PepsiCo grows Gatorade with G Zero: ‘The lapsed Gatorade consumer doesn’t want the calories, but they want the Gatorade brand’

Launched in April, the beverage addresses consumer concerns about sugar and has the chance to re-introduce consumers to the brand, says PepsiCo.

“Gatorade Zero really meets a very unmet need for the lapsed Gatorade user: they just don't want the calories, but they want the Gatorade brand,” said Hugh Johnston, vice chairman, executive vice president and CFO, speaking during PepsiCo’s Q2 2018 earnings call this month.

Trademark Gatorade: ‘very, very strong’

Indra Nooyi, chairman of the board and CEO, PepsiCo, said: “The underlying Gatorade trademark is very, very strong. And Gatorade always attracts new players into the marketplace and they come in with either lower prices or they try to come in and build distribution and they might take a few share points in any quarter or two.

"But then, over time, if you look at it over a period of five or seven years, the Gatorade franchise has been extremely resilient and has basically held onto its leadership position.

Gatorade Zero (or G Zero) joins other innovations in the Gatorade brand, with a drink that ‘has no sugar while maintaining the same proven hydration and fueling benefits of Gatorade Thirst Quencher’.

And Nooyi says it is just the latest in a line of innovation for the brand.

“We've innovated to build shoulders with the Gatorade recovery drinks, the Gatorade Chews before you start exercising and then we have segmented along flavors and then across different sports.

"Many of our consumers wanted a Gatorade Zero for the light exerciser who didn't want the carbohydrates that real athletes needed. And so we launched Gatorade Zero.”

Gatorade already has a sugar reduced version, G2, alongside other variations of the drink.

 “And we keep advertising along the entire trademark. And we have never wavered from advertising to athletes and to active exercisers and that's going to be a continuous focus of Gatorade. It's a very strong, resilient franchise and we feel good about where it is and where it's headed.”

On the mend: North American Beverages

PepsiCo’s North American Beverages segment – its largest division – saw volumes slip last year; but Nooyi has pledged to tackle the problems and now says the unit is making ‘steady improvement’.

Indra Nooyi: “What we told you in [in April] is that you should expect to see sequential improvement in North American Beverage performance. That's exactly what we are focused on and that's what we're delivering. Every part of the business in North American Beverages is showing sequential improvement.

“At the end of the day, our North American Beverage business, which participates in a highly competitive category, needs to be managed very, very carefully especially at a time when there are changes in the marketplace from lots of competitive activity.”

One key focus is the core Pepsi brand. The ‘Pepsi Generations’ campaign is helping boost trademark Pepsi this year, said Nooyi, with its focus on music and entertainment starting with a Super Bowl commercial.

“Now when it comes to our North American Beverage business, we are investing in carbonated soft drinks, especially trademark Pepsi,” said Nooyi.

“And we're investing more in trademark Pepsi because we saw a stepped up investments in media from our competition, so we're doing that. When it comes to the Zero Sugar portfolio, both between Diet Pepsi and Pepsi Zero Sugar, Pepsi Zero Sugar is growing extremely well. When it comes to Diet Pepsi, Diet Pepsi is also back to good performance.”

Other recent innovations helping drive the North American Beverages portfolio forward are calorie-free sparkling water bubly and the return of tropical lime-flavored Mountain Dew Baja Blast.

PepsiCo has also recently launched a new entrepreneurial group in the US called The Hive, which will focus on growing PepsiCo’s most promising new beverages.

“We remain laser focused on higher-growth categories with appropriate brand investment and robust innovation,” said Nooyi.