News: Gatorade Turns to Tiger
Woods helped choose three new Gatorade flavors that will be launched in March under the name Gatorade Tiger and packaged in bottles that highlight the golfer's name.
While Chicago-based Gatorade has had plenty of celebrity sports pitchmen, most prominently Michael Jordan, this is its first licensing agreement: Woods will get royalties from sales of the drink.
Terms of the deal were not disclosed. However, Woods is the sporting world's highest-paid athlete in terms of endorsements, and Golfweek magazine has reported a Gatorade deal could pay him $100 million over five years.
Still, for Gatorade and its New York-based parent company, PepsiCo, the cost will be justified if the deal boosts sales, stock analysts say.
Gatorade dominates the lucrative sports-beverage market, which is growing much faster than the sluggish soda business. Still, sports-drink sales have been slowing, including for Gatorade, and competition is heating up, with rival Coca-Cola heavily pushing its Vitamin Water sports drink.
The Woods deal is one way for Pepsi to keep its big lead, said Matt Reilly, an analyst at Morningstar Inc.
"It's a solid idea, but it doesn't make me do cartwheels in the street," Reilly said. It signals that as the sports-drink market matures, costly celebrity tie-ins are necessary to stay on top, he said. "There's a little tinge of desperation."
However, Reilly noted that Woods is the right choice for such a strategy. "If there is one athlete to put money behind now, it's Tiger Woods."
Jack Russo, an analyst at Edward Jones, agreed.
"There's no one even close who can help you," he said, noting Woods' global stature is particularly useful as Gatorade emphasizes its international sales.
Woods, who has won 13 major golf championships, was the top-earning athlete on Forbes magazine's most recent Celebrity 100 List, raking in $100 million last year, $90 million of which came from endorsements and appearances. He has endorsed Nike, Gillette, Buick, Accenture and many other major brands.
"Tiger has been on our radar screen for a long time," said Jeff Urban, Gatorade's senior vice president of sports marketing. The company and the golfer began talking in August, he said.
Gatorade Tiger will be a "subline" of Gatorade Thirst Quencher, meaning it will have the same basic recipe but will come in different flavors: cherry blend, citrus blend and grape.
Woods participated in numerous flavor taste tests, Urban said. "These are Tiger inspired flavors. They fit the palate of Tiger Woods."
Gatorade Tiger will be packaged in a uniquely shaped bottle, with a black label emblazoned with "Tiger" in sleek white letters. More Woods-related drinks will follow, Gatorade says.
Woods likely will get some sort of base fee from Gatorade, said Marc Ganis, president of Sportscorp., a Chicago consulting firm. Plus, in a typical licensing deal, a celebrity would get a royalty of 8%-30% of a product's wholesale cost, closer to the high-end with someone of Woods' stature, Ganis said.
A new deal for sector
Such licensing deals are common in the athletic shoe business, he said. Shoemakers design "signature" lines with the input of top athletes, who in turn get a royalty. However, such deals have been absent from consumer products like beverages and food.
"That's what makes this unusual," Ganis said of Gatorade Tiger.
Indeed, Gatorade has a long history of sports endorsers, with Chicago Bulls legend Michael Jordan perhaps the most prominent among them.
"But there wasn't a product called 'Jordanade,'" Reilly said.
"Pepsi has done a very good job innovating the brand since they bought it," Reilly said. Several new flavors and sublines have been added, some with quirky names like Rain, Frost and X-Factor.
Gatorade remains king: For the 52 weeks ending September 9, Quaker had more than 81% of the U.S. market for bottled and canned sports drinks, according to Information Resources Inc. Still, that was down from nearly 86% in 2002. For the current period, Coca-Cola, maker of Powerade, was second, with a 16% share.
Gatorade shipments have fallen in recent quarters. Coke is redoubling its efforts in sports beverages, shelling out $4.1 billion this year for the owner of Vitamin Water brand. Vitamin Water, whose celebrity endorsers include Chicago Bears standout Brian Urlacher, has "been on fire" saleswise, Reilly said.
The sports-beverage market is particularly important for Coke and Pepsi, the latter of which is also set to roll out another new variety of Gatorade, G2, this year.
"The only growth in beverages has been in bottled water and sports and energy drinks," said Russo of Edward Jones.
Still, that growth rate is slowing from double digits to single digits, analysts say. That makes the launch of new products like Gatorade Tiger all the more important for beverage-makers.
From the October 22, 2007, Prepared Foods e-Flash