Gatorade:Marketing Channel Analysis

Gatorade is a sports beverage designed to replace electrolytes and carbohydrates lost while exercising. Gatorade is owned and produced by PepsiCo and is positioned to be sold at supermarkets and convenience stores. The thirst quenching drink is sold as a high performance sports beverage in 80 countries world wide, with over 50 flavors. Gatorade can be found anywhere that Pepsi products are sold. PepsiCo manufactures a flavor concentrate that it ships to independent bottling facilities. The bottling facilities then mix the final product, bottle it in packaging supplied by an independent supplier, and distribute it to the various retailers. Gatorade is priced slightly lower than its main competition, POWERade. PepsiCo keeps very close control over the pricing of its products, ensuring that every channel member makes a profit. Product promotion for Gatorade is focused in three areas, media advertising, event sponsorship, and contests. The main competitor for Gatorade is the Coca-Cola product, POWERade. Currently Gatorade seems to have the upper hand because it is experiencing sales growth while POWERade is not expecting any growth in the next year. Gatorade keeps its competitive edge through product innovation. All of Gatorade's product research takes place at a special facility called the Gatorade Sports Science Institute, use of this resource will help to maintain Gatorade's competitive edge in the years to come.

1. Introduction

Gatorade was the first widely used sports drink in the United States. It was developed in 1965 for the Florida Gators football team by a group of four university physicians (The History of Gatorade, 2007). The Gatorade formula was proven to be effective when the Florida Gators started winning against heavily favored teams by outlasting their opponents in the heat. From there orders for Gatorade started coming in from other college football teams and now Gatorade is one of the most widely used sports drinks in the world.

Gatorade is owned by PepsiCo and is produced in the same facility as the many other beverages sold by Pepsi. A huge part of the success of Gatorade in today's market is promotion. Gatorade uses endorsements by stars in many sports from soccer to race car driving to promote their product. Another huge factor in Gatorade's success is PepsiCo's channel control and support.

2. Image

Positioning a product is a manufactures attempt to have consumers perceive their product in a particular way, relative to competitive products (Rosenbloom, B, 2004)). Essentially, their product is 'positioned' as an alternative to the product the consumer currently uses. The most important factors in positioning products are where and how they are going to be sold. Gatorade products are positioned to be sold at supermarkets and convenience stores and are either stocked on the shelf with a large amount of variation of Gatorade flavors, or in a trendy eye-catching point-of-purchase display. PepsiCo would like Gatorade to have a perceived image as a healthy alternative to carbonated soft drinks and as well as a thirst quenching drink to accompany any physical endurance activity.

Gatorade's value proposition is a high performance sports drink that will hydrate your body and rejuvenate your electrolytes (Packaged Design, 2007). PepsiCo does not provide any warranty or guarantees on their Gatorade products, but offers a scientific validated blend of carbohydrates (6% carbohydrate blend, 14 grams per 8 0z) and key electrolytes (including the proper amount of sodium at 110 mg at 80z) to replace fluids and provide energy to working muscles (The Gatorade Company Fact Sheet). Looking further down the distribution channel however, we find that supermarkets and convenience stores that carry Gatorade will fully refund a consumer of their Gatorade purchase if something is wrong with the bottle or the drink itself, as long as it is accompanied with a receipt. If a purchased Gatorade is returned and a refund has been issued to a consumer, the retailer will then send the product back to PepsiCo in order for them to receive a refund as well.

In order to have an image that is appropriate with all cultures and in all countries around the world, PepsiCo benefits from having a diverse workforce and diverse supplier force which allows them to meet a variety of consumer needs. Gatorade is currently available in 80 different countries and has more than 50 flavors available (The Gatorade Company Fact Sheet).

3. Product

Gatorade is a thirst quenching beverage that is designed for athletes. There are 30 different flavours of Gatorade available in the United States and over 50 available internationally (The Gatorade Company Fact Sheet). Although Gatorade has many different flavours the basic formula is the same in each of them. Gatorade is made up of three main ingredients: electrolytes, carbohydrates, and flavour (Gatorade Thirst Quencher, 2007). The fluid osmolality has been adjusted for optimal absorption into the bloodstream, this helps with quenching thirst faster.

4. Channel Control

In a growing global market it becomes harder for a company to gain a sustainable competitive advantage. Parity observed in the sport drink industry relative to product, price, and promotion increase the importance of distribution for these firms (Carpenter et al, 2007). PepsiCo has developed and monitored various distribution channels in order to serve customer needs. These channels include direct store delivery (DSD), warehouse distribution, vending, and food service systems (Pepsico, 2006).

PepsiCo manufactures flavor concentrates at their own production plants to ensure quality control of their product (Pepsico, 2006). This syrup is then delivered to independent bottlers. Packaging and other materials including labels, caps, and carbon dioxide are outsourced to other companies and are delivered to the bottlers alongside the syrup. Samples of all of these materials are shipped to the manufacturing plant to ensure sanitation and proper packing of materials (Pepsico, 2006). Once bottled the beverages are distributed through DSD systems, warehousing, vending systems, and foodservice operations.

The DSD system employed by Pepsico and other soft drink manufacturers is a distribution method that bypasses wholesale operations. The beverages are delivered from independent bottlers