PepsiCo on Gatorade: Innovation, brand legitimacy, and keeping ahead of the competition

By Rachel Arthur

- Last updated on GMT

Innovations help Gatorade reach athletes. Pic: iStock/Catherine Lane
Innovations help Gatorade reach athletes. Pic: iStock/Catherine Lane

Related tags Gatorade Indra nooyi

Gatorade’s efforts in innovation, and its popularity with athletes, will continue to set the brand apart from emerging competitors who try and attack the brand on price, says PepsiCo CEO Indra Nooyi. 

Speaking during PepsiCo’s FY2015 earnings call, Nooyi championed ‘very good’ innovation from the global sports drink and sports performance brand.  

The development of a smart cap, for example, gives athletes direct hydration feedback on their personal smart cap vessels.

It is innovation that design partner Smart Design says moves beyond typical introductions of new bottle shapes and flavors, instead providing a ‘long term innovation platform… to deliver on an athlete’s nutritional needs in a highly personalized, data-centric way.’

Asked by analysts if the success of Gatorade was simply down to the fitness, health and wellness trend in the US, Nooyi said innovation continues to boost the brand’s position and set it apart from its competitors.

Fierce and Frost alone [PepsiCo’s ‘bold and intense’ and ‘light and crisp’ lines], I think, contributed significantly to sales growth.

"And all the new stuff that Gatorade is doing with the smart bottle, with the pods that are tailored for the athlete, the Gatorade Prime and Recover, all of that is giving more legitimacy to the brand. And I think that it's driving more of the Gatorade sales.”

'Innovation machine'

Nooyi highlighted the role of innovation throughout the company during the FY2015 earning’s call.

If there's one place where the consumer likes the news and is willing to pay up for, it's for innovation. And we've been really ramping up our innovation machine to be able to get price realization through innovation.”

Going into 2016, Nooyi promises to ‘keep the pedal to the metal’ on innovation (PepsiCo has already announced a 2016 launch of organic Gatorade​).

Gatorade and athletes

Nooyi believes Gatorade’s popularity with athletes will keep it ahead of any lower-priced competitors hoping to take a chunk of the large and growing sports drink market.

The effect of hot weather, too, should not be underestimated, she said, saying this helped the brand’s performance in the US in 2015.

“On a competitive basis, relatively speaking, the fact that so many athletes are choosing Gatorade now is allowing Gatorade to far outdistance any emerging competitors in the space who tried to attack Gatorade just on price.

"And Gatorade has managed to hold its own and, in fact, extend its advantage.

“It was a hot year – and it was hotter for a longer period of time - and Gatorade does well when the temperature is above normal, especially for as long as it was during the year. So we shouldn't underestimate the impact of that.”

PepsiCo released its fourth quarter and full year 2015 results last week, with organic revenue growing 5% in the year. Nooyi said the company met or exceeded all financial goals for 2015.   

She added that the company expects solid financial performance in 2016, although warns of continued macroeconomic challenges in both developing and emerging markets.

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