The sports drink market continues to grow, led by market leader Gatorade (Chicago). Mintel International's (Chicago) “Sports Drinks” report analyzes the facts and figures of the category, finding sales of sports drinks have managed to outpace those of most other beverages. While sports drink sales in food, drug and mass merchandise (FDM) channels, not including Wal-Mart (Bentonville, Ark.), are up 18% since 2002, both carbonated beverage and bottled juice sales in the same channels declined 1% over that time. The growth in sports drink sales in FDM channels is matched by that of bottled water, which is up 17% between 2002 and 2004.
Gatorade, manufactured by PepsiCo Inc. (Purchase, N.Y.), controls the predominant share in the market, with roughly 83% of FDM sales (excluding Wal-Mart). Powerade, manufactured by the Coca-Cola Company (Atlanta), controls approximately 13% of the market. All other players have less than 5% of category sales. Kraft Foods' (Northfield, Ill.) Capri Sun Sport has 3% of the category's FDM sales (excluding Wal-Mart). Smaller players, including All Sport (Monarch Beverage Co., Atlanta) and private label brands, share the remaining 1%.
Reaching for GrowthMuch of the category's growth is driven by reaching new demographics, including ethnic groups, children and more-serious exercisers. Young men long have been the core target for the sports drink category, and they remain the group most likely to consume these products. However, over the past two years, major players in the sports drink arena have succeeded in reaching previously untapped demographic groups. In March of 2002, Gatorade launched Xtremo, a sports drink targeting Hispanic athletes. With Latino-appealing flavors such as mango, tropical and citrus flavors, Xtremo's FDM sales increased from $12 million to $21 million between 2002 and 2004.
Given the concerns about the effect of soda on children's weight, teeth and overall health, some parents are looking for alternative beverages their children will like. For some, sports drinks fill that role. According to Mintel's exclusive consumer research, some 83% of those with youngsters in the home believe “sports drinks are a more healthy anytime beverage than soda pop.” This figure compares to 70% of those without children in the home.
Illustrating parents' beliefs, the children's sports drink market constituted more than $95 million in sales during 2004. Both Gatorade's All*Stars and Kraft's Capri Sun Sport contributed to this rapidly growing segment. Launched in September of 2002, Gatorade's All*Stars, a line of sports drinks in kid-friendly flavors and packaging, earned $11 million in its first three months on the market. Estimated 2004 sales are $61 million. Appealing to both kids and parents, the product is in 12oz. bottles, a smaller and more appropriate size for young people, and is offered in kid-tested flavors.
In February of 2003, Kraft launched the kid-friendly Capri Sun Sport drinks, offered in the familiar Capri Sun pouch. The pouch packaging has been well-accepted by children, as well as their parents, resulting in estimated sales of $34 million for the Capri Sun Sport line in 2004, reports Mintel.
To reach more hardcore athletes, Gatorade introduced its seventh line extension in 2005, Gatorade Endurance Hydration formula. This line has the same amount of calories and carbs as regular Gatorade but includes a five-electrolyte blend designed to meet athletes' fluid needs during long, intense workouts.
Water CompetitionSports drinks have a great deal of competition from outside their category. In 2004, sales of bottled water were roughly $3.2 billion in FDM channels, not including Wal-Mart. According to Mintel's consumer research, 87% of respondents agree with the following statement: “When it comes right down to it, water is the best thing to hydrate your body.”
The success of PepsiCo's Propel Fitness Water has brought increased interest and competition to the enhanced water category. In 2005, Coca-Cola will introduce Powerade Option, a water playing off the company's sports drink brand. However, Coke plans to differentiate Option by marketing it as a diet sports drink, targeting those who want lower-calorie drinks for “non-sweat” occasions--when they are not exercising.
Meanwhile, PepsiCo introduced Aquafina FlavorSplash Flavored Water as a complement to Gatorade's Propel Fitness Water. FlavorSplash is positioned for refreshment, while Propel has a fitness positioning.
Nestlé Waters North America Inc. (Greenwich, Conn.) is part of the new flavored water product action, as well. The company introduced a line extension under the Nestlé Pure Life trademark, Nestlé Pure Life Natural Fruit Flavors. Nestlé's product is a non-carbonated, calorie-free, carb-free water beverage sweetened with sucralose.
Blurring the LinesSports drinks are defined as beverages with carbohydrates and sodium that help restore the essential fluids and minerals the body loses during exercise. However, to appeal to calorie- and carbohydrate-conscious consumers, many manufacturers have released sugar-free, low-carb versions of sports drinks, such as All Sport Zero (launched in March of 2004) and XS Clearly Sugar-Free (launched in November of 2004).
These products meet consumer demand for sports beverages that do not replace the calories just burned. In addition, they speak to consumers who see traditional sports drinks as too sugar-laden. (Mintel's exclusive survey shows 30% of all respondents believe sports drinks are “really just a source of sugar.”) If successful, these products could change the definition of the category, at least in terms of consumer perception.
Flavor is KeyGatorade dominates the sports drink category--with an 83% share. However, its market share is down 4% since 2002. Next in line, Powerade holds 13% of the category's market share. While Gatorade's share declined, Powerade's grew by nearly 30%, which may have been a result of limited-edition packaging released by the brand in 2004. Indeed, in that year, Powerade had five limited-edition packages, including ones for the movie Matrix Reloaded, the National Association for Stock Car Auto Racing (NASCAR, Daytona Beach, Fla.) and the Olympic Games.
Both Gatorade and Powerade keep their brand dynamic through the launch of new flavors. Currently, Powerade has 11 flavors, far behind Gatorade's 28. In the case of Gatorade, which originated in 1967, the company believes new flavors provide a way to appeal to specific tastes. The Fierce line exists to meet the needs of those who want intense flavor, while Xtremo targets Hispanics with ethnic flavors (mango) and Spanish names (Tropical Intenso).
For Powerade, new flavors are a way to say “trendy.” In 2004, the brand combined the power of a new flavor launch with that of celebrity endorsement. LeBron James helped design and name a new flavor called “sourberry.”
According to Mintel's research, 36% of respondents who buy sports drinks “really just buy (them) for the taste.” Still, hardcore athletes whose main concern is hydration and performance likely would find taste less important.
FutureAccording to Mintel, the future will bring further fragmentation of the sports drink category. As the sports drink category matures, manufacturers will be targeting smaller niches with specialized physical needs. To this point, growth has been realized by segmenting the market further from the original mass market positioning. As examples, Gatorade's All*Stars has captured more children; Extremo has brought growth through its targeting of Hispanic athletes; and Gatorade's new line of Endurance products is expected to attract more elite athletes. Further segmentation is envisioned, possibly to the point of sport-specific formulations.
It is likely a sports drink brand will launch and market an entire line of products designed to meet the body's needs before, during and after a game. Gatorade is well poised to make this move. It has both a hydrating thirst quencher and, now, a nutrition shake, to promote “muscle recovery.”
Should “time specific” formulae appeal to consumers, manufacturers will be eager to make one of those usage occasions “anytime.” Sports drink manufacturers will support further medical research unveiling the importance of hydration, not only in sports and exercise situations but also for general well being. In this way, they will be able to take advantage of the belief that sports drinks are a healthier alternative to sodas for “anytime,” without straying too far from the category's benefits that speak to avid athletes.
According to Mintel's report, the future will see more new packaging bring interest to the category. Due to its link to sports and exercise locations, the sports drink category is, almost by definition, an “on-the-go” market. The future will bring packaging advancements that give consumers the best tasting beverage while they are in motion, such as “stay cool” packaging, which is key, as many sports drinks taste better when chilled.
After the 2001 purchase of All Sport, Monarch released new packaging, known as “Chill-In” bottles. These bottles are insulated and designed to keep the bottles colder for 60%-80% longer than traditional packaging. While sales for this brand have not been robust, chilled bottles could lend sales support to another brand. Proper promotion of the bottles' feature would be necessary.
Furthermore, Mintel's report predicts more sports drinks will be seen in little hands. The demographics of the U.S. population, in particular those 10 and under, could be a link to desirable sales growth for any manufacturer. Sports drinks are a category for which children may establish their preferences early and then remain with a favorite brand. Parents may provide support for the child's choice of sports drinks over highly publicized, and increasingly controversial, sodas. Mintel expects sport drink manufacturers to introduce more products, packaging and promotions targeted to the youngest consumers, to capture their interest early and--ideally--retain it for a few decades.
Mintel predicts the sports drink category will continue to grow, yet at a slower pace than previously. The rate of growth will slow, due to maturity of the major player, Gatorade, as well as competition from alternative beverages.
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Energy Beverages Go GlobalWhile establishing Powerade to take on Gatorade in the sports drink category, Coca-Cola Co. (Atlanta) has not abandoned other efforts in energy beverages. Its Full Throttle has graced American shelves for some time and has begun to penetrate markets outside the U.S. That brand, however, is not the only energy drink from the beverage giant. In New Zealand, the company's Lift+ added a sugar-free variety in a 355ml bottle in June, with energy enhancements from guarana, ginseng and essential B vitamins, including niacin and thiamin. Certainly, the lift is not from caffeine alone: Lift+ claims only 14.5mg (added caffeine), compared with the 80mg found in Red Bull (Fuschl am See, Austria). However, the botanical guarana also naturally contains significant amounts of caffeine.
Another Coke entry in New Zealand's energy drink market features even more vitamins, adding B5, B1, A and E to the mix, leading Mintel International's (Chicago) GNPD to regard it as “an energy drink which is also a dietary supplement.” The beverage contains fruit juice, minerals, calcium and electrolytes.
Similar vitamin and mineral enrichment is found in an energy nutrition drink from Nestlé (Vevey, Switzerland) in Vietnam. Nestlé Milo, however, attempts to rectify one of consumers' longest-running complaints about energy drinks--the taste. Granted, chocolate may not be the first thought when contemplating energy beverage flavors.
Considering Red Bull is the market-leading energy drink around the world, was it just a Freudian slip when Drinks Unlimited (Warsaw, Poland) introduced its XL Energy Drink to the Portuguese market with the tagline “Enough energy to beat a bull”? Either way, XL Energy Drink claims to improve vigilance and wakefulness, concentration and reaction speed, as well as physical endurance, while also “helping the body break down toxic substances.” A sugar-free version lowers the calories, while maintaining the 75mg of caffeine per 250ml can.
--William A. Roberts, Jr., Business Editor
The More Things ChangeBeverage Marketing Corp. (New York) estimates the size of the U.S. energy drink market at over $650 million, with Red Bull (Fuschl am See, Austria) holding a lion's share of that amount, which should be little surprise considering the company virtually founded the category when it debuted in 1997. However, with introductions from major and smaller players in the beverage field, Red Bull's hold has begun to slip, though it still can boast market share greater than 60%.
Newer introductions have begun to abandon the 250ml slim can which marked those early days of Red Bull. Coca-Cola's (Atlanta) Full Throttle, for instance, retails in a 16oz. can, and this citrus-flavored beverage can now be found in Canada, where it debuted in July. A Coke spokesperson notes the energy drink market in Canada has been “exploding” since mid-2004; for that matter, Red Bull has been available there only since late 2004. The U.S. has seen energy beverage formulations remain largely the same, but with different marketing approaches; north of the border, the situation appears little different.
PepsiCo, for instance, introduced Mountain Dew Energy in Canada in June, but its ingredient legend reads suspiciously similar to its U.S. cousin, regular Mountain Dew. In addition, its ingredients list reads most unlike the Amp energy beverage under the Mountain Dew brand in the U.S. Also curious is the packaging for Mountain Dew Energy--which includes plastic bottles, heretofore rare among energy beverages. Considering regular Mountain Dew in Canada does not offer caffeine, the “Energy” version simply may be the same caffeinated Mountain Dew available in most of the U.S. It should be noted that Mountain Dew marketed in Australia, Canada and several U.S. states has no caffeine added at all.
--William A. Roberts, Jr., Business Editor