Last week we had the distinct pleasure of listening to Debra Crew '00, President of PepsiCo Americas Beverages, speak about the transformation of Gatorade through the years. The Kilts Center for Marketing has organized similar events like this before, top leadership from Anheuser Busch and Panera Bread, to name a few. Through these Speaker Series I would generalize that we learned one thing that applies to many facets of business: always keep your consumer in mind. Gatorade's story is a prime example.
This last lesson is especially true for PepsiCo and Gatorade. As Debra took us on a stroll through memory lane, to the year 2007, she analyzed three forces that would fundamentally shift the company's trajectory: the economy, changing consumer interests and demographics, and a rapidly changing retail environment.
So, how does a food and beverage giant like PepsiCo stay relevant and profitable? This brings us to a case study of Gatorade, which from its beginnings in 1965 to 2002 was growing organically namely due to its strengths in consumer engagement, scientific credibility, pro-athlete endorsement, and credible recommendations. Debra showed us some heart-wrenching ads that represented the consistency of Gatorade through the years, you must remember these: runners sweating green or purple Gatorade-looking sweat, ballers pushing themselves to an athletic high ground that I will never reach (I'm more of a casual catch-the-train sprinter). From 1965 to 2002, this all led to phenomenal growth because Gatorade was targeting their core consumer of athletes and teen athletes, who appreciated the benefits of Gatorade and were constantly reminded of this by the consistent messaging.
In 2001, PepsiCo acquired Gatorade and Coca-Cola created Powerade to directly compete with Gatorade, leading to price wars. As a result, PepsiCo stopped investing in R&D so that they could wage war with Coke and 1,400 other brands of noncarbonated beverages that all magically appeared at this time. As a result, Gatorade grew rapidly from 2003 to 2005 due to its discounted prices, but at the cost of brand strength and product differentiation. Their core athletic user was neglected as PepsiCo used Gatorade to compete as a noncarbonated beverage instead of its right-to-win as a sports performance product. The sizzle reel of this period now felt a little confused: vitamins were added for some reason, athletes endorsed Gatorade in hilarious but distracting ways, a low calorie version was introduced, and a pre-scandal Tiger Woods marketed Gatorade Tiger. What happened there? Debra explained that they were not innovating against athlete needs and were instead targeting the casual user, who were fickle and eventually left Gatorade for cheaper brands. This led to stalled growth and even decline in 2006 to 2009.
In 2010, PepsiCo realized the wrongdoings of its past and went back to its historical strategy of defining the sports drink category instead of playing defense. They invested once again in sports performance innovation, new products, and even expanding globally to get back at their core athletic user. Gatorade is still recovering from that period but now growing steadily and not from discounts.
Also in attendance was Morgan Flatley, VP for Brand Marketing at Gatorade and Rod Thorn, Senior Director of Communications at PepsiCo. After the presentation I asked Morgan Flatley for more details (wow look at me, talking to VPs. Thanks LEAD for making me so brave!). She shared with me that as innovative as they were, launching Gatorade Prime, Perform and Recover all at once, was somewhat confusing and challenging for consumers. You can't just return from the discount world and introduce three new lines of products when you haven't built back the scientific credibility, or at least in consumers' minds.
My fellow classmates, always remember that whatever you might be selling in the future, whether it be stocks, companies, professional services, tech products or consumer packaged goods, always think about your consumer!