gatorade&vitamin water

8/6/2019 Gatorade&Vitamin Water

1/12

Low calorie functional drinks case study CSCM0250/ Published 06/2009

Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

DATAMONITOR VIEW

CATALYST

Energy drinks have gained a bad reputation in media circles and have been cited in some corners as a contributing factor

to obesity. As some factions have called for energy drinks to carry health warnings, manufacturers have moved to provide

healthier options. This case study examines low calorie versions of functional drinks and how some companies have

sought to change the perception of functional drinks in the public eye.

SUMMARY

The energy drinks category has shown strong growth to become an established sector of the non-alcoholic

beverages market. However, more recently growth has slowed and concerns over the negative health impact of

some drinks have become widespread. Consumers still desire food and drinks that can provide both mental and

physical boosts, so the potential for functional drinks still remains high, and lower calorie variants could be a key

to aiding future growth.

PepsiCos Gatorade brand has a solid footing in the functional drinks market, with a strong emphasis on

hydration for athletes. The brands G2 range was introduced in late 2007 and has become a success as a

lifestyle brand with many consumers. The drink aims to offer all the benefits of the core drinks, but with

substantially less calories.

Vitaminwater has established its brand as a force in the developing enhanced water niche. While bottled water

has been criticized by some sources over its large carbon footprint, enhanced water products are more easily

justified. Vitaminwater has received criticism for a high sugar content, but the company has released a lower

calorie Vitaminwater10 variant that addresses these fears.

CASE STUDIES

Low calorie functional drinks casestudy (Gatorade and Vitaminwater)Making functional drinks healthier

Reference Code: CSCM0250

Publication Date: June 2009


2/12

Low calorie functional drinks case study



ANALYSIS

Functional drinks have a complex relationship with the global health megatrend

The healthy positioning of some functional drinks has been questioned in some quarters

Functional drinks and energy drinks are associated with high levels of sugar and other synthetic ingredients such as

caffeine. The high levels of such substances can be harmful and certain quarters in the health industry have begun to

campaign for such product offerings to carry health warnings, or to be banned to children. Aside from the long-term

implications of consuming these beverages regularly (including obesity and rotting teeth), they have also been linked with

comedowns, which leave consumers feeling tired after an initial surge in energy brought on by the high sugar and caffeine

levels. Other health problems associated with these drinks include nausea, abdominal discomfort and irritability, and

elevated heart rate and blood pressure.

Functional drinks and bottled water have shown robust growth in the US

The data in Figure 1 shows that the carbonates subcategory remains dominant in the US soft drinks market. However, a

decline in market value has been seen in this category, while the bottled water and functional drinks segments are two of

the fastest growing markets in this area. Datamonitor expects growth to continue in these two subcategories, although the

rate has begun to slow, and this can partly be attributed to the concerns noted above.


3/12




Figure 1: Carbonates remains dominant in soft drinks, but bottled water and functional drinks are showing

strong growth

The market value of the carbonates, bottled water andfunctional drinks segments in the US, 2003-2013

0

10

20

30

40

50

60

70

2003 2008 2013

Mar

ketvalue,

US$billion

Carbonates

Bottled water

Functional drinks

$64.

0

billion

$63.

2

billion

$61.

4b

illion

$12.

3

billion

$2.

3

billion

$18.4

billion

$26.

5

billion

$11.

0

billion

$6.

2

billion

Source: Datamonitor Consumer Survey, April 2009 D A T A M O N I T O R

The positive health benefits of some functional drinks have successfully been communicated to

consumers

As shown in Figure 2, the majority of consumers in the US show interest in food and beverages that can improve physical

energy, improve mental concentration and improve alertness. However, of those professing interest in these benefits, only

a minority are actually acting on this through regular consumption. These are all benefits that have been touted by a wide

variety of functional drinks.

The gap in those interested and actively buying and those interested but not actively buying is worthy of further analysis.

While such consumption gaps often indicate large potential for a market, they can also be indicative of strong consumer

resistance. While the potential for functional drinks clearly exists among consumers in the US, it is worth considering that

many consumers are not buying such products due to the health fears mentioned above.


4/12




Figure 2: US consumers show an interest in the benefits that many functional drinks claim to provide

How interested are you food and beverages providing the following benefits

19% 24%24%

56%57% 57%

25%19% 18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Improve your physical

energy or stamina

Improve your ability to

concentrate

Improve your alertness

%o

frespondents

Not interested and not actively buying Interested but not actively buying

Interested and actively buying

Source: Datamonitor Consumer Survey, April 2009 D A T A M O N I T O R

Energy drinks and sports nutrition products have become important niches in the non-alcoholic beverages market after

initially being linked with the positive health trends involving exercise and increased mental alertness. However, traditional

functional drinks typically contain high levels of sugar, which can cause them to be unhealthy if abused by consumers. This

situation has been compounded by some consumers who choose energy drinks for the aspirational element that makes

them feel more athletic. However, many consumers would not adjust their physical activity levels to compensate for the

extra energy, hence leading to weight gain.

The example shown below in Figure 3 demonstrates how Lucozade has successfully aligned its range of energy drinks with

a positive impact on health. Principally available in the UK, GlaxoSmithKlines Lucozade brand has been established for

over 80 years and after its origins as a tonic to build energy levels for hospital patients, the brand has been repositioned as

an energy drink that can provide benefits for anyone.


5/12




Figure 3: The Lucozade brand has been aligned with some positive health trends

GlaxoSmithKline has successfullyaligned its Lucozade energy drink brandwith both physical and mentalstimulation. In particular, the LucozadeSport range has been targeted at regulargym goers, while Lucozade Alert isdesigned to boost mental alertness.

Source: Lucozade; Datamonitor analysis D A T A M O N I T O R

Some functional drinks are therefore at odds with the health megatrend, providing some benefits, but with many detrimental

effects. In the above example, Lucozade contains a relatively high level of caffeine and sugar (46 milligrams of caffeine and

68 grams of sugar per 12.85 ounces), which significantly offsets the purported benefits in the long term. Some companies

have moved to reduce any harmful effects, but in doing this, it is important to ensure that the original benefits are not

compromised.

Gatorade has introduced low calorie variants to its range of hydrating beverages

Gatorades core range of drinks relies on electrolytes for energy benefits

The PepsiCo brand Gatorade traces its routes back to the mid 1960s when it was specially formulated to aid a football

team. Soon after, the drink became distributed nationally and relied on a mix of water, sodium, sugar, potassium,

phosphate and lemon juice. This initial formulation was designed to quench the thirst of football players during training and

games, thus leading to better performance as players were better hydrated.


6/12




Figure 4: Gatorades core range

Gatorades core range has evolved substantially since itsinception in the 1960s. However, the drinks rely on a content of

electrolytes to provide athletes with hydration during or afterperiods of physical activity. As Gatorade became more widelyavailable, many consumers in the US became regular drinkers,but not all were regular partakers in exercise. The relatively highcalorie and sugar content thus posed problems for theseconsumers.

Source: Gatorade; Datamonitor analysis D A T A M O N I T O R

The low calorie G2 range launched in the US in late 2007

Gatorades G2 range was introduced to the US market in late 2007. The launch was the most prominent in Gatorades

history, and the company secured a high profile introduction by securing a prestigious advertising slot at the 2008 Super

Bowl. In addition, Gatorade launched a high profile digital campaign based around the online G2 lounge, which allowed

internet users to play interactive games, listen to music and watch videos all centered around a G2 theme. The success of

G2 was illustrated by its inclusion in Advertising Ages Top 50 Marketing Ideas for 2008, with reported sales of $159 million.

The aim of PepsiCo, Gatorades parent company, was to create a beverage that could still be classed as an energy drink,

but designed for consumption when away from physical activity. Such an objective would see the brand established as a

lifestyle brand, rather than a truly functional drink. As was already pointed out earlier in this report, many consumers

bought energy drinks purely for the aspirational element and PepsiCo therefore attempted with G2 to create a beverage

that would better suit the needs of these consumers, particularly those who were already regular purchasers of Gatorades

beverages.


7/12


8/12




However, the importance of drinking water has been well publicized and the benefits of hydration are well known. Many

consumers have been skeptical about switching to tap water as fears persist over its safety in many areas. Hence, despite

concerns, bottled water can still be an attractive proposition for consumers. One method of offsetting these contrasting

opinions has been seen with the emergence of enhanced water.

Enhanced water remains a more favorable option for many consumers

Products that can be classified as enhanced water aim to provide consumers with standard hydration, along with additional

benefits that would not be available from drinking tap water. The addition of vitamins and minerals and other ingredients to

the water can be used to better justify the industry to consumers, as enhanced water distinguishes itself from the bottled

water market and brings it more into line with other soft drinks categories.

One of the leading providers of functional waters is Glaceau which produces Smartwater and Vitaminwater. Smartwater

was launched in 1996 by Glaceau founder J. Darius Bikoff who wanted to offer drinking water that could also boost the

immune system. Vitaminwater was introduced in 2000, by which time Mr. Bikoffs enhanced water products were available

in thousands of stores in New York. The following year, these enhanced water products were made available nationally in

the US through a series of distribution deals. Eventually, Mr. Bikoffs company was bought by Coca-Cola in May 2007 for

$4.1 billion.

Vitaminwater10 was launched in April 2009 and aimed to counter fears over the sugar content of core

drinks

In January 2009, Vitaminwater was at the center of some controversy after the Center for Science in the Public Interest

filed a lawsuit that claimed that it was deceptive to market these enhanced water drinks as a healthier alternative to regularsodas. The key factor was the inclusion of 33g of sugar in one bottle of Vitaminwater, which it was claimed could lead to

health problems such as obesity and diabetes for regular drinkers. Parent company Coca-Cola dismissed the lawsuit as

ridiculous, but clearly this presented problems for the brands image.

Vitaminwater moved quickly to counter negative associations with the launch of the 10 calorie drink Vitaminwater10 in April

2009. To emphasize the drinks low calorie count, the company arranged to promote it with a presence in New York Citys

Union Square, which featured a team of hydrators. Visitors to this exhibit were invited to take part in activities such as

table football and tic-tac-toe, which are both activities that can burn 10 calories. This emphasized the low calorie content of

Vitaminwater10 by showcasing relatively passive activities that could quickly burn the amount of calories consumed in one

drink.


9/12




Figure 6: Vitaminwater10 was given a high profile release in New York City

Glaceau ensured a high profile presence in New York City for itsVitaminwater10 brand that successfully showcased the low calorie contentof the drink. The team of hydrators demonstrated the low calorie content ofthe drink by inviting consumers to take part in low-energy activities such astable football and tic-tac-toe, both of which could successfully burn off theamount of calories consumed in one bottle of Vitaminwater10.

Source: Vitaminwater; Datamonitor analysis D A T A M O N I T O R


10/12




APPENDIX

Case study series

This report forms part of Datamonitor's case studies series, which explores business practices across a variety of

disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and

insurance, pharmaceuticals and software.

Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,

highlighting the ways in which the company has become one of the best in its field or how it deals with different problems

encountered within that sector.

Methodology

A variety of secondary research was carried out for this case study. This included researching the functional drinks market

on Datamonitor's Interactive Consumer Database and the Productscan Online Database of new products, alongside an

extensive review of secondary literature and other in-house sources of information.

Secondary sources

Forget the sports-drink hype: All you need is water, sugar, salt; The Globe and Mail (June 2009)

Pepsi unveils low calorie Gatorade G2; CNN (September 2007)

New Vitaminwater cuts calories; Drug Store News (May 2009)

Further reading

Datamonitor,Functional Food, Drinks & Ingredients: Consumer Attitudes & Trends

, February 2008,DMCM4602

Datamonitor, Next Generation Functional Food and Drinks: Opportunities in Personalized Nutrition,November

2008, DMCM4650

Ask the analyst

The ConsumerKnowledge Center Writing team [email protected]

Datamonitor consulting

We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you

have further requirements, Datamonitors consulting team may be able to help you. For more information about

Datamonitors consulting capabilities, please contact us directly at [email protected].

Disclaimer

All Rights Reserved.


11/12




No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,

electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith

from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such

Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be

incorrect.


12/12

Copyright of Low Calorie Functional Drinks Case Study (Gatorade & Vitaminwater): Making Functional

Drinks Healthier is the property of Datamonitor Plc and its content may not be copied or emailed to multiple

sites or posted to a listserv without the copyright holder's express written permission. However, users may print,

download, or email articles for individual use.

gatorade&vitamin water

Documents