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Gatorade is a dominant product in the sports drink market, however Gatorade is only one

brand in the stables of the PepsiCo Company. Therefore, before talking about Gatorade it is

appropriate to talk about the company that owns the brand. This Company is currently PepsiCo,

whom bought out Quaker Oats in late 2000 and in the process acquired the Gatorade brand.

Corporate Context

In 1898, Caleb Bradham found PepsiCo’s beverage business. Mr. Bradham was a

druggist from North Carolina that created the original formula Pepsi-Cola. PepsiCo’s world

headquarters rest on a 144-acre complex located in Purchase, New York. PepsiCo Inc.’s

corporate mission is

“To be the world’s premier consumer products company focused on convenient foods

and beverage. [They] seek to produce healthy financial rewards to investors as [they]

provide opportunities for growth and enrichment to [their] employees, [their] business

partners and the communities in which [they] operate. And in everything [they] do,

[they] strive for honesty, fairness, and integrity” (http://www.pepsico.com).

PepsiCo Incorporated wants to put their mission “into action through programs and focus on

environmental stewardship, activities to benefit society, and a commitment to build shareholder

value by making PepsiCo a truly sustainable company” (http://www.pepsico.com). PepsiCo Inc.

competes within two key businesses: food and beverage. When it comes to being a food and

beverage corporation, PepsiCo is the world’s third largest. However, they are the second largest

in the carbonated soft drink industry.

PepsiCo is definitely a market-oriented corporation. The definition of a company in the

market-orientation stage is when it is able to “identify what customers want and tailor to all the
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activities of the firm to satisfy needs as efficiently as possible” (Etzel, Walker, Stanton, 2005).

PepsiCo Inc includes many popular brands that nearly all consumers are familiar with. PepsiCo

Inc includes

Lay’s potato chips, Doritos flavored tortilla chips, Tostitos tortilla chips, Cheetos cheese

flavored snacks, Fritos corn chips, Ruffles potato chips, Rold Gold pretzels, Sun Chips

multigrain snacks, Munchies snack mix, Lay’s Stax potato crisps, Cracker Jack candy

coated popcorn and Go Snacks. Frito-Lay also sells a variety of branded dips, Quaker

Fruit & Oatmeal bars, Quaker Quakes corn and rice snacks, Grandma’s cookies, nuts and

crackers . . . carbonated soft drinks, juices and juice drinks, ready-to-drink teas and coffee

drinks, isotonic sports drinks, bottled water and enhanced waters. PBNA has well known

brand such as Mountain Dew, Diet Pepsi, Gatorade, Tropicana Pure Premium, Aquafina

water, Sierra Mist, Mug, Tropicana juice drinks, Propel, SoBe, Slice, Dole, Tropicana

Twister and Tropicana Season’s Best” (http://www.pepsico.com).

With all of these products available, and widely known, PepsiCo Inc does not need to focus its

energy sales, but on marketing. They understand the market’s wants and needs and are able to

produce goods that appeal to consumers. The company has been around for so long and its

brands are so famous that consumer’s will buy PepsiCo’s product out of repetition and loyalty.

The brands included in PepsiCo Inc are household names that no family is without.

Marketing Concept

The Marketing Concept is another important notion that corporations must consider when

trying to sell their products. The Marketing Concept consists of several things. First and

foremost, a company must address its customers. It is extremely important to establish

relationships with consumers if you want to turn them into your product-buying market. The
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stronger a company is able to connect with consumers, the longer consumers will stay that

company’s loyal customers. I believe PepsiCo has done a wonderful job at establishing and

maintaining it relationships with consumers. Otherwise, they never would have survived and

thrived from 1898 up to now. Mass customization is another portion of the Marketing Concept.

PepsiCo definitely practices mass customization. Mass customization is when large quantities of

standardized products are produced, sold, and able to satisfy almost every potential customer.

PepsiCo has several products in the food and beverage industry. They have the capability of

selling at least one of their products to nearly all consumers. Quality is another important factor

in the Marketing Concept. Consumers are much more likely to remain loyal to a brand or

corporation if they have I high level of quality. In the case of PepsiCo, they have a high quality

of taste. Their products taste great, which implies great quality causing consumers to build

relationships and remain loyal customers. The last aspect of the Marketing Concept has to do

with organizational goals or objectives. The organization should aim to meet the needs of

society and the wants of their customers while achieving their own performance objectives along

the way. PepsiCo could not possibly have achieved this portion of the Marketing Concept

without working hard to prosper for more than one hundred years. PepsiCo Inc. meets all the

conditions of practicing the Marketing Concept effectively. Without this concept they would not

be as successful as they are today.

Marketing Environment

There are six different elements within the marketing macro-environment: competitive,

economic, technological, political/legal, cultural/social, and demographics (Etzel, 28). There are

three different types of competition and PepsiCo competes in each. There is brand competition,

substitute products, and limited consumer buying power. PepsiCo has been competing with
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Coca-Cola for years (brand competition); PepsiCo is in the food and beverage industry and must

compete with other corporation’s foods and beverages, like Saltine Crackers vs. Rold Gold

Pretzels (substitute products); and every company has to compete for a consumer’s finite ability

to buy products (limited buying power) (Etzel, 33). There are many different economic

conditions that affect a market, although the market has no control over these conditions. The

economy goes through prosperity, recession, depression, and recovery all the while affecting the

market. Not to mention inflation or the increase in interest rates. Inflation is a predictable

economic condition that always occurs. Prices of products will continues to inflate over time as

the value of the dollar becomes smaller and smaller. Just think of what the prices for PepsiCo’s

products were back in 1898. Obviously inflation has affected PepsiCo’s products or else

consumers would still be paying the 1898 price for a soft drink (Etzel, 32-33). There are three

different ways a technology can affect the market’s macro-environment. The first way is by an

organization starting an entirely new industry; the second, by radically changing or destroying an

existing industry; and lastly, by stimulating the current markets and industries not related to the

new technology. PepsiCo has established many new ways of changing their existing products

using new technology. They use this new technology in order to make their products healthier

and their packaging more environmentally safe (Etzel, 41). Political and legal forces are another

element that organizations have no control over. This would include monetary policies, social

legislation and regulations, government relationships with the industries, and legislation related

specifically to marketing. One famous example would be the FDA. When items are FDA

approved, that means that the Food and Drug Administration deems the products suitable for

consumption or use. Because PepsiCo create products for consumption they must receive

approval from the FDA as well (Etzel, 39). Then there are social and cultural forces affecting
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the macro-environment. There are a few different types of social and cultural forces. There are

concerns for the natural environment, the changing of gender roles, premiums on time, and

physical fitness/health. Each of these forces affects organizations within each industry.

Consumers are concerned with quality more than quantity, males are beginning to take on more

female roles and vice versa, consumers want more convenience for what little time they have

available, and they want to improve their lifestyles by making healthier choices. PepsiCo is in

the process of satisfying the last want listed for consumers. They are working hard to create a

healthier version of their existing products. They are hoping to target health-buffs around the

globe in order to keep up with their growing demands (Etzel, 34-39). The last element of the

macro-environment is demographics. Demographics relates to population, distribution, growth

rates, composition of households, etc… PepsiCo has incorporated demographics into the

corporation. There are specific products available in some locations but not others. PepsiCo has

a distribution center in Mexico and in London, both having their own products based on where

they are located (Etzel, 30-31). A few popular Mexican products created by PepsiCo are

Mirinda, Sabritas, and Gamesa; Walkers in the United Kingdom; Elma Chips in Brazil;

Matutano in Spain; and Simths in Australia (http://www.pepsico.com). PepsiCo Incorporated

has made themselves successful worldwide by following the Marketing Concept effectively and

by formulating several trends in each of the six elements within the marketing macro-

environment.

Market Definition
A market is the total buying potential of customers for that good or service. In the

instance of Gatorade the overall market is Non Alcoholic Beverages. This market is further

segmented into smaller markets including but not limited to: soft drinks, energy drinks, sports

drinks, hot drinks, ready to drink teas, coffees, juices, and dairy based drinks, to name a few.
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Thus, Gatorade is competing in the sports drink market but it can be an alternative for some of

the other markets, such as soft drinks. Market share is the percentage of market volume a

company has in the market. The sports drink market is further divided into bottled sports drinks

and powdered sports drinks. The bottled sports drink market grew by 20.8% in the year ending

June 18 (State of Market) (Fuhrman, 22). The bottled sports drink market is a $1.5 Billion dollar

industry. The entire Gatorade product line controls 85% of the bottled sports drink market.

PowerAde is the second largest brand in the market with a market share of 13.2%. The original

brand of Gatorade has a market share of 47.5% at a size of $681 million. Thus, Gatorade is the

obvious market leader (Fuhrman, 22).

Competitive Analysis
The competitive market structure for the Beverage Market is somewhere between an

oligopoly and monopolistic competition. There are three main competitors, The Coca-Cola

Company (TCCC) (Coke and Sprite), PepsiCo (Pepsi and Mountain Dew) and Cadbury

Schweppes (Dr Pepper and 7 up). These three firms are multinational. However, there are

smaller companies and brands in the US and in other parts of the world that do compete in this

market. In the US there is the Rudy Revolution Sports drink that recently got stared. There is

also the Firefighter EMS Hydro Energy drink which is a combination sports drink. There is also

Amino Vital Puredge, SunnyD Intense Sport and Blue Sport, all from different companies and all

aimed at the sports drink demographic (Fuhrman, 24). However, the main competitor for

Gatorade remains PowerAde which is sold by The Coca Cola Company. Gatorade maintains the

higher market share at 85% of the market while PowerAde has a market share of 13.2%. Thus,

the smaller brands only make up about 2% of the market and are not really serious threats to

Gatorade (Fuhrman, 23). The main weakness of PowerAde is TCCC lack of future insight.
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Gatorade created the sports drink market and in the process gathered a lot of loyal

followers. For a while Gatorade was the only option for athletes to maintain their level of

performance while playing. Because of this Gatorade gained many followers, essentially because

there were no other options. This allowed them to gain a large market share in the beginning.

The loyal followers are what allowed them to then maintain that large share. It is difficult for

PowerAde to capture those shares against Gatorades entrenched position in the market. People

have been dealing with Gatorade a lot longer than PowerAde, thus they are reluctant to change

products. Another thing that Gatorade has going for it, is the range of products they offer. There

are many different flavors and types of Gatorade for consumers to choose from. Therefore,

consumers have not reason to choose PowerAde because they have so much choice within the

Gatorade brand. Not only that but Gatorade’s advertising has been superior to PowerAde’s. They

got Michael Jordan to endorse the product for a while which helped the brand

(www.gatorade.com). Not only that but they also have exclusive sponsorship agreements with

almost every national sports league. One of the only sports leagues that did not have Gatorade as

a sponsor was the NHL which was sponsored by PowerAde, until recently when they changed to

Gatorade as a sponsor. Not only that but Gatorade also sponsors many community and athletic

events, which further build their brand recognition and consumer confidence in the brand.

PowerAde is trying to combat this with their new spokesperson Lebron James

(www.powerade.com). They are revamping their product and coming up with some new

advertising to try to go after the younger segment. PowerAde’s strength’s right now are their

renewed ad campaign trying to increase brand recognition and consumer trust. Their largest

weakness was that they waited to long to come out with the brand therefore they were not able to

capture as large of a market share. Another weakness of the PowerAde brand is that they did not
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advertise as much as they should have in the beginning, thus they remained largely unknown for

a while. Some would possible argue that one works better than the other or that one taste is

preferred to another but that is all based on personal preferences.

Targeting
Gatorade’s target markets are varied. The original target market that Gatorade was

created for was college athletes. This then spread to athletes in general because athletes needed

something to replace the fluids they were losing while competing hard in sports. After a while

Gatorades target market expanded to include any people who were active. Gatorade realized that

active people need the same sort of drink athletes did. Generally, they try to target people who

are engaged in any sort of athletic or exercise routines because these are the people who need to

stop dehydration and who need to keep their bodies going throughout their workout or sports

game. Gatorades target market is still people who in engage in anything from sports to exercising

at the gym. Thus, Gatorades slogan: Is it in you? Gatorade now comes in a variety of different

flavors as well as different calorie ranges. Therefore, they can appeal to people who want

something that tastes different or to those that need to stay hydrated but want a drink with few

calories. Also, with the decrease in sales of soft drinks, sports drinks offer an alternative. These

drinks have flavor but without all the perceived harmful effects of soft drinks. Thus, as high

schools stop selling soft drinks students are forced to other drinks, one of which is sports drinks.

A trend in young people has also found that they are not drinking soda as much and are focusing

more on healthier drinks. Gatorade appeal to health conscious consumers, as well as to the

athletes, and active people who need to keep hydrated.

Segmentation
There are three market targets for Gatorade each with slightly differing characteristics.

The first target is the aspiring young athletes. They are segmented by their age, ranging from
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around 8 to 14. They are also segmented by their activities. They are mostly pre-competitive

athletes or at least sports enthusiast.

The second target is the causally active person. These people are also normally of high

school age and older. Their lifestyle is also important because they are active in non-competitive

athletics of all types. Benefits received from the product are important as well. These people

want a good tasting and rehydrating thirst quencher. The third target is solely based by the

benefits desired. These people are the serious athletes who are looking for a real and

scientifically proven competitive edge and aren’t focused as much on image and taste.

Gatorades marketing segmentation scheme is designed to reach specific segments of their

market and multiple segments at the same time. Their single segmentation schemes involve

commercial advertisements which can be aimed at reaching a specific target audience. Take

their big head commercials for example. They are specifically targeting younger audiences by

creating a link and connection between the professional athlete and the activities of younger kids.

They also use multiple segments such as their colored sweat commercials. The extreme sweat

and exertion exhibited by the athletes in their commercials followed by a thirst quenching

moment creates a need in the mind of the causal athletically active person because when they are

at the gym for example and feeling the same tiredness, they want to feel the refreshing Gatorade

as well. Furthermore, seeing professional athletes performing at their peak followed by their

slogan, “Is it in you?” creates a need in the mind of the younger audience because it poses a

challenge for younger audiences to live up to.

Positioning
The positioning strategy by Gatorade focuses on aspects that make their product unique. Firstly,

they are the ultimate thirst quencher and they provide this benefit better than any other brand.

Secondly they distinguish themselves as the category founder. They started this beverage
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category in 1965 at the University of Florida in order to help their Gator football team play better

in the hot humid sun of Florida (History of Gatorade Retrieved October 3, 2006). It was

scientifically formulated by three scientists at the school which leads to the third distinction:

Gatorade is highly scientifically proven to give athletes better performance over just plan water

(History of Gatorade Retrieved October 3, 2006). The fourth category is the physical and mental

competitive edge that a player will receive from using Gatorade. They position their product as

the only drink that will help your performance. If you want to perform like the best, you must use

what the best drink (www.gatorade.com).

Gatorade holds a remarkable 85 percent market share which is followed by a 14 percent

share by PowerAde (Fuhrman, 23). The reason why Gatorade has such a large share is for a

number of reasons, but using a perceptual map that I created makes the answer easier to

visualize. Gatorade positions itself exactly in-between desired taste and benefits received. They

are a good tasting and beneficial product. PowerAde has attracted a 14 percent market share

because they have positioned their product as a better tasting thirst quencher with less emphasis

on its benefits. This is important to people who are fatigued but want something great tasting

and aren’t focused on its actual scientific results. There are a few smaller companies that occupy

a very small percentage of the market who position themselves as having a higher scientifically

proven advantage such as Accelerade (Fuhrman, 22). They boast that they’re product helps

performance and recovery better because it is the only sports drink that includes protein.

Customer Analysis

The majority of the customers that drink Gatorade are active. The age range seems infinite

since people are staying active for longer periods of time, and they know what the benefits of

Gatorade are. With the increasing lifespan among elders, Gatorade has profited from a "healthy-
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conscious" class of elders. Even with this wider age-range among consumer in general,

Gatorade still gets most of its consumer activity by from the 14-23 age range. Gatorade has been

used by and large by large competitive teams. One example is football; Gatorade is the common

drink that football players drink.

In terms of problem solving, a routinized response behavior is the obvious conclusion in

relation to Gatorade. Some characteristics of a rountinized response behavior is that the product

is inexpensive, has little risk of purchase, and is frequently purchased; this all leads to relatively

low involvement with regards to problem solving. Another factor that is in Gatorade’s favor is

that it has an impeccable reputation. In a pinch, the consumer is more likely to buy Gatorade

over a competitor most of the time based on reputation. Since Gatorade has a low price, the

consumer does not feel a large need for researching into a drink that cost $1.59.

Gatorade consumers are being affected by many influences. Socially, Gatorade has been

accepted among our whole culture as the best drink to satisfy your athletic thirst. Brand

Recognition is arguable the best reason as to why Gatorade is so popular. Historically, Gatorade

has associated itself with successful athletes such as Michael Jordan, Derek Jeter, and Peyton

Manning. People respect these athletes and will often times want to associate with them. This is

an example of a cultural influence. Gatorade is accepted in a variety of social classes. Gatorade

has consumers from the upper-lower class and all the way up to upper-middle class (with a few

exceptions in the upper class). The example of Gatorade’s promotions that was given early also

shows a key factor in many reference groups. Many young football players idolize someone like

Peyton Manning. The reference group here is football. When people can associate with a

professional football player who endorses Gatorade, there is a large influence on any of these

particular consumers to purchase Gatorade. Psychologically, Gatorade has done a great job with
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their commercials in their ability to associate Gatorade was the “#1 thirst quencher.” Situational

factors include having Gatorade at various sporting events by University and High Schools,

nationwide. The ever present Gatorade cooler is evident on sidelines nationwide and has been

popularizes by the “Gatorade Dunk” which is dumping a coach after an important factory with

the Gatorade cooler. This all plays a roll in consumer perception as well.

Market research

Gatorade has been the staple in the sport drink industry; this is easy to see with Gatorade

owning 85% of its market. The market will inevitably change overtime and one thing that will

enable Gatorade to keep its dominate stance is by conducting market research in order to stay on

top of consumer needs. The first thing that Gatorade should do, with regards to market research,

is start by gathering secondary-data. Secondary-data gathering is the least expensive form of

research for a company to do because the research is gathering data within the company. One

strategy that Gatorade could take advantage of is by looking at its sales relative to distribution.

From this they can find out where Gatorade sales are higher (for example: Gatorade sells higher

in supermarkets than liquor stores). A find such as the previous example could stimulate

Gatorade to change something in its distribution to liquor stores. The next type of research that

Gatorade can conduct is called primary-data gathering. Primary-data gathering is the process of

obtaining new data by way of the observation method, survey method, and experimental method.

The observational method could produce weak results for Gatorade because it has high rates of

impulse buys. However, they could observe customers shopping in a supermarket as they pass

by the sport drink section. This could possibly tell them about some brand recognition (whether

the customer looks over at the product and does not buy it). Surveys could be an affective way

to gather information; however, surveys are characteristic of high cost for this type of research.
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A mail survey or face-to-face interview could be conducted. Questions for a survey could range

from brand recognition to consumer behavior and buying decisions. The last type of primary-

data gathering is the experimental method. Since the large part of the target market for Gatorade

is composed of those with active lifestyles, Gatorade could run a survey as to who these

consumers idolize. Knowing who inspires them individually will give Gatorade a possible new

promotional idea. We see this particularly with the younger target market. These groups of

consumers are very influential. Having a popular, professional athlete represent their company

in advertisements could really be effective. Another type of experiment could be for Gatorade to

sponsor a marathon or another event. Instead of having just one design to their product, they

should have a couple variations to the physical appearance to their product. Ideally, Gatorade

would want their product to be free at the time. The reason behind this is Gatorade will find out

which label will be more aesthetically pleasing and attractive to those who are going to drink it.

Recording which label is preferred (regardless of price since they are free) most will tell them

which the consumer prefers. I feel that a marathon setting would be beneficial is because the

runners, or athletes, would be picking the appearance of the bottle that they like more. I am

assuming that the athletes are just grabbing bottles on impulse. Ideally, these athletes are not in

an incredible hurry. The test subjects need to have a small amount of time to consider all options

of the bottling appearance; therefore, they can assess which bottle design is more pleasing to

them. This would be a method of field experiments. This would be good data for Gatorade

because it is a more realistic setting. Gatorade will be able to find out which type of a

bottle/label design has a greater chance to influence an impulse buy once it hits stores.
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References

Eztel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing. New York: McGraw-Hill

Companies, Inc.

Fuhrman, E. (2006). 2006 State of the Industry. Beverage Industry, 97(7), 22-23. Retrieved

September 24, 2006, from Factiva Database.

History of Gatorade. (2006). Retrieved October 3, 2006, from

http://gatorade.com/history/proven_on_the_field