The Gatorade Company

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The Gatorade Company

555 West Monroe Street
Chicago, Illinois 60661-3605
U.S.A.
Telephone: (312) 222-7111
Toll Free: (800) 88-GATOR
Web site: http://www.gatorade.com

Wholly Owned Subsidiary of PepsiCo, Inc.
Incorporated: 1967 as Gatorade Inc.
Employees: 1,200
Sales: $1.22 billion (2004 est.)
NAIC: 312111 Beverages

The Gatorade Company makes the world's leading sports drink, Gatorade Thirst Quencher. Created in 1965 by University of Florida researchers interested in improving the school football team's performance in sweltering heat, the drink virtually invented the sports drink industry and continued to dominate the market for decades. The beverage's carbs and electrolytes are only part of its formula for success. Intensive marketing is another ingredient. Sponsorships across a wide range of top-tier sporting competitions, leagues, teams, and individual athletes keep the brand in the public eye. Gatorade has faced down dozens of competitors over the years and typically holds an 80 percent share of the U.S. sports drink market. Gatorade also makes Propel fitness water.

FLORIDA ORIGINS

Gatorade was developed in 1965 at the University of Florida; its name is a reference to the Gators sports teams there. In that summer, more than two dozen freshman players were hospitalized due to the effects of practicing in the sweltering heat. Dr. Robert Cade, a kidney specialist at the University of Florida, led the group of four doctors credited with inventing Gatorade. Others included Dana Shires, Cuban émigré Alex De-Quesada, and Jim Free. Drawing on research into rehydration, the team developed an electrolyte-carbohydrate solution, a mix of salts and sugars designed to provide the athletes with energy and necessary chemicals for physical and mental performance. Plain water could not move through the body quickly enough, nor restore its chemistry.

By replacing minerals lost in sweat, the players were able to outperform their exhausted rivals in the second half of games. The Gators won their first Orange Bowl in 1969. (In the same year the second Gatorade flavor, appropriately enough, orange, was introduced.) Gatorade was soon adopted by other football and basketball teams.

Gatorade was not the only sports drink brewing in collegiate football, notes Darren Rovell's First in Thirst: How Gatorade Turned the Science of Sweat into a Cultural Phenomenon. A New Jersey doctor named Gerald Balakian was plying the Rutgers team with his own "Sportade"; it failed, however, to attain the same level of success and legend.

The doctors who invented the brew realized its sales potential but tired of their initial attempts to commercialize it. Canned food packer Stokely-Van Camp acquired U.S. rights to the drink in 1967, whereupon Gatorade Inc. was incorporated in Florida. Its start-up capital was reported as just $500. The doctors agreed to be compensated with royalties through the Gatorade Trust, which included a few other supporters, such as internist Eugene Tubbs and nephrologist Kent Bradley, who had transferred to the University of Indiana and was responsible for making the initial connection with Stokely-Van Camp.

EARLY MARKETING COUPS BEGINNING IN 1967

Stokely was quick to sign up Gatorade as the official sports drink of the National Football League in 1967. Distinctive orange and white coolers and green waxed paper cups, all branded with the Gatorade logo, took up a highly visible presence on the sidelines.

The formula was tweaked by one of Stokely's chemists to make the briny brew more palatable. After one of its ingredients, the artificial sweetener cyclamate, was banned in 1969 because of a link to cancer, Stokely quietly had the drink reformulated to replace it with more fructose, a natural sugar found in fruit. A number of other flavors were developed but set aside in favor of the original lemon-lime and the second flavor, orange. The company also toyed with dozens of other names before opting to preserve the brand recognition Gatorade had already attained.

Gatorade was marketed originally to sports teams and sold in 64-ounce metal cans. When it turned out that the salts in the drink made these cans leak, it was put into the 32-ounce glass bottles that would be the standard for 25 years. But, writes Rovell, the teams soon convinced Stokely to produce a powdered concentrate so that they could mix it themselves in safer, nonglass containers on the field.

Stoked by profiles in leading regional and national sports publications, Stokely's own ads trumpeted the drink as "Gatorade, The Big Thirst Quencher for Active People!" Even Elvis Presley became a fan during a marathon series of performances in Las Vegas, notes Rovell.

Royal Crown Cola licensed a carbonated version of Gatorade but pulled the plug in the early 1970s. Gatorade's phenomenal early success had attracted the interest of another soda pop company, Coca-Cola, which announced its short-lived Olympade sports drink in 1970.

The federal government questioned whether the doctors were the proper owners of Gatorade's rights since they had been working on government grants at the time it was developed. The inventors considered it a side project. The University of Florida, too, was looking for a share of the fortune. Legal challenges were resolved in 1972 when a settlement gave the University of Florida a 20 percent share of Gatorade royalties; this would amount to nearly $100 million by the end of 2004, notes Rovell. To satisfy the federal government, the doctors were required to publish their Gatorade-related research.

ACQUIRED BY QUAKER OATS IN 1983

In 1983, Quaker Oats Company bought Stokely-Van Camp for $220 million. It promptly sold off most of Stokely's assets, keeping the famous pork and beans business, as well as Gatorade, which was the main reason for the deal.

The New York Giants are credited with starting the ritual of the "Gatorade dunk"—a postgame dowsing of the winning coach with the team's bucket of Gatorade—in 1985. Replicated at countless other sporting events, including the Super Bowl, it made for great TV, and was an unplanned marketing bonanza.

Gatorade expanded its international distribution under Quaker ownership. It became available in Canada beginning in 1984, followed by Asia in 1987, and Europe and South America in 1988. Australia followed five years later. By 1998, Gatorade was sold in 47 countries and was the market leader throughout North America and much of Latin America. The overseas products included dozens of flavors not available in the United States.

COMPANY PERSPECTIVES

Gatorade was born on the playing field in the 1960s by researchers at the University of Florida to help the Gators football team prevent dehydration when they played in the swamp-like heat. Since the Gators' 1967 Orange Bowl victory, Gatorade has grown to become an essential part of the equipment of sports, and can be found on the sidelines, in the locker rooms and on almost every field of play. Backed by more than 40 years of scientific research, Gatorade has proven rehydration and performance benefits over water. No other beverage or sports drink company has established such a strong expertise in rehydration and sports nutrition.

Gatorade virtually owned the $200 million sports drink market when Quaker acquired it, though this category still accounted for just one-tenth of 1 percent of total U.S. beverage sales. Net sales had been $90 million in 1982, but Quaker would nearly double this in a couple of years.

The new owners revisited the laboratory to study their new product. In 1988, the Gatorade Sports Science Institute (GSSI) opened in Barrington, Illinois, site of Quaker's other food labs. Gatorade claimed to be the most researched sports drink on the market.

Quaker brought the brand's marketing to a higher level. The company successfully tapped into a new interest in exercise in the United States by identifying and targeting different categories of active people, such as fitness buffs, competitive team players, and people working physically demanding jobs.

Net sales were about $170 million a year in the mid-1980s, notes Rovell. A hugely successful television campaign with the tagline, "Gatorade is Thirst Aid for that deep down body thirst," helped to drive sales to nearly $900 million by the end of the decade. Another firm, Sands, Taylor & Woods Co. (best known for King Arthur Flour), had already trademarked the "Thirst Aid" name for flavoring syrups and successfully sued Quaker for infringement, bringing the campaign to a court-ordered close in 1990.

One of Gatorade's inventors, Dr. Robert Cade, created a new sports drink containing glycerol and pyruvate in the early 1990s. Quaker bought the patent and shelved it, according to First in Thirst.

LIKING MIKE FROM 1990 TO 2000

A new approach followed the Thirst Aid campaign. In 1990, Quaker signed a ten-year, $13.5 million contract to make Michael Jordan its exclusive celebrity spokesperson. A catchy jingle urged millions of TV viewers to "Be Like Mike." Gatorade had previously oriented itself toward sponsorship of teams and leagues rather than individual sports stars, recalled a Quaker marketer in First in Thirst. Signing up Jordan, however, helped to deny Coca-Cola his services for its new sports drink, POWERade.

Gatorade switched to plastic for its larger jugs and introduced a 16-ounce sports bottle in the first half of the decade. These moves helped get the drink into new environments. At the same time, the U.S. sports drink market continued to grow, reaching $1 billion by 1994. In 1997, the hugely successful Gatorade Frost line was launched to reach beyond the sports drinks into the wider "active thirst" market. It had the same basic formulation as the original but lighter flavors.

KEY DATES

1965:: University of Florida scientists formulate Gatorade.
1967:: Stokely-Van Camp acquires the U.S. rights to Gatorade, which becomes the official sports drink of the NFL.
1969:: Gatorade is reformulated with fructose after cyclamate is banned because of a cancer link; orange flavor is introduced.
1972:: A lawsuit settlement gives University of Florida a 20 percent share of Gatorade royalties.
1983:: Quaker buys Gatorade owner Stokely-Van Camp; fruit punch flavor is introduced.
1984:: Gatorade enters the Canadian market; a partnership is formed with the NBA.
1987:: Gatorade expands to Asia.
1988:: Citrus cooler flavor is introduced; the European and South American markets are entered; Gatorade Sports Science Institute is opened.
1989:: The first aseptic (box) and plastic packaging introduced.
1990:: Gatorade signs a ten-year endorsement deal with Michael Jordan.
1993:: Gatorade is introduced in Australia.
1997:: Gatorade Frost is launched.
1999:: The first of Fierce flavors debuts.
2000:: Propel fitness water is launched; Pepsi acquires Gatorade parent Quaker Oats.
2001:: Sports nutrition products such as energy bars and energy drinks debut.
2002:: Propel fitness water and Gatorade Ice flavors are launched.
2005:: Record heat and military use lead to a reported Gatorade shortage in the United States.

There were some notable failures for the brand. The saccharine-sweetened Gatorade Light, introduced in 1990, failed to catch on with its target audience of women. Midnight Thunder, a black-colored, blackberry-flavored variant, also proved unappealing. The Gatorgum chewing gum of the 1980s was another flop. More short-lived side ventures that threatened to dilute the brand included the fruit juice-based Freestyle and the caffeinated Sunbolt energy drink. Gatorade also failed to build a significant presence in the energy bar business despite launches in 1994 and 2001.

Jordan's contract was extended through 2007. In the late 1990s, Gatorade increased its endorsement roster to include several star athletes. Introduced around 1999, the very successful "Is It In You" campaign featured weekend recreational athletes. The ads visualized the sweating process with computer graphics.

Coca-Cola and Pepsi sought to dominate the growing sports drink market with their new products (Pepsi's carbonated product being called Mountain Dew Sport, later All Sport). Gatorade, notes Rovell, helped stave off the attacks by a proliferation of flavors that the soda giants' distribution networks were not equipped to match. It also gave increased attention to growing convenience stores as a marketing channel. Another area of interest was the growing Hispanic market, for whom Gatorade rolled out a line of "Xtremo" tropical flavors in 2001.

Sports beverages had become a $2 billion market in the United States by 2000. Gatorade was so dominant, however, that it expanded its view of the competition to include bottled water and other beverages in addition to the sports drink category. Its own Propel fitness water was introduced regionally in 2000 and nationally two years later. (The Gatorade logo was displayed on the sub-brand's packaging.) Propel had very few calories and, unlike Gatorade, included vitamin additives, which Gatorade had always maintained did not enhance performance during athletic activity.

A PEPSI BRAND IN 2000

PepsiCo, Inc., acquired Gatorade's owner, Quaker Oats, in December 2000 in a stock deal worth $13 billion. Pepsi had also acquired the SoBe brand and to meet antitrust requirements subsequently sold its existing All Sport business to The Monarch Beverage Company, the Atlanta-based maker of Dad's Root Beer.

Endurance Formula, with more sodium and potassium, addressed the issues of cramping on extra hot days and tied in to the popularity of endurance sports. According to First in Thirst, the elixir was developed after some cramp-ridden football players were spotted quaffing Pedialyte on extra-hot days. Over the years, doctors had come to dispense Gatorade to dehydrated patients. Although Abbott Laboratories Ltd. embraced the medical setting with Pedialyte and Rehydralyte, Gatorade did not play up the connection due to regulatory and image considerations (it was one thing to be associated with the sweat of athletic exertion and quite another to be associated with illness and diarrhea).

Record heat and sales to the military overseas led to a shortage of Gatorade in 2005. The company was soon working on its ninth facility, in Pryor, Oklahoma. Gatorade also had plants in Indianapolis, Indiana; Atlanta, Georgia; Dallas, Texas; Mountain Top, Pennsylvania; Kissimmee, Florida; Oakland, California; Tolleson, Arizona; and Wytheville, Virginia. Gatorade remained the leading player in the estimated $3 billion market for sports beverages in the United States.