Powerade SWOT Analysis: Competing in the Sports Drink Market

SWOT ANALYSIS

Strengths: Powerade possesses a broad distribution network and an established group of loyal customers. Its utilization of drink technology differentiates it from rivals, while the brand name is reinforced by athlete endorsements.

Weaknesses: Powerade's online marketing strategies and visibility require enhancement.

Business opportunities include expanding product and market reach, as well as innovating flavors and drinks.

Threats: Potential price wars may negatively impact the athletic drink market as Powerade and Gatorade are engaged in intense competition.

External analysis Competition analysis The main competitor of powerade is Gatorade.

The combined market share of all Gatorade products is 84.7% of the sports drink market. These Gatorade products include traditional Gatorade, Gatorade Frost, Gatorade Fierce, Gatorade X Factor, Gatorade All Star, Gatorade Ice, Gatorade Extreme, and Gatorade Endurance Formula. The combined sales for these Gatorade products were $2.1 billion for the 52 weeks ending June 12, 2005. In this time period, there was a 0.1% increase in its market share for Gatorade. Additionally, it has sponsorship deals with the National Football League National Basketball Association, Major League Baseball and Major League Soccer.

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Gatorade, which has been the original sports drink since 1965, has a rich and noteworthy background. In recent times, it has expanded its offerings by introducing Propel Fitness Water as a competitor to Powerade. Both Gatorade and Powerade offer a variety of flavors at similar prices. These items are usually available in plastic bottles but can also be bought as powder mixes. For a detailed nutritional comparison between Powerade and Gatorade, please see Appendix A.

Powerade faces competition from other sports drinks such as All Sport and Protein Ice, which collectively make up only 1% of the market.

Additionally, Powerade also competes with various bottled water brands. It is important to mention that the bottled water industry was valued at $9.1 billion domestically in 2004, indicating a significantly larger market compared to sports drinks.

Client Analysis The sports drinks market has experienced recent growth. In the past, serious athletes and body builders were the primary consumers of sports drinks. However, now the target market includes individuals of various ages (teenagers to those in their 40s) who have an interest in sports, regardless of regular participation. Sports drinks are commonly consumed after physical activity, as a breakfast option, and while on the go. Companies are therefore shifting their focus from exclusively targeting sports enthusiasts to accommodate these different consumption patterns. Traditionally, sports drinks have been associated with masculinity, with males outnumbering females at a ratio of 4 to 1. Nevertheless, data shows that females also regularly purchase this product.

Objectives:

Powerade's revenue decline in recent years is not attributed to intense competition with Gatorade in the sports drink market, but rather to competition from enhanced water products such as Vitamin Water and Smartwater. To recapture consumer attention and generate excitement, Powerade intends to revitalize the brand.

Strategy: The objective of the company is to broaden its customer base, focusing on both athletes and any active consumer.

Tactic: Powerade is undergoing a rebranding and modernization process, which includes renaming and repackaging its drinks. The bottles have been enlarged, while the name powerade is now displayed in a reduced font size. Furthermore, powerade is venturing into the enhanced beverages market.

Strategies and Positioning

Powerade, a beverage created by Coca-Cola, is specifically designed for the sports industry to provide energy and replenish vital minerals lost during physical activity.

Powerade was introduced in 1992 as a competitor to Gatorade, which already had a dominant position in the market. It is important to note that both Coca-Cola and Pepsi are significant players in this industry, each offering their own sports products - Powerade and Gatorade respectively.

Despite Gatorade's monopoly and lack of rivals, Coca-Cola Co. made the bold decision to join the market despite being at a disadvantage. In its initial year, Powerade managed to capture a share of Gatorade's sales, making up at least 10% of the market. This achievement was attributed to Pepsi Co.'s perception that Gatorade was solely intended for household consumption, whereas Powerade positioned itself as a sports drink designed for athletes, enabling it to compete in this particular market.

With a new competitor in the market, the only competitor at the moment, and it was none other than Coca-Cola, the worst enemy of Pepsi Co., the company decided to begin a marketing battle that is still ongoing in our markets today.

Innovations and New Products: Gatorade launched a marketing campaign targeting various locations associated with its product, such as gyms and football fields. However, it was Coca-Cola who took the lead in this area by entering the market and persuading several sports figures to endorse Powerade.

Pepsi has introduced new concepts! Instead of being exclusively recognized as a nutritious drink for mothers to provide their children, Pepsi aimed to expand its customer base. In order to accomplish this goal, Pepsi chose to establish a more significant presence in the sports sector. Consequently, they launched various items designed to improve athletic performance, including energy bars and high-energy beverages. They even developed a gel utilized by Olympic athletes. However, Coke Co had already adopted comparable strategies and also discovered inventive methods for entering and competing in this industry.

Powerade also introduced energy bars, drinks, and gels, similar to Gatorade. However, Coca-Cola Company responded to the competition with a new product called Powerade Zero. This drink, categorized as a diet drink, contained zero calories and zero sugars. As a result, Powerade deeply penetrated not only the sports market with this product, but also opened up a large market for fat-free drinks. Many individuals who wanted to lose weight without engaging in much physical activity found this drink to be perfect for their needs. Gatorade fought back through advertising campaigns, claiming that an energy drink requires calories to replenish those burned during exercise. Coca-Cola was prepared for this counter-argument and asserted that what athletes truly needed during physical activity was a drink that could supply mineral salts and offer great flavors. To support their claim, Coca-Cola used scientific studies which resulted in Powerade gaining more sales and ultimately stealing market share from Gatorade.

Powerade is aware that the battle is not yet won, but they have taken action to address this by launching a marketing campaign featuring well-known basketball and football stars to promote their product. They have also introduced new flavors.

In the meantime, Coca Cola Co has strategically hired the former executive manager of science and sports from Gatorade, posing a significant threat to Pepsi Co. This hire becomes even more substantial if Coke Co assigns him to the research and development department, potentially resulting in an increase in Powerade sales and a decrease in Gatorade sales.

In 2010, Powerade's sales experienced a notable rise, achieving a market share of 32% in the third trimester. It should be noted that when the drink was launched in 1990, it possessed less than a 10% share. Despite Gatorade maintaining dominance with over 60% of sales, this growth significantly impacted them. Nonetheless, Powerade continues to consistently attract more customers annually compared to Gatorade.

In conclusion, Coca-Cola ventured into the sports drinks market by introducing Powerade. However, they encountered a significant disadvantage as their market share was only 10%, compared to Pepsi Co and its Gatorade which held a dominant position with 80% of the sales.

Powerade had a promising future and was prepared for its launch. Famous athletes endorsed the brand, leading to a marketing battle between Powerade and its competitors at sports venues. Gatorade quickly responded to the competition by developing additional strategies and introducing new products. However, Powerade remained determined and released even more products while also expanding their range to include diet beverages.

While both companies have successful marketing strategies, Powerade outperforms Gatorade in terms of sales and user base. Personally, I used to consume Gatorade but now I prefer Powerade because of its superior advantages during sports activities.

Product

Powerade, a sports drink manufactured by "The Coca-Cola Company," was first introduced in 1988 and later became widely available throughout the United States in 1992. It serves as a competitor to Gatorade, which is produced by PepsiCo and is Coke's main rival. As of June 2007, Powerade had a market share of 13.4% in its category, while Gatorade maintained dominance with 84.2%. The ingredients used for creating Powerade are:

Powerade is made up of water, high fructose corn syrup, salt, potassium citrate, phenylalanine, sucralose, sodium citrate, malic acid, potassium phosphate, vitamin B6, and vitamin B2.

Flavors This product has a diverse range of flavors. Currently, there are eight options to choose from: Orange, Mountain Berry Blast (formerly known as Mountain Blast), Fruit Punch, Grape, Lemon Lime, Sour Melon (previously Green Squall), White Cherry (previously Arctic Shatter), and Strawberry Lemonade.

Powerade zero offers a variety of six flavors for its zero calorie version: Mixed Berry, Grape, Lemon Lime, Orange, Fruit Punch, and Strawberry.

Sponsorship Powerade sponsors a variety of teams and organizations, including the Wallabies, New Zealand's All Blacks, River Plate from Argentina, the Australian Football League, O'Higgins F.C., Argentina's national football team, Mexico's national football team, the PGA Tour, Nascar, and the United States Olympic team.

Powerade is the sponsor for three renowned athletes: Rogelio Funes Mori of River Plate, Lebron James from the Miami Heat, and Wayne Rooney who plays for Manchester United.

The Product life cycle consists of four stages: introduction, growth, maturity, and decline. In the introduction stage, the product has low recognition and does not generate substantial profit. Marketing expenses are high as market evaluation and distribution channel establishment take place. During the growth stage, the product starts to make profit and experiences rapid sales growth. This requires investments in marketing activities, particularly for brand establishment. Competitors enter the market, with their numbers depending on how appealing the product is. The decline stage signifies a decrease in profit and is referred to as the 'Maturity stage'.

Originally, Powerade was created specifically for athletes. However, it had to undergo reformulation due to its unpleasant taste and ingredient issues. The improved formula provided enhanced nutritional benefits, causing Powerade to become a popular beverage choice for the general public. As a result, Powerade expanded its product range by introducing various drinks aimed at athlete hydration. The brand strives to innovate and introduce more new products compared to its competitors, including Gatorade. However, this task is challenging as Gatorade products are more highly sought after.

When sales decline, a company has different choices for its products. It can opt to keep the product and potentially revive it by adding new features and exploring new uses. Another option is to cut costs and still offer the product, possibly targeting a dedicated niche group. Alternatively, the company may choose to stop producing the product entirely.

In the case of Powerade, it will persist in providing its products with confidence in ongoing growth and avoiding decline. Moreover, Powerade will introduce modifications like a new bottle design to demonstrate a fresh and innovative image.

Since 2009, Powerade, a Performance Partner of the 'All Blacks', has seen substantial growth in volume sales of its 750ml bottles in supermarkets throughout New Zealand. This increase has strengthened its position as the leading sports drink in the country, with a 22.9% rise. Despite already dominating 80% of the market share, Powerade aimed to further expand its brand by launching its latest campaign.

By realizing that Powerade was only consumed on game days by consumers in New Zealand, the brand aimed to integrate itself into daily training routines. To achieve this, Powerade utilized its sponsorship of the Rugby team and launched a multi-touch point campaign in late June. The goal was to increase excitement leading up to the Rugby World Cup in September. This campaign, called Powerade's 'Black', was launched in supermarkets across New Zealand and had a significant impact on fans. It instilled a sense of patriotism in what was an important year for the nation, particularly in terms of Rugby.

The campaign gained greater importance with the introduction of a TV commercial called 'Train Like You're In The Game'. The commercial emphasized the idea that the effort put into training is reflected in a real game, establishing a connection between excellent performance and the power of Powerade to keep the body hydrated.

The launch of a Powerade New Zealand Facebook page allowed access to training tips and behind the scenes footage of the New Zealand Rugby team, giving insights into the lives of elite athletes. Members of the New Zealand Rugby Team were asked, "what makes an 'All Black'?" The Powerade NZ website expanded on this concept by featuring tips and advice from NZ Rugby strength and conditioning coach, Dr. Nic Gill. The website also included a 'hydration calculator' tool that calculated the amount of fluid lost through sweat during exercise. Additionally, training drills targeted at improving endurance, speed, performance, and strength were shared by Dr. Gill. Information about the 'Powerade Challenge' was also provided.

Powerade introduced the 'Powerade Challenge' in July to allow consumers to compare their fitness levels with those of the All Blacks players. The challenge involved a running course situated on the Auckland waterfront, equipped with RFID technology for time tracking. To participate, individuals could register online to obtain a custom Radio Frequency Identification (RFID) bracelet. These bracelets could be activated by placing them on designated Powerade vending machines placed at different points along the running route. All recorded results were then uploaded to Powerade's website.

Powerade's integrated push aims to solidify its position as New Zealand's top-selling sports drink. The brand seeks to increase its value and demonstrate its innovative technologies during the Rugby World Cup, a time when the sport is top-of-mind for consumers in the country.

PRICE The Price element of POWERADE's Marketing Mix involves studying why companies set specific prices for their products. This element provides a real benefit to the company and varies depending on the country it is sold in and the country's GDP.

AMERICA

In the table shown above, the values for POWERADE and GATORADE in North America are displayed. In Canada, the price of Powerade is lower than Gatorade, which is typical as Powerade usually sells its product at a lower price compared to its major competitor, Gatorade. The same applies to the price of Powerade in the USA, where it is also lower than Gatorade. In this case, the GDP of Canada and the USA does not strongly influence the evaluation of the product's price. Moving on to Central America, in Mexico, the price of Powerade is significantly lower compared to North America but slightly higher than Gatorade. This can be attributed to Mexico having a lower GDP, resulting in lower prices for both products. In South America, in Brazil, we observe that the price of Powerade is considerably higher than in the USA, despite having a lower GDP. This could be explained by a smaller demand for Powerade leading to a higher price or by Gatorade having a larger market share in Brazil. This discrepancy accounts for the relatively significant difference between the two products. In Argentina, there is a greater difference between the prices of both products, indicating that Powerade's marketing strategy of offering the same product at a lower price is implemented. Comparing the prices to those in the USA, it is evident that Powerade is more expensive.

Europe Powerade (500 ML)

$ POWERADE $ GATORADE $ GDP EUROPE UK 1,33 1,42 35.500

FRANCEn2.08n2.51n34,569

GERMANY
1,58
1,83
37.900

ITALY
1,64
2,34
31.264

SPAIN 1,22 1,41 31.500

When studying the price of Powerade in Europe, we can observe that there is not much variation in prices between countries. This could be attributed to the fact that the analyzed European countries are all part of the European Union, and there is no significant difference in prices among them. However, it is worth mentioning that France stands out with higher prices for Powerade (and Gatorade), even when compared to Germany, which has a higher GDP.

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POWERADE GATORADE GDP ASIA CHINA 1.26 1.6 8400

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JAPAN 2,81 3,25 35280

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SOUTH KOREA
1,26
1,89
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The displayed box showcases the significant variation in GDP across Asia, owing to the economic prosperity of the nations being examined. Notably, Japan experiences notably higher prices for Powerade compared to China or South Korea. This discrepancy can be attributed to Japan's greater wealth in comparison to other Asian countries. AFRICA

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POWERADE GATORADE GDP AFRICA MOROCCO 0.9 1.145 5252

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EGYPT 0,95 1,12 6180

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SOUTH AFRICA
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In Africa, the prices of Powerade (and Gatorade) remain consistent with other developed countries. However, it is notable that Powerade is more expensive in South Africa compared to Morocco or Egypt. This discrepancy may be attributed to South Africa having a higher GDP than the other two countries.

OCEANIA POWERADE (500 ML)

$ POWERADE $ GATORADE $GDP OCEANIA AUSTRALIA 2,25 2,79 40820

NEW ZEALAND
3,56
2,76
29535

When analyzing the prices in Oceania, it becomes evident that there is a significant price discrepancy compared to the prices in other parts of the world. Specifically, the cost of Powerade bottles of 500 ml in Australia and New Zealand is higher than in other countries.

One possible explanation for the higher production cost in these countries could be the distance between them and Asia. Another reason could be the GDP, which is higher compared to the average GDP, especially when comparing Australia and New Zealand. In New Zealand, the cost of purchasing a bottle of Powerade is significantly more expensive than in Australia. However, Gatorade is cheaper than Powerade, possibly due to higher demand. As a result, the company reduced the price of Gatorade to maintain consumption levels.

Australia is prone to natural disasters.

Natural disasters, such as earthquakes, cyclones, storms, and floods, are events that occur naturally. They can result in substantial physical damage, disruption of business services, and personal injury or loss of life.

As a result of global warming and the resulting climate change, the frequency of natural disasters in Australia is consistently growing.

Personally, I have experienced a natural disaster in Pakistan in 2012, specifically a flood. This personal encounter enables me to understand and illustrate the immense pain and severe economic repercussions caused by these calamities, as they ravage everything in their path.

There are two categories of economic consequences resulting from natural disasters.

1. The direct economic impact.

This encompasses various essential lifelines like water, sanitation systems, gas, electricity, telecommunication, and transportation. These lifelines are susceptible to all forms of natural disasters and are incorporated into both public infrastructure and community facilities. Additionally, business enterprises, households, and residents are all directly affected.

2. The indirect economic impact.

The indirect economic impact of a disaster involves the costs associated with the disruption and clean up required as a consequence of the event.

Australia has consistently experienced such disasters, resulting in significant damage and requiring substantial time and financial resources to restore the country. Between 1967 and 1999, Australia encountered 265 disasters that incurred costs exceeding $10 million each. The majority of these disasters had a total cost ranging from $10 to $50 million. Among all types of disasters, floods were the most frequent and costly, accounting for $10.4 billion or 29 percent of the total cost. Storms and cyclones followed closely, constituting 26 and 24 percent of the total cost respectively. The bushfire crisis in Victoria is Australia's most severe bushfire catastrophe to date, as well as its worst natural disaster in over a century, resulting in the loss of 131 lives.

If we analyze the available data, we find that the total cost of natural disasters in Australia from 1967 to 1999 is approximately $36.4 billion, which is astonishing. If we include deaths and injuries in this data, the total cost rises to $37.8 billion or around $85 per person in 1999 prices. This estimation results in an average annual cost of natural disasters of $1.14 billion since 1967 or $1.17 billion since 1980, with prices adjusted to the year 1999.

An organization known as "The Natural Disaster Relief and Recovery Arrangements (NDRRA)" assists Commonwealth and States in jointly funding the reconstruction of state assets that have been damaged by natural disasters. This enables the states to receive financial support from the Commonwealth for the rebuilding of government assets.

Each state in Australia has its own self-insurance program or managed fund to insure its assets. Many experts suggest that the formula used in "The Natural Disaster Relief and Recovery Arrangements" should be modified to the expenditure method before the state or territory receives insurance recovery.

The economic impact of natural disasters in Australia is significant, often making it difficult for the government to manage the consequences. To address these disasters, the government can establish plans and organizations specifically designed to handle such situations, recognizing that they are an unavoidable part of life in Australia. Although limited in their effectiveness, these measures can mitigate the impact of natural disasters. Here are some suggested approaches.

The government should provide large-scale concessional loans with low interest rates to companies. The repayment period for these loans should be extended as much as possible. Existing homes should be eligible for a flood premium discount, but not new homes. It is important to annually save a portion of the Gross Domestic Product. Funding for emergency relief assistance and emergency re-establishment assistance should be increased. Additionally, it is recommended to choose a carrier with a reputable claiming service.

The text discusses a publication titled "Economic cost of natural disaster in Australia" by Neil Gentle, Sharyn Kierce, and Alistair Nitz in 2001. The publication can be accessed from the URL: "https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&ved=0CDAQFjAA&url=http%3A%2F%2Fwww.em.gov.au%2FDocuments%2FEconomic_costs_of_natural_disasters_in_Australia.pdf&ei=XO17UdX2FcaiigeT1oCYCQ&usg=AFQjCNE89LiWzBdi_zr3hvixQdXzkLYLBA&sig2=bVIuhvxRuq8ZUmgV1h7sYg&bvm=bv.45645796,d.dGI". The information was retrieved on 18th April 2013.

2. Emergency Management Australia, 2002 "Economic and Financial aspects of Disaster Recovery" Retrieved from https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDUQFjAB&url=http%3A%2F%2Fwww.em.gov.au%2FDocuments%2FManual28-EconomicandFinancialAspectsofDisasterRecovery.pdf&ei=XO17UdX2FcaiigeT1oCYCQ&usg=AFQjCNGgKyl9WZm6lEw4LUhncbrFlzf7zA&sig2=4zfhYHeYKdlqn4qrM5cFaA&bvm=bv.45645796,d.dGI on April 19, 2013.

According to a report from the Bureau of Transport Economics (2001), titled "Economic costs of natural disasters in Australia," the information can be found at http://www.bitre.gov.au/publications/2001/files/report_103.pdf. This report was accessed on April 21, 2013.

4. "Natural disaster insurance review," by John Trowbridge, Jim Minto, and John Berrill, September 2001