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PepsiCo Shows How to Ruin a No. 1 Brand: Gatorade

Fixing Gatorade should be PepsiCo (PEP) CEO Indra Nooyi's top priority. The sports drink leads its category but is dragging down sales at Pepsi's beverage unit. Revenues there sank to $10.1 billion last year, Pepsi said in its annual report, driven by "double-digit declines" in Gatorade.

If you wanted a case study on how to ruin a No. 1 brand, then Gatorade has all the symptoms:

  1. The company has taken a perfectly good, massive brand, "Gatorade," and tried to change it into something else, "G."
  2. While creating spinoff brands is sometimes a smart thing to do in terms of diversification, creating too many results in "worsification," where consumers get confused by the array of choices and simply give up trying to follow the brand.
  3. Gatorade hooked up with, and then dropped, Tiger Woods. 'Nuff said.
  4. Management has been distracted by a lengthy and pointless (from a consumer point of view) legal fight with Coca-Cola (KO)'s Powerade brands.
  5. In the last two years, both the lead client executive and the lead agency on the brand have changed -- meaning that no one at the top has the long-term, institutional knowledge that is often key to winning obscure but important battles in such areas as coupons, distribution to small retailers, and point-of-purchase efforts.
There are now 12 different G brands, including baffling distinctions like G Prime 01, G Recover 03, G Powder, G2 Powder, and an "Elite" series of drinks for before, during and after your workout. (Because taking three different bottles to the gym is what consumers really want to do, right?) Here's Gatorade CMO Sarah Robb O'Hagan's recent investor presentation on the issue.

There's nothing specifically wrong with Gatorade's advertising, except that it's same-y. How many iterations of sweaty athletes quenching themselves can there be?

The brand recalled Michael Jordan for endorsement duties in 2009, a questionable move if you want to snag young consumers who never saw him play. This year's ads feature current athletes such as Peyton Manning and Dwight Howard, but they're accompanied by a quote from Muhammad Ali. I love Ali as much as the next man, but you have to be over 40 years old to remember Ali's last fight (loss by decision after 10 rounds to Trevor Berbick in 1981).

Nooyi has not had a great track record of paying attention to the advertising side of her business, even though sugar-water products are entirely dependent on the strength of their brands. She cited to investors the importance of "sweating the details" in brand relaunches, but also confessed that she was blindsided by the furor that surrounded the relaunches of Tropicana and Pepsi:

... some of the stuff I read about I didn't even know about. But, you know what, it happened. When you have high-profile agencies these things happen.
"These things happen" is not a plan for managing your marketing.


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