Top executives at PepsiCo. indicated Wednesday that consumer cost-cutting may have contributed to a recent volume drop in Gatorade sales. But they expressed confidence that the recent "brand refresh" efforts will propel growth in 2010.
With its depiction as simply "G," PepsiCo. has narrowed the target for the brand to athletes and workout devotees. Yet many of the group who are looking to trim their belt sizes have also been belt-tightening, opting instead for tap water to cool down, CFO Richard Goodman said.
"Gatorade's recent volume challenge is primarily a result of the economic downturn," he said.
Nonetheless, Gatorade volume showed "modest," although undisclosed, improvement in the third quarter, compared to results for the first six months of the year. (PepsiCo. does not break out Gatorade results.)
And Goodman, speaking on an investor call to discuss third-quarter results, said the G2 lower-calorie Gatorade "continues to grow at high levels." He said the launch of the "That's G" campaign has driven increases in brand equity with the core athlete audience.
But consumers are looking for cheaper alternatives -- with a large percentage turning to free tap water or bottled water, or less expensive juice drinks, Goodman said. He added that a very small amount are believed to have shifted to "so-called competitive offerings."
PepsiCo. CEO Indra Nooyi said that "unfortunately ... there is a free alternative called tap water -- one has to be very cognizant of that as we think about the outlook for a beverage business, not just PepsiCo's beverage business."
"Going into 2010, our plan is to keep Gatorade solidly in the athletic space and to deliver targeted innovation," Goodman said. Gatorade has been using a stream of leading athletes in its "That's G" effort, from sprinter Usain Bolt to tennis star Serena Williams.
Sarah Robb O'Hagan, Gatorade's CMO, said recently that while Gatorade has run Super Bowl spots the past two years, she does not view a presence in the game as critical to growth -- and may go without a spot in February. Still, PepsiCo. buys a block in the championship and Gatorade could still get one.
But she said Gatorade's presence on the NFL sidelines with its iconic orange coolers and green water bottles in players' hands is more crucial.