Introduction of gatorade company

Abstract

In this term paper I first give introduction of Gatorade Company and then its expansion into international market. The political, economic, social, technological, ecological and legal (PESTEL) environments of the company in India and Porters 5 forces model is also being discussed in this term paper. It also defines the opportunities in international market for Gatorade’s products, its market selection decision, pricing approaches of Gatorade product for Indian market.

Introduction

Gatorade is a brand of flavored non-carbonated sports drinks manufactured by the Quaker Oats Company, now a division of PepsiCo. Intended for consumption during physically active occasions, Gatorade beverages are formulated to rehydrate and replenish fluid, carbohydrates and electrolytes.

Gatorade started in the summer of 1965 with the realization that the Florida Gators football players could not make it through practice without struggling. Many players reported being dehydrated and playing sluggish during team drills. So the physicians got together and determined what exactly the problem was.

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The athletics suffered from a back lack of electrolytes and carbohydrates, which was not being replenished with just water. The group of four physicians blended a drink that had perfect balance of carbohydrates and electrolytes. The drink would prove to help the Gator football team perform better on the field, so naturally they called the drink “Gatorade”.

What happened next was rather remarkable because then players started performing better. They finished with a record of 7-4 that season and the next seasons they finished with a record of 9-2, winning the orange bowl for the first time in school history.

Eventually, the drink moved into the professional leagues and the first team to adopt it was the Kansas City Chiefs. The chief has trouble practicing in the stifling heat of Missouri’s summer afternoons and they kept it on the side-lines the whole year. It resulted in the chiefs beating the heavily favoured Minnesota Vikings in super bowl sixth.

Soon it become popular to have Gatorade on the side-lines and it started the sports drink category. By 1965, Gatorade had expanded its research in sports science by building the Gatorade sports science institute. The institute allows them to better understand the human body, its needs during the stress of competition and how to improve their products.

Gatorade is the official sports drink of the National Football League Major League Baseball, National Basketball Association, Women’s National Basketball Association, USA Basketball, National Hockey League, Association of Volleyball Professionals, US Soccer Federation, Major League Soccer, and many other pro or collegiate organizations, providing supplies of the drinks to the teams in all flavors available. Gatorade extended their market to the U.K., in 2008, and promoted this, in part, by becoming the sports drink provider for Chelsea F.C.

Composition

The original Gatorade contained water, sucrose (table sugar) and glucose-fructose syrups, citric acid, fish oil, sodium chloride (table salt), sodium citrate, monopotassium phosphate, and flavoring/coloring ingredients; some Gatorade flavorings use brominated vegetable oil as a stabilizer. Gatorade Thirst Quencher meets the Food and Drug Administration’s definition of a “low sodium product.” Gatorade is available in a variety of flavors, including the original Lemon-Lime, Grape, Orange, and Fruit punch.

In the past decade, several new formulations of Gatorade, including Rain, AM, Fierce and X-Factor, have been introduced with each only being minor tweaks of the original 1965 formula.

Gatorade revealed the Gatorade line Energy Bar in 1999. This energy bar was Gatorade’s first foray into solid foods and was introduced to compete with PowerBar and Clif Bar. Gatorade Energy Bars contain a large proportion of protein, in addition to its carbohydrates. The bar is mainly made up of puffed grains and corn syrup, common components of other energy bars.

Gatorade’s Products

• Original Gatorade Thirst Quencher
• Gatorade Fierce
• Gatorade Frost
• Gatorade Xtremo
• Gatorade Nutrition Shake
• Gatorade Energy Drink
• Gatorade Energy Bar

Propel Fitness Water

• Propel is a lightly flavored water with essential vitamins and just 10 calories.
• Available in four natural flavors including Lemon, Berry, Black Cherry and Orange, Propel is currently the market leader in the rapidly growing fitness water category.

PEST Analysis of Gatorade Company

Political analysis for Gatorade: – The government plays a role within the operation of manufacturing these products in terms of regulations. There are potential fines set by the government on companies if they do not meet a standard of laws.

The following are some of the factors that could cause Gatorade company’s actual results to differ materially from the expected results described in their underlying company’s forward statement:-

• Changes in laws and regulations, including changes in accounting standards, taxation requirements, (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign jurisdictions.
• Changes in the non-alcoholic business environment. These include, without limitation, competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors.
• Political conditions, especially in international markets, including civil unrest, government changes and restrictions on the ability to transfer capital across borders.
• Their ability to penetrate developing and emerging markets, which also depends on economic and political conditions, and how well they are able to acquire or form strategic business alliances with local bottlers and make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology.

Economic analysis for Gatorade: – The economic stability in the target market facilitates an international marketer’s task. For example a recession creating increased activity at the lower ends of product price ranges. Rate of interest raises depressing business and causing redundancies and lower spending levels.

Economic environment of India affects the international marketing decisions of Gatorade greatly. The economic conditions of a country such as the state of foreign exchange reserves and inflationary conditions also affect the openness of a country’s trade policies. In the recent years, the opening up of the Indian market has paved the way for import and distribution of consumer goods. However, it has put pressure on domestic firms to compete with international brands such as Gatorade, PowerAde etc.

Social Analysis for Gatorade: – Social change involves changing attitudes and lifestyles. Many Indian citizens are practicing healthier lifestyles. This has affected the non-alcoholic beverage industry in that many are switching to bottled water and diet sports drink instead of beer and other alcoholic beverages. The need for bottled water and other more convenient and healthy products (Gatorade sports drink) are in important in the average day-to-day life.

Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. There is a large population of the age range known as the baby boomers. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This will continue to affect the non-alcoholic beverage industry by increasing the demand overall and in the healthier beverages.

Technological Analysis for Gatorade: – The effectiveness of Gatorade Company’s advertising, marketing and promotional programs are the factors which cause company actual result. They make some products look attractive. This helps in selling of the products. This advertising makes the product attractive. This technology is being used in media to sell their products.

Introduction of cans and plastic bottles have increased sales for Gatorade as these are easier to carry and you can bind them once they are used. As the technology is getting advanced there has been introduction of new machineries all the time. Due to introduction of this machineries the production of the Gatorade company has increased tremendously then it was few years ago.

Porters 5 forces model for Gatorade Company

Rivalry among competitors: – There is high competition for Gatorade Company because other Sports drink companies are also there which are providing the same tough competition to Gatorade.

Rivalry is increasing, as the market decreases, and competitors downsize, the competitors become more or less equal in size and capacity. This means that as economic conditions worsen, competitors downsize and then compete for the same remaining market.

Threats of new entry: – The threat of new entrants is high in the Sports drink industry because many other companies are also coming in the same market in order to provide cut through competition to Gatorade.

Threats of substitutes: – Threats of substitutes is very high because many other forms of soft drinks are available in the market which is doing the same work as that of the Gatorade.

Bargaining power of Buyers: – The bargaining power of buyers is very high because many other sports drinks are also available in the market such as PowerAde so buyer if not satisfied with the product can switch to other companies products.

Bargaining power of suppliers: – The supplier’s power is low for Gatorade Company because other player such as PowerAde of Coca Cola are also present in the market so the suppliers cannot charge high cost by the customers than its competitors.

Current Products

G Series and Elite Series

In early 2010, Gatorade announced its latest marketing campaign, promoting its products as the “G Series.” Gatorade describes the G Series as a three-part regimen designed to fuel every step of its consumers’ athletic performance. The first part, “Prime,” includes a “pre-game fuel” with B vitamins, carbohydrates, and electrolytes to be taken before athletic performance. G Prime is described as “coming soon” on the company’s website. The second part of the series, “Perform,” includes traditional Gatorade products such as Gatorade G, G2, and Gatorade powder. The third part of G Series, “Recover,” is described as “the world’s first rehydrating protein drink” and is designed for consumption immediately following athletic activity.

In addition to the G Series, Gatorade also maintains a line of products called the “Elite Series” designed for serious athletes. Similar to the G Series, the Elite Series includes products for before, during, and after workouts, as well as “All Day” nutrition shakes.

G2: Off the Field Hydration,

Otherwise known as Gatorade 2 (G2), is a low-calorie electrolyte beverage that was launched in late 2007; G2 is currently available in six flavors: Orange, Fruit Punch, Lemon-Lime, Strawberry Kiwi, Blueberry-Pomegranate, and Grape. It is also labeled as a healthy choice beverage. It was the top new food product of 2008, generating the sales of $159.1 million.

2009 Rebranding

In 2009, Gatorade began a massive rebranding, resulting in new names for most of their products; however, some products only had name changes:

• Original Gatorade was relabeled as Gatorade G
• Gatorade Rain was relabeled as No Excuses

Other products were reformulated as well:

• Gatorade AM was relabeled Shine On, which now contains the addition of 20% RDV of Vitamin C per 8-oz. serving.
• Gatorade X-Factor was relabeled as Be Tough, which now contains the addition of 20% RDV of Vitamin E per 8-oz. serving.
• Gatorade Fierce was relabeled Bring It, which now contains the addition of 25% RDV of several B vitamins, including B3, B5 and B6.

G2, which was not renamed, now contains the same added B vitamins as Bring It. G2’s label was further redesigned at the end of 2009, giving it a silver label and a new slogan: “½ the Calories, All the G”.

Former Products

Gator Gum

In the late 1970s and early 1980s (as well as the late 90s to early 2000s), Gatorade sold a brand of chewing gum called Gator Gum. The product, manufactured by Fleer Corporation, was available in both of Gatorade’s original flavors (lemon-lime and orange) and was rather sour-tasting by normal chewing gum standards.

In the late 1970s, Stokley-Van Camp (owner of Gatorade prior to 1983) negotiated a long-term licensing deal, with Swell and Vicks, to market “Gator Gum.” T

he gum, which had no functionality or ingredients of Gatorade Thirst Quencher, was discontinued in 1989 after the contract expired. Mueller Sports, in Wisconsin, manufactures a gum called Quench; it is based on Gator Gum but is not the same as what Stokley-Van Camp created.

Gator Gum’s foil packaging advertised that the product “Helps Quench Thirst.” However, like all chewing gums, the product would not actually rehydrate the body on its own but would, instead, only give the feeling of a “wet mouth”. However, it did contain electrolytes to assist the human body with the rehydration process.

Competition of Gatorade with PowerAde

Gatorade’s main competitive brand is POWERade, made by the Coca-Cola Company. PowerAde is the main competitor for Gatorade, others like all sport exist, but they do not present a challenge to Gatorade. The brand of PowerAde has essentially the same target market as Gatorade: 18-24 year old males who are engaged in athletics.

However, PowerAde appears to be looking for the trendier types of consumers.

Based upon their company website design, it seems as through PowerAde is trying to offer the attributes of having the “cooler” drink.

PowerAde has a very interactive website compared to Gatorade, one can choose from 8 different varieties of musical beats that represent each unique flavour. The website also allows individuals who are visiting the site to put up their own thoughts about PowerAde.

PowerAde does not have a good target market perception; they are considered a second place to Gatorade, PowerAde does not have the same quality of winning athletics that Gatorade has. They also lack scientific research behind their product without a research institute.

The future for competition against Gatorade seems bleak. Gatorade owns the sports drink category and much can be done to stop them.

Segmentation, Targeting & Positioning

Demographics

The demographics of the Gatorade target market are active males, aged 18-25. They can be students, just starting their career, or well established, regardless of status the majority of them believe they are athletics.

They grew up idolizing many different sports athletics and teams, which still have an influence. They make very wide variety of incomes because Gatorade is inexpensive.

Education could vary also, most have at least high school level education and some have college experience. Their attitudes can vary a little, but most of them are competitive, care about sports and enjoy their perspective athletics endeavours. These types of consumers may also be interested in other sport-related clothing and accessories. They may be interested in items such as jerseys, hats, shoes or anything that will show off their allegiance to a team, sport or player.

Advertisement

• TARGET MARKET: Athletes
• CURRENT SLOGAN: Is it in you?
• TYPES of ADS: commercials, web site, print, sponsorship, partnerships, promotion, etc.

Endorsements

• Gatorade scored a slam dunk in 1991 when it tabbed Jordan to become its first athlete endorser. Although the sports drink brand already dominated store shelves, millions of people still have the “Be like Mike” jingle stuck in their head so many years later.

Other Endorsers include,

• Mia Hamm
• Derek Jeter
• Vince Carter
• Peyton Manning
• Yao Ming

Positioning of Gatorade

Positioning is making unique identity in the mind of the prospective customers. Sports being Gatorade’s biggest focus, they brand themselves as the best sports drink for an athletics trying to reach their peak performance.

They have done this through source credibility, by gathering a group of athletics like Peyton Manning, Dwyane Wade, Derek Jeter, Kevin Garnett and Michael Jordan. All of these athletics are memorable and influential to kids and adults, but Jordan has the most impact.

Recent Programs

Defeat the Heat

• Campaign to protect kids from heat illness
• After a 10 year old boy collapsed on a sports field, he and his mom helped initiate Defeat the Heat which was sponsored by Gatorade, National Athletic Trainers’ Assoc., and SAFE KIDS.
• This program teaches kids the importance of staying hydrated while playing sports.

Gatorade loves Racing

• Gatorade has become a huge influence on NASCAR racing by becoming a huge sponsor.
• They introduced the G.I.D.S. (Gatorade In-Car Drinking System) to give drivers fluids during long races.
• Makes getting fluids easier
• Gatorade is able to advertise heavier now during a sporting event that has a huge fan base that increases every year.

Expansion Strategies of Gatorade in India

Diversification Strategy: –

Gatorade as US Company will use Diversification strategy in India because it is new product for Indian customers and the market is also new for Gatorade. So for the growth of the product in the new market in order to make people aware of the Gatorade products for increasing market share diversification strategy will be used by Gatorade company.

Under the direction of the Quaker Oats company, Gatorade’s distribution was increased and new flavours have been added. This also included an advertising and promotion campaign held in conjunction with the NBA (National Basketball Association) Championship.

Pricing Strategies for Gatorade in India

Skimming Pricing: – Selling a product at a high price, sacrificing high sales to gain a high profit, therefore ‘skimming’ the market.

Gatorade use skimming pricing strategy in India as they have targeted mostly athletic so they can charge high because of their new product in the Indian market as a division of PepsiCo Company. So skimming pricing strategy can be used by Gatorade Company for Indian market.

Competition based pricing: – Setting the price based upon prices of the similar competitor products.

Competitive pricing is based on three types of competitive product:

Products have lasting distinctiveness from competitor’s product. Here we can assume

• The product has low price elasticity
• The product has low cross elasticity
• The demand of the product will rise

Products have perishable distinctiveness from competitor’s product, assuming the product features are medium distinctiveness.

Products have little distinctiveness from competitor’s product. assuming that:

• The product has high price elasticity
• The product has some cross elasticity
• No expectation that demand of the product will rise

Gatorade is priced slightly lower than its main competition, PowerAde. PepsiCo keeps very close control over the pricing of its products, ensuring that every channel member makes a profit. Product promotion for Gatorade is focused in three areas, media advertising, event sponsorship, and contests. The main competitor for Gatorade is the Coca-Cola product, PowerAde. Currently Gatorade seems to have the upper hand because it is experiencing sales growth while PowerAde is not expecting any growth. Gatorade keeps its competitive edge through product innovation.

Current Trends

Despite aggressive competition, Gatorade was able to maintain its market share in 1997 and make further inroads into foreign markets. The company cited the addition of new flavours in addition to packaging changes, promotions, and scrutinized distribution. Among these were the Cherry Rush, Strawberry Kiwi, and M’mmmandarina flavours, added in 1996. Prior to that, three new flavours, aimed at women athletes, were introduced-Alpine Snow, Glacier Freeze, and White water Splash.

Global Presence

For many years, Gatorade was primarily a United States phenomenon. In 1992 Quaker Oats decided to distribute the beverage worldwide. The theory was that the drink would be equally successful outside the United States because “no other sports beverage because of its distinct scientific formulation and market position is more poised to take advantage of a worldwide opportunity.”

The company continues to work at expanding distribution beyond the United States, particularly in Latin America and the Pacific Rim countries. More than $20 million was spent on expansion in 1996, resulting in sales of $283 million in more than 45 nations. The number of countries in which the sports drink was sold increased by 10 over the previous year. Worldwide sales increased 19 percent internationally, reflecting growth in both Latin America and Italy. In 1997 international sales climbed 18.7 percent to $335.2 million.

By 1998 the company was the world’s leading manufacturer of sports beverages, with Gatorade being sold in 47 countries around the world. The number one sports drink in the United States, Canada, Mexico, Italy, Argentina, Brazil, Venezuela, Colombia, Indonesia and the Philippines, Gatorade is also one of the leading sports drink brands in Korea and

Sport Drink

Gatorade is marketed not merely as a tasty drink, but as a carbohydrate-electrolyte beverage designed to provide rapid rehydration. How does it work? Well, all food and beverages are absorbed by the small intestine, and Gatorade claims that its 6-percent carbohydrate level and small amount of sodium are ideal for rapid fluid absorption. By comparison, beverages with a higher percentage of carbohydrates, such as fruit drinks and soft drinks, are said to slow the absorption rate of fluids. Gatorade points out that the salt and sugar in Gatorade “stimulates people to drink more fluid voluntarily.”

Current Strategy

Target Market

• Athletes
• Males 18 to 24
• Focused on “Point of Sweat”

Getting to Market

• TV Ads /ESPN
• Sports Venues – cups, coolers, billboards
• Sports Magazines
• Limited Radio
• Sponsored Events
• Celebrity Endorsements
• High School “Athlete of the Year”

Current Market Facts

Part of PepsiCo

Control 80% – 90% of Market Share in North America

1.5 Billion dollar brand

Competition

• PowerAde (Coke)
• Private Label Isotonic Sports Drinks
• Water

View of Future State

Create Brand Loyalty

• Younger generation
• Increase market share
• New Market
• Non-athletes

How Do they Attract Youth?

Parenting Magazines

• Emphasize health benefits of the active child

Kids Magazines

• Sports Illustrated for Kids, Seventeen, etc.
• Internet Pop Ups / Websites

Nick Jr., Discovery Kids, Disney

TV Ads on Kids Programming

Target Youth

Endorsements appealing to the younger child

• Dora the Explorer, Sponge Bob
• Video game background banners
• Form strategic partnerships with other companies, Ex. EA Sports

Continue celebrity endorsements aimed at pre-teens/teens

• Derek Jeter
• Mia Hamm

Supporting Facts

Current National Trend is to Decrease Childhood Obesity

• Overweight children – 9 million (3x that of 1980)
• Children dehydrate faster that adults
• Instill brand recognition at an early age
• Studies show taste promotes more consumption with kids

Attracting a New Market

Non-Athletes

• Home Improvement
• Contractors
• Do-It-Yourselfers
• Construction Workers

SWOT Analysis of Gatorade

Strengths

• Gatorade is the market leader in the sport drink category, dominating the main competition of PowerAde.
• Gatorade has science to back up their product and it is proven to excel and maintain physical performance during competition.
• It is the field of play in many professional sports, which means not is it on television, but it is also proven to work at the highest level.
• A wide array of athletes endorses the Gatorade message from virtually every type of sport. Not only are those, but nearly every one of their athletes proven winners which instils additional credibility in the brand.
• Gatorade has a loyal consumer base and their brand is held in high regard. This gives them flexibility to expend into other products meant to help athletes.

Weaknesses

1. There may be too many varieties and flavours of the Gatorade product, which might ultimately, might confuse and annoy customers.
2. Gatorade also does not have an energy drink and do not have lot of potential to make one because it could lead to dehydration.
3. Work needs to be done in these two areas and they can heal the few weaknesses they have.

Opportunities

1. If Gatorade can develop a unique blend that would provide additional energy and keep athletes hydrated it would certainly give them an edge.
2. Adding one athlete from the mixed martial arts (MMA) could help them expand quite a bit. Since MMA has recently boomed in the sports world as the new, exciting form of entertainment.
3. They could also add a vitamin-enhanced hydrator to complete with brands like vitamin water that take some of their target market.
4. Gatorade also has some products listed on their website that have some potential like protein shakes, but they are not promoted as much.

Threats

1. New energy drinks flavours present a threat to Gatorade because it is also appealing to the target market of 18-24 year old males.
2. The currency economy also has an effect on what people will consider to buy the grocery store.
3. Finally, Gatorade has to worry about their brand plateauing and losing interest in their target market.

Suggestions and recommendations

I would like to give certain suggestions to the Gatorade company which are as follows: –

1. Gatorade Company targeted mainly athletics and sports persons and there exist a huge potential in the market for them so they should also have targeted other segments in order to have more market share.
2. In India they use skimming pricing approach by which they can charge high prices but if they charge less by reducing the price of the Gatorade products they can increase their sales which give them maximum profits.
3. In Indian market they should have created more awareness among the peoples as less number of peoples knows about the Gatorade brand.
4. For promotion in Indian market they should have used celebrity endorsement such as cricketers or Bollywood stars as they use Michael Jordan for the promotion of their energy drink products.
5. They should have also made the Gatorade products for the rural India as more than 70% of the sector is unorganised and there exist huge potential for growth.

Conclusion

References

• GATORADE’S EXPENSION INTO INTERNATIONAL MARKET-BY-MOHD FAHAD