Gatorade enters new categories — even unflavored water — as competition to hydrate consumers ramps up

A smattering of products housed under the Gatorade brandSource: Gatorade

As Gatorade approaches its 60th birthday, the brand is staying spry, branching out into new categories from unflavored water to energy drink mixes.

Since its founding in 1965, Gatorade has been the dominant sports drink. It accounted for 63.5% of the U.S. sports drink market in 2023, according to Euromonitor International data.

Owner PepsiCo's archrival Coca-Cola takes the second and third slots with Powerade, a perennial No. 2 choice to Gatorade, and Bodyarmor, a newer addition to its portfolio. But combined, Coke's two brands account for only about a quarter of the U.S. sports drink market. Last year, Pepsi reorganized its portfolio to house Propel, Muscle Milk and other fitness-related brands under the Gatorade name.

But Gatorade's dominance doesn't mean that it can rest on its laurels. As more competitors enter the market, the brand has tried to reinvent itself.

“There's probably been more change in the industry in the last five years than there was 20 years before,” said Rabobank beverage analyst Jim Watson.

Pepsi's rivals are looking to steal its market share as they branch into new products. Unilever bought drink mix company Liquid I.V. in 2020 for an undisclosed amount; Gatorade's individually packaged hydration powders resemble the upstart's. Nestle Health Science bought hydration tablet maker Nuun in 2021, the same year that Coke bought Bodyarmor.

With Coke's acquisition of Bodyarmor, it bought a brand that could price its sports drinks higher, thanks to its marketing as a healthier option. Coke's other sports drink, Powerade, is typically cheaper than Gatorade, appealing to consumers looking for a deal.

“That means they have a different and better story to tell the retailers to try to get more shelf space and to take some of that from Gatorade,” Watson said. “That's where Gatorade has to come up with all kinds of new innovations so they have a new story to tell the retailers so they keep all of their shelf space.”

Even smaller brands without the firepower of Coke or Unilever have been putting pressure on Gatorade.  PepsiCo CEO Ramon Laguarta called out influencer Logan Paul's Prime Energy as one brand stealing share from Gatorade.

“It is true that the emergence of Prime in the category took some share from Gatorade, [though] less than other brands in the category or less proportionally to the size of the brand,” he said on the company's third-quarter conference call in October, adding that Prime's market share weakened as summer turned to autumn.

Gatorade's market share should improve this year but will likely still fall from the prior year, according to a Citi Research note from February.

Gatorade President Mike Del Pozzo told CNBC that the competition is good for the category overall – and shows his brand's own strength.

“There's plenty of loud voices right now, trying to make a name for themselves,” said Del Pozzo. “This is a competitive business, and because we're in the business of sports, we love competition. Clearly, we're winning, and I think many of them are spending more time on talking about us and less about their own brand, the consumer approach.”

For its part, Gatorade has been thinking about its own pitch to consumers. Del Pozzo said that the line between hydration and wellness has blurred, and more consumers are focused on hydrating throughout their day, not just during exercise.

They now like low- or no-sugar drinks, “functional” beverages that tout health benefits like improving immunity and alkaline water, he said.

Gatorade has responded by branching out with new products: Gatorade Zero Sugar, tablets with vitamin C and zinc for immune support, a Pedialyte lookalike called Gatorlyte, a caffeinated spinoff called Fast Twitch and its first unflavored alkaline water, which launched nationwide in February.

“It's off to a great start so far, but we were super patient to get it right,” Del Pozzo said about Gatorade Water, which has about a fifth of the electrolytes found in classic Gatorade.

Year to date, Gatorade is gaining share in every hydration category it has products, according to market research firm Circana. And Propel's annual sales are projected to cross $1 billion for the first time this year, Del Pozzo said.

Gatorade's long history has given the brand the ability to step into new categories and blur the lines, according to Rabobank's Watson.

“This is one of the brands that has the best marketing campaigns, such great brand equity, consumer awareness, consumer love,” he said.

For now, classic Gatorade remains the brand's top seller.