Sporting challenge

The competition for hydration supremacy is heating up

Sports drinks have been one of the great cool beverage success stories of recent years but, as the number of 'hydrating' options continues to grow, the category faces a number of important challenges.

As usual, due to space restrictions, the battle for beverage supremacy is being fought out with particular vigour in the convenience and impulse channel. Emerging categories such as energy, ice tea and water are affecting the growth of sports drinks … but it is certainly not all doom and gloom, and the outlook for drinks like Powerade, Gatorade and Staminade remains most definitely healthy.

The good news is that the sports drink category still accounts for 8.6% of NARTD Value Sales in P&C. The latest Nielsen data for sports drinks also shows that while 50% of volume sales is through grocery, 38% is through route, and 12% is through convenience.

So, while growing buyer base in convenience will certainly be challenging, it is far too important to give up on. Critical to growing the category is understanding the channel properly, and how and why people buy their sports drinks there.

The challenges & opportunities

In convenience, consumers who purchase sports drinks tend to buy for immediate consumption (within 30 minutes of either starting or completing exercise). The majority of purchases – some 80% – therefore come from the in-store fridge, while in supermarkets consumers tend to purchase sports drinks from the aisle at ambient temperature.

Research shows that some 25% of sports drink purchases through the grocery channel are requested meaning that the person buying is therefore not necessarily the end consumer. This tends to mean shoppers buy sports drinks in a larger volume in grocery.

Basically then, the sports drinks category is driven by the need to refuel, replenish and rehydrate – whether is it for immediate consumption or for later.

Schweppes, the manufacturer and distributor of Gatorade, says that in contrast to grocery purchases, typical sports drinks consumers in the convenience channel are male (66%), aged 26-44 years and working full time (74%).

So what can be done to boost sports drink sales in convenience? Coca-Cola which produces the popular Powerade brand is in little doubt.

"With more competition in the hydration category, one of the challenges is remaining competitive from a relevance perspective and a pricing perspective," said Michael Garnett, Powerade Brand Manager.

"That means giving consumers enough of a reason to pay a premium for the category in this competitive climate, and ensuring promotional calendar/bench prices are kept at competitive levels both within sports and versus other hydration categories."

He says that the average price point for sports drinks in convenience is $3.40 compared with $2.90 in grocery ... and that this has got to have an effect on sales.

"However, growth may come from existing users buying and consuming more, and by focusing on differentiating sports from other categories, largely via its sporting and functional credentials that the other categories lack," he said. "The sports drink category needs to focus on the core strength of hydrating before, during and after exercise."

Coca-Cola believes that this will strongly differentiate sports drinks from both the energy and sport supplements category, neither of which, it says, focus on the specialised athletic need for fast and effective hydration to benefit sports performance. And that could mean improved sales.

Schweppes, which is responsible for Gatorade, points to the success of the grocery channel, which has seen category growth of 9.5% (Nielsen MAT to 31/10/09), as evidence of the opportunities that remain to implement strategies to achieve category growth through convenience.

"Each channel is important because they each play a different role to satisfy the needs of our consumers," Glenn Ellul, Marketing Activation Manager – Gatorade, said.

Driving the sports drinks category

"Grocery plays an important role in achieving category scale and getting sports drinks into the home whereas the convenience and impulse channel ensure the product is available when a sports drinker needs it most – on the way to or from training or competition."

He identifies three key ways that convenience and impulse retailers can drive the sports category to achieve maximum potential.

Firstly, he says, retailers should look to increase their range, both in terms of facings and of flavours.

"It may seem like an obvious statement but many retailers are 'under-facing' sport which limits the categories opportunity for growth," he said. "Stocking a variety of flavours will give consumers greater reason to buy more, and so allocating incremental facings/space to flavours will increase sales."

He says that increasing the touch points in store can also have a dramatic impact. While we know that some 80% of sports drink sales in convenience come from the chiller, that also means that a not insubstantial 20% of those sales do not come from the fridge.

"A clever strategy is to off-locate sports drinks near other complimentary products which can increase your consumers' weight of purchase," he said. "The best adjacencies we see though our data are: front counter; hot food counter; or the food-to-go fridge."

Finally, Mr Ellul urges retailers to take part in promotions and he points to a recent study undertaken by Schweppes which found that 46% of consumers really responded positively to a 'two for the price of one' promotion as proof of their effectiveness.

"The main reason for this being is that they could 'buy one for now and one for later'," Mr Ellul said.

A share of the action

Steric Trading, which is responsible for Staminade, says it doesn't currently have the manpower or market share dominance to have much impact through any other channels except for supermarkets. Staminade's Lance Robey says some of the larger manufacturer's fridge policy of having most of the space for their own brands effectively locks smaller operations out. Staminade then doesn't really have any impulse channel business except for those customers purchasing from Campbells Cash & Carry.

"However, we would certainly love to have more business in this segment through experienced and reliable distributors who can deliver on customer service," said Mr Robey. "Sports drinks have suffered slightly in the last couple of years from the explosion of energy drinks but the fact that electrolyte sports drinks actually deliver a proven benefit for people who exercise regularly will ensure the category performs well into the future."

Staminade's target market is anyone doing some exercise either at elite or even casual level, both males and females. Mr Robey says the company is 100% Australian owned and although it is up against a couple of the largest drink manufacturers in the world it is a premium-priced category that can generate excellent profits.

On show, cold & well presented

"The product is consumed quickly so it is not a take home purchase," he said. "The product needs to be on show, cold and well presented."

The brand's best sellers include: Staminade 330gr Powder and the Staminade 600ml sports drink in Lemon Lime, Berry, Orange and Blue.

The company says the introduction of a new bottle and label last year has had a very positive impact on sales, and that it has also recently reformulated/ tweaked its flavour profiles to ensure it is delivering satisfaction to consumers.

For its part, Coca-Cola says 2010 will be a big year for Powerade Isotonic and it will deliver continued focus on partnering with Australia's premier sporting groups. It promises comprehensive involvement in the country's most popular mass participation grassroots events, and exciting innovation, as well as a ground-breaking new communication campaign.

Powerade Isotonic is also the official sports drink of the year's biggest sporting event, the 2010 FIFA World Cup in South Africa.

"Powerade Isotonic will seek to consolidate its position as Australia's number one sports drink and continue to lead the category in research and product development," Powerade's Mr Garnett said. "Convenience and impulse outlets can capitalise on the powerful marketing spend behind Powerade Isotonic in 2010 by ensuring consumers have access to Powerade's most popular flavours in Mountain Blast (blue), Berry Ice (red), Lemon Lime (yellow), Gold Rush (orange) and Blackcurrant (purple).

Of course, Gatorade is working just as hard to maintain and increase its share of the sports drink category. Lemon Lime and Orange Ice are the leading Gatorade products, with the latest Gatorade flavour, Lime Storm, also performing well.

"Success comes from consumers understanding that Gatorade is the number one sports drink globally with over 40 years of research and development," said Gatorade's Glenn Ellul. "It is scientifically proven to contain the fluids and electrolytes to promote complete rehydration; and the carbohydrates to refuel working muscles."

The company will be adding to its numerous sports associations early this year by aligning itself with Skins (the sport compression garments) to bring a category-first exclusive 'gift with purchase' promotion to the convenience and impulse channel.

The specialised Gatorade Skin will be a reward with multi-buy purchases in selected P&C outlets.

"Consumers can now keep their Gatorade cool over summer and make sure it tastes great whenever they need it," Mr Ellul said. "This promotion will launch what will be an exciting year for Gatorade, increasing its marketing investment to drive the category forward."

Promos & packaging

Like all the manufacturers, Gatorade has put a lot of energy into coming up with the right packaging to attract sports drink customers.

"The Gatorade bottle has also been developed to fit easily in the hand and has a wide mouth so that it can consumed faster for rapid re-hydration," said Mr Ellul. "Labels are important for any beverage but more so for sports drinks because they have a role to play in communicating the benefit of the product."

He says that overall Gatorade aims to deliver packaging that stands out on shelf to maximise the sales opportunity.

Like its competitors, Gatorade provides strong support to enhance in-store presence, and offers an entire suite of point of sale items help stores better market the product.

"This includes a variety of clearly branded merchandise solutions that can interrupt, remind and persuade consumers to purchase a sports drink" said Mr Ellul. "We have an entire department looking for new and exciting ways to merchandise stores and we are proud to be able to offer this support for our customers."

The challenge then has been laid down. Sports drinks have been slowing slightly through convenience in recent months but they are not going to give up fridge space easily. And why should they?

The most recent Australasian Association of Convenience Stores report shows that together energy and sports drinks comprise 25% of impulse beverages sales in convenience, and that impulse beverages represent a whopping 21% of merchandise sales, and have enjoyed year on year growth of 4.1%.

There is a lot happening in the sports drinks category at the moment with major promotions, flavour introductions and packaging innovations all taking place. Sports drinks, it seems, are here to stay … and with impulse beverages so vital to I&C outlet profitability … that is very good news indeed.