PepsiCo Identifies Sports Nutrition Opportunity with Gatorade
The fourth-largest beverage brand in the U.S. market just launched an energy drink, which is cool, but shouldn’t industry professionals be more interested in what the Gatorade Fast Twitch product innovation means to PepsiCo’s entire sports nutrition portfolio strategy?
“Gatorade” Fast Twitch
In February, PepsiCo officially launched a caffeinated energy drink under the Gatorade brand that’s formulated specifically for athletes. Gatorade Fast Twitch is essentially an energy and sports drink mashup that’s uncarbonated, contains no sugar, and has no artificial colors or flavors. Each bottle includes 200-mg of caffeine, B vitamins, and electrolyte levels that are consistent with Gatorade sports drinks. It will also come in a collection of popular Gatorade flavors such as Glacier Freeze and Cool Blue.
If that product name sounds familiar, it’s because PepsiCo decided to remix a relatively dormant product name from an acquisition it made in early 2019. Fast Twitch was originally a ready-to-mix pre-workout powder and RTD beverage under the sports nutrition brand CytoSport. While that brand/portfolio name might not ring a bell for everyone, even casual observers of the sports nutrition brand industry will be familiar with CytoSport’s protein sub-brand called Muscle Milk.
Gatorade Remix Innovation Strategy
Do you remember BOLT24? It’s OK if you don’t because…
BOLT24 didn’t look anything like a Gatorade sub-brand
BOLT24 lasted less than three years in market
The defunct Bolt24’s soul now lives on within two new Gatorade products.
Gatorade Fit = BOLT24 had no artificial sweeteners or flavors and delivered electrolytes from watermelon and sea salt, as well as a vitamin blend.
Gatorade Fast Twitch = BOLT24 had a caffeinated variant called Energize.
Note: Gatorade Fit is a remixed name from G Fit…a previously used concept that launched in 2011.
Gatorade Fast Twitch Opportunity
What does Fast Twitch potentially offer the growing $16 billion U.S. energy drink market, especially in sets at large retailers? Incrementality. That’s actually an extremely powerful word in CPG that often doesn’t get talked about enough. Retailers love incrementality because those products generate sales that truly add to overall revenue, rather than simply reallocating revenue from one product to another (thus “cannibalizing” other products).
Gatorade Fast Twitch would align within the performance energy drinks sub-category that was created with the spike in popularity of Bang Energy about 7-8 years ago. But instead of Gatorade launching a typical carbonated performance energy product and cannibalizing other competitor categorical sales, they decided to make the product non-carbonated. That lack of carbonation now positions them in a gap which fills a consumer pain point for those that use performance energy drinks before a workout or sports activity.
Yes, non-carbonated performance energy drinks have been around for decades. In powder form obviously, but that creates friction for some consumers that aren’t comfortable or familiar with mixing up sports nutrition products. In beverage form, almost all those options are sold in brick-and-mortar specialty retailers GNC or The Vitamin Shoppe. Again, that creates friction for some consumers that don’t shop at those types of retailers. So, for mainstream consumers that shop at places like Walmart, Kroger, and Target, this is a completely new thing that’s attached to one of the most powerful beverage brands.
Does that mean Gatorade Fast Twitch is going to be the next billion-dollar energy drink brand? No. Gatorade Fast Twitch is positioned within a niche of an energy drinks market sub-segment. One that doesn’t even have a total addressable market at that level (yet).
Gatorade “All G” Strategy
In a recent quarterly earnings call, PepsiCo leadership stated "we remain optimistic about the runway for growth within the sports nutrition category." This optimism has been supported by the innovation focus at PepsiCo with product extensions into additional Gatorade "fuel solutions" or what the brand now calls its ‘All G’ portfolio of products.
It might have taken Gatorade 53 years to introduce a sugarless product, but the mid-2018 launch of Gatorade Zero has proven to be a wildly popular decision with consumers. That was followed three years later by a protein version of the Gatorade Zero. A few months after that Gatorade launched Gatorlyte, a "rapid rehydration" beverage for elite athletes. This move was in response to Abbott Nutrition owned Pedialyte expanding product and marketing communications that now directly competed with Gatorade. Additionally, the Mexico-based sports drink challenger brand Electrolit was starting to make some noise that a defensive product strategy was needed by Gatorade. Finally, the two products that came out of the BOLT24 ashes were launched…Gatorade Fit (February 2022) and Gatorade Fast Twitch (February 2023).
PepsiCo & Sports Nutrition
That takes us full circle to Fast Twitch and the acquisition of CytoSport (aka Muscle Milk) in early 2019 from Hormel Foods. Since the acquisition three years ago, I’ll be completely honest in saying I was almost lulled to sleep by PepsiCo’s relative inactivity with CytoSport.
Yes, I noticed PepsiCo had cleaned and sharpened up the Muscle Milk branding.
Yes, I see them helping a tiny bit with the plant-based protein brand Evolve that was apart of the CytoSport portfolio.
Yes, I saw them basically SKU rationalize or deprioritize basically the entire CytoSport product line.
I thought it would end up being just another sad story of a large CPG conglomerate buying a sports nutrition legacy brand and letting it fizzle away, but then I got the heads up from someone that noticed an under the radar website change. PepsiCo began listing Muscle Milk and Evolve products on the Gatorade website. This was about two weeks before the launch of Gatorade Fast Twitch.
Does that mean PepsiCo could possibly be "merging" its sports nutrition brands together? If so, what does that mean long-term?
The new President of Gatorade Performance Portfolio has said one of the goals he wants to accomplish is to reconnect with the brand’s roots. Moreover, Gatorade’s CMO recently stated the brand aspired to serve “a broader aperture of athletes.” With those statements in mind, I think we will be seeing Gatorade deepen its fuel solutions for elite athletes and simultaneously broadened into more active lifestyles. The signs look to be pointing towards a continuation of what’s already in process. Gatorade will start to absorb the CytoSport family of brands to make a more cohesive sports and active nutrition strategy.
I believe the following will start to happen:
Evolve will be the plant-based protein offshoot of the Gatorade Performance Portfolio. I believe branding adjustments will be needed to connect Evolve better into Gatorade. This will also signal what Gatorade thinks about plant-based athlete lifestyles.
Muscle Milk will be the milk-based protein offshoot of the Gatorade Performance Portfolio. Muscle Milk will continue to focus on (outside of the hydration category) sports nutrition solutions that are above and beyond the current reaches of Gatorade. I wouldn’t expect vast product portfolio expansion outside of additional protein and aminos variants. We will see what they do with branding adjustments to better align it with Gatorade.
CytoSport is dead and will be stripped for parts. While I likely can’t remember everything, I’m fairly certain there isn’t much usable IP in terms of product names or concepts left that would be appealing for Gatorade outside of Fast Twitch.
What’s Next for PepsiCo & Its Sports Nutrition Ambitions?
Gatorade’s CMO as recently stated “there are some exciting things coming around the corner with innovation from a multitude of fronts.” While I think most of that innovation would be more aligned with categories like the Gx sweat patch delivery and Smart Gx bottle technology, I want to keep this content focused on the CPG space…
Gatorade still holds about a 70 percent share of the US sports drink market, they are facing increased competition and categorical shifts. The most obvious to note is Body Armor, but I think Gatorade now has a competitive product stack that wouldn’t need anything more defensive at this point. On the other hand, hydration has broadened as a category, stemming from the “Liquid I.V. Effect.” There’s a white space in the market for those looking beyond water for their hydration needs, but high-intensity sports were not relatable to their lives. Propel might be that sub-brand to meet those consumers where they are, but new ideas will need to emerge because right now Liquid I.V. sells three times more than Propel powdered offerings across large retail channels.
That being said, I don’t think Gatorade can be everything to everyone in today’s market, so I would love to see PepsiCo make additional M&A moves in the "sports nutrition" category. If the sports nutrition category is growing in importance as PepsiCo leadership has stated, why not attempt to consolidate a fragmented space, and compete directly against Glanbia Performance Nutrition, Nestle Health Science, or Unilever, with a differentiated portfolio? All I know is that I’m suddenly paying much more attention to PepsiCo in terms of sports and active nutrition news than I have in the previous few years combined, so we will see how things play out.