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Pepsi Co. may be a well-diversified, international conglomerate, but that does not mean it is immune to missteps. Its 2001 acquisition of Gatorade has so far underperformed expectations that the company’s overallU.S.sales fell by 6 percent in just one quarter—a period in which Coca-Cola lost only 1 percent.

To stem the flow, Pepsi attempted to rebrand Gatorade and project a new, hipper image with the simple name “G,” celebrity promotions, and viral marketing that asked, “What’s ‘G’?”  Gatorade even had prime spots during the 2009 Super Bowl. While consumers were intrigued, they did not show curiosity with their wallets, and G’s market share dropped 4.5 percent, with sales falling 17 percent.

But perhaps the greatest damage comes from the 12 percent decrease in sales in the sports drink category overall. Gatorade still maintains a 75 percent market share, but as consumers choose healthier drinks, teas, and juices, sports drinks simply do not sell as well as they once did.  Bottled water cannibalized sales away from other beverage categories for a few years, but in this economy and with newfound interest in green products, consumers are questioning the value of bottled water.

After all, remember when a construction boom, hot temperatures, and a healthy economy meant that everyone, not just athletes sweating through practices, drank sports drinks? That time has passed, and Pepsi is responding by retreating from the G campaign to refocus on Gatorade as the drink of athletes, “the sweating masses.”

Discussion Questions

  1. Was it a good idea for Pepsi to tinker with an established market leader?
  2. If the size of the sport drink market continues to decline, what options does Pepsi have to improve sales of Gatorade?

Valerie Bauerlein, “Pepsi Sweats Over Gatorade,” The Wall Street Journal, July 23, 2009.