Gatorade †Marketing Project Essay

The Gatorade Company makes the world’s leading sports drink. In part, this is due to its ubiquitous marketing strategies that can be seen almost everywhere. Gatorade is the official sports drink of the NBA, WNBA, MLB, NHL and MLS. It is also the official sports drink of the NFL and has become part of a famous tradition, the â€Å"Gatorade Dunk† where the winning athletes of the Super Bowl empty the Gatorade cooler over the coach. Gatorade has also been advertised by some of the greatest athletes in history; from Serena Williams, to Peyton Manning, to Olympic gold medalist Usain Bolt, to probably the most famous endorser in NBA great Michael Jordan. Gatorade makes several products including the G series which consists of pre-game, thirst quencher and post-game beverages. There is also the G Series Pro which consists mainly of sports nutrition products. Then there is G Natural which contains more natural ingredients. The Gatorade Company also makes Propel Fitness Water. The Gatorade Company was not always such a large company nor was it created by an existing beverage corporation. It was created as a necessity by the team in which it’s named after: The University of Florida Gators. Gatorade was created in 1965 by a team of five scientists led by Dr. Robert Cade. The beverage was created to improve the athletic performance of the university’s football team. When more than a dozen of the players had fallen sick due to dehydration from the intense heat and training, the scientists researched dehydration and what the body loses during immense activity. They found out that sugars, salts and minerals were required to hydrate the human body after immense physical activity; water alone was not enough. They created an electrolyte-carbohydrate drink and supplied it to the athletes. The results were phenomenal. The Gators were able to outperform their rivals, especially in the latter half of the game where exhaustion seemed to cripple their opponents. The Gators went on to win their first Champion ship and soon after Gatorade was adopted by other sports teams. Supplying the beverage became more and more difficult for the scientists as demand increased, and after failed attempts to commercialize it, Stokely-Van Camp acquired U. S. rights to the drink and Gatorade Inc. was incorporated in Florida in 1967. After much success, the coach of the Florida Gators suggested the winning formula to the coach of the Kansas City Chiefs. The Chiefs were impressed and used throughout the entire season culminating with a Super Bowl victory. Much of the growth of the Gatorade Company occurred when it was acquired by Quaker Oats, which bought Stokely-Van Camp for $220 million in 1983. It was under Quaker Oats that Michael Jordan, who was arguably the most famous and fast rising athlete at the time, became the celebrity spokesperson for the company. Sales skyrocketed and Gatorade was once again the leader as the sports drink market grew to $1 billion by 1994. Also during its ownership by Quaker Oats, the product went global. It was and continues to be sold in numerous countries and several continents successfully. It also expanded its product line to include more flavor varieties. Towards the end of the 1990’s the sports drink market grew to $2 billion. With its consistent success, Gatorade continued to launch new products including Propel Fitness Water. In 2000, PepsiCo, a multinational corporation focusing on beverages and snacks, acquired Quaker Oats for $13 billion. It bought over Quaker Oats primarily for the Gatorade brand, which is still one of the corporation’s largest and most successful divisions. Gatorade continued to grow because it renewed its contract with Michael Jordan, campaigned its â€Å"Is it n you? † ad, and also signed a host of new celebrity athletes. Today, Gatorade has over a dozen plants where it manufactures the products it sells and is still the leader in today’s $3 billion dollar sports drink market. Target Market Description The original target market for Gatorade was sports teams. In fact, it was originally only sold to sports teams. It spread from the Gators football team to other Gators teams such as basketball. It then spread to other college sports teams until finally it reached professional teams in the NFL. It spread team to team until it became the official sports drink of the NFL in 1983 and was used by over 70 divisions and college teams. Sales trends increased with the same rapid pace. In the early 1980’s Gatorade led the $200 million sports drink market. Net sales were recorded at $90 million in 1982 and grew exponentially in the following years. By the mid 1980’s net sales were recorded at $170 million. During the latter half of the 1980’s Gatorade marketed its famous â€Å"Gatorade is Thirst Aid for that deep down body thirst,† this along with televised adds, strategic placing of the product on sidelines during big games and a growing sports drink market raised net sales to nearly $900 million by the end of the decade. The demographics of the Gatorade G Series target market: * Traditionally active males, aged 18 to 25. They can be students, just starting their careers, or well established. * They grew up idolizing many different sports athletes and teams, which still have an influence. * They make a very wide variety of incomes because Gatorade is inexpensive. It could be anywhere from $10,000 to $60,000. * Education could vary also, most have at least high school level education and some have college or above experiences. * These types of consumers may also be interested in other sport-related clothing and accessories. They may be interested in terms such as jerseys, hats, shoes or anything that will show off their allegiance to a team, sport or player. * The G Series’ core target is the 13- to 17-year-old high-school athlete, while G Series Pro’s target is the 16- to 24-year-old who is in the business of being athletic, whether as an elite athlete or personal trainer. A more detailed look at the MRI report gives a great glimpse into the target market for the sports drink industry. As highlighted in the index, 18-24 year olds are the core target market. With an index of 174, that means 74% of that age range are more likely to drink sports drinks. Moving further up the age range, 18-49 year adults provide a tremendous opportunity for this market. As highlighted by their percent down (which indicates the percent of those persons out of everyone that consumes a variable), 78. 2% of the total population that drank sports drinks were of that age group. Capturing the teen consumer has been identified as a priority for the brand, with the CMO of Gatorade, Ms. Robb-O’Hagan, conceding that teens thought the brand was dated. Last year’s shift to G was meant to grab their attention. With that accomplished, she said, the brand has been working with teens to test and promote the new products. Through May, a mobile locker room is making its way to high schools, showcasing the G Series products. â€Å"What we’re focusing on this year, from a marketing standpoint, is making sure that the high-school athlete understands the G Series, understands the three-part series,† Mrs. Robb-O’Hagan said. â€Å"If we land that strongly with the teen consumers, we have a lot of opportunity. A Reporter Report is complete with explanations of key numbers. Please note that all the numbers are based on the 2009 Fall MRI study, and that the projected numbers (000) are expressed in thousands. (Appendix A). Market Trends and Macro Forces According to the Beverage Marketing Corporation, the sports drink industry has actually shrunk in sales by 12. 3% from 2009. Considering that Gatorade holds over a 70% market share of the entire sports drink market, they saw losses in gallons produced by 15. 5% in that same year. In a more local look at the market, from 1986 to 2009, the geometric growth of the industry in America has been 11. 62%. However, considering the great growth for the first 19 years of its existence from 1986 to 2005 of 14. 3%, this number might be misleading. A more accurate picture can be painted by using the last 5 years, letting the state of the economy be fully reflected in growth. In this new scenario, the growth is at -. 27%. Gatorade markets not only to the athlete, but to the casual drinker as well: construction workers, restaurants, and families for dinnertime. Sales records for the sports drink brands for the year 2009 and 2010 are available in the Appendix B. Market Trends Changing Needs Gatorade being a sports drink primarily focuses on the needs of the athletes. The researchers believe that the athletes are looking for pre and post workout drinks. â€Å"The average consumer is already consuming during the before-and-after occasion,† said Sarah Robb-O’Hagan, chief marketing officer at Gatorade. â€Å"Different consumers have different nutritional needs on game day vs. training days. What we’ve seen as we’ve developed these products is different consumers mixing and matching their own regime to meet their needs. † In addition, in order to build long term brand loyalty Gatorade is focusing on target high school students between the ages of 13-17 years. â€Å"What we’re focusing on this year, from a marketing standpoint, is making sure that the high-school athlete understands the G Series, understands the three-part series,† she said. â€Å"If we land that strongly with the teen consumers, we have a lot of opportunity. What are also sparking the changing needs in this market trend are consumers increasingly focusing on their health. They are conscious about the effects of beverages on their own bodies. According to Mintel, a consumer packaged goods monitoring service, some of the product areas with the highest growth were in the sports and meal replacement categories, which place a greater emphasis on nutrition. More beverage companies are focusing their attention on adding new nutritional benefits to their new products, promoting a product’s ability to enhance sports performance. As the consumers are growing increasingly conscious about the contents of the sports drinks and the needs of the athletes are changing, so is the change in formulations of sports drinks. It is getting even more complicated. Sports nutrition companies are looking at low glycemic sugars as functional sugar systems to enhance endurance in certain products. These include newer functional sweeteners, such as isomaltulose and trehalose. Gatorade has risen to this challenge of balancing innovation with market needs. Beverage World selected Gatorade as the Winner for Brand Reinvention when it released the G-Series which includes the three products: Prime, Perform and Recover for before, during and after work out respectively. Macro Forces There are many macro forces that affect the sports drink industry. Among the most toxic is the current state of the economy. As we have discussed earlier, the poor spending power of consumers has shifted demand to less expensive alternatives, such as water or vitamin infused drinks. As the recession begins to lag into the next year, the sports drink industry can expect sales volume to remain at current levels. Given that the U6 rate (the most comprehensive form of unemployment that combines both unemployed and underemployed) is at 17%, discretionary income will continue to be a hindrance on this industry. While our competitor analysis is fully developed in the coming sections, it should be pointed out now that competition plays a significant role in this industry’s macro forces. Currently, there are two main competitors, Gatorade and Powerade, or Pepsi and Coke, respectively. Unfortunately there is no room for consolidation in this domestic saturated market, so the competitive battles that spur between the two eat away at costs and sales. A recent example comes from a lawsuit between these two companies. An article in the Beverage Industry relating to the industry issues reported a clash between Coca-Cola’s Powerade and Pepsi-Cola’s Gatorade on a lawsuit over brand advertising. At issue was a Powerade Option ad that featured a â€Å"drag race† between horse-drawn carts, one of which was carrying 10 bales of hay and the other 50. The message was that 10-calorie Option allowed the 10-bale horse to win the race over the 50-calorie competitor. The lawsuit argued the ad sent the message that Powerade was more effective as a sports drink, as well as containing fewer calories. The matter was resolved in a matter of days, with Coca-Cola agreeing to modify the ad. Such trivial pursuits between the two are costly to the industry and companies themselves. In addition to the direct competitors, sports drinks are facing increased competition from bottled water like Vitamin Water and coconut water and nutritional drinks like skimmed milk and chocolate milk for hydration and nutrition. Coconut water, skimmed milk and chocolate milk are easy to produce and provide natural health benefits compared to the artificial electrolytes in popular sports drinks like Gatorade. While health concerns have had positive effects on the industry, there are also some negatives as well. A new study done by researchers at The University of Iowa suggests that the sports drink Gatorade erodes teeth faster than a carbonated soft drink. â€Å"I don’t think everybody realizes how erosive these things are, especially Gatorade and Red Bull,† Leslie A. Ehlen, a student at the University of Iowa – School of Dentistry tells WebMD. â€Å"People need to be aware that all sorts of beverages can be causing dental erosion. † Of course, this leads right back to another macro force in regulator procedures. Although in know will health issues like this loom over the industry’s ability to sell their products, the F. D. A (food and drug administration) can certainly dampen sales volumes if need be. The F. D. A has recently banned production of Four Loko as it the combination of caffeine and alcohol mix is extremely dangerous.