s recent marketing makeover marks the second time that Pepsi has failed at a rebranding—the first being a packaging overhaul of its Tropicana juices that consumers called generic—Gatorade’s “G” campaign again confused consumers, Mintel said, asserting that consumers clearly need more than just rebranding of current products to reinvigorate the market.
On the flip side of the blue and red beverage coin, Coca Cola’s Powerade brand also enjoyed $176 million worth of success with its new ION4 product. The debut was said to help Coke win valuable market share and post positive gains, attracting “sales from current Powerade users” while likely adding new users to the brand.
Mintel forecasted the sports drink segment to grow nearly 5% to approximately $2 billion by 2014. Though two companies hold the lion’s share of interest in future category growth, one thing’s for sure: if additional growth is to be attained all brands in the category must broaden their product appeal beyond the traditional athletic consumer. “The two key players in this segment have tightly locked marketing in terms of athlete endorsements,” the Mintel report stated. “New companies competing in this arena will need a completely different angle to gain mass. One yet to be fully explored is sports drinks formulated with all-natural or organic ingredients. This could be executed with marketing aimed at female-dominated sports as a complement to the mostly male sports targeted by Gatorade and Powerade.”
