17.5% drop in Gatorade brand sales - but they still say "G" is not a gamble

PepsiCo Inc. executives say a high-profile makeover of its Gatorade sports drink is on track despite recent weak sales, and they plan to introduce an array of new beverages to appeal to consumers who have drifted away from the powerhouse brand. This according to a posting on WSJ.com.

In an interview, PepsiCo's Americas Beverages chief Massimo d'Amore said that a new marketing campaign with a big letter "G" is proceeding "fully in line with our plan." Internal research conducted by the company shows that the "G" campaign scores high in the "coolness factor," he said.

A summer promotion offering Gatorade in limited-edition bottles that feature Michael Jordan is exceeding expectations, he said.


"We did not just decide to change the identity on the back of an envelope," Mr. d'Amore said. "'G' is not a gamble. 'G' is a deliberate strategy that will work in the long run."


In January, PepsiCo ran teaser television, online and print advertisements asking, "What's G?" During the Super Bowl, advertising revealed that "G" was Gatorade, "the heart, hustle and soul of athleticism" as bottles hit store shelves.

In the first six months of this year, sales volume dropped 17.5%, according to estimates from Beverage Digest, an industry publication. That caused Gatorade to lose 4.5% in share of the sports drink market, but the brand still dominates the category with a 75% share. Soft beverage sales in the Americas and currency fluctuations weighed on the company's second-quarter profit of $1.66 billion, down 2% from $1.7 billion. Revenue fell 3% to $10.59 billion.

Pepsi says Gatorade sales have been hurt by a weak economy. Casual consumers who bought the sports drink because it was cool - not to replenish themselves after a workout - are seeking out cheaper alternatives, particularly tap water, the company says. They have also been drawn to other products such as enhanced water and tea, executives say.

Chairman and Chief Executive Indra Nooyi said, in a Wednesday, July 22 earnings conference call with analysts and investors, that during the housing boom, construction workers en route to job sites routinely bought a half-dozen bottles of Gatorade each morning at convenience stores. That's not happening now, she said.

"We grew past our core occasions," Mr. d'Amore said. "The key question we should debate is, should we chase those occasions or not?"

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