Pepsi Brings Propel Back to Gatorade

Propel - from the makers of Gatorade
Propel – from the makers of Gatorade

After a couple years differentiating itself focusing on the lifestyle space, Pepsi is re-launching Propel water under the Gatorade hydration portfolio.  From AdAge, Natalie Zmuda shares that the enhanced water brand will update its product packaging, remove the “zero” from its product name, and position itself as a hydration beverage for regular exercisers (article link here).  Unlike Gatorade, which is targeting the serious athletes and is a sports drink, Propel helps fulfill an athlete’s need with water – not an isotonic.  Still, the question remains how effective can Propel compete within the crowded enhanced waters space?  And given all the changes to the Propel franchise, how will consumers perceive Propel after another restage?

With popular brands like glaceau vitaminwater, glaceau smartwater, and SoBe Lifewater in leading market positions, Propel still manages to control a 13% market share.  It has remained competitive as a result of the brand’s equity and the consumer’s affinity with the hydration beverage.  The franchise will look to strengthen its market position by catering toward “routine exercisers” and piggy-backing on the Gatorade name.  Their updated packaging will feature the line “from the makers of Gatorade” to drive awareness and availability.  This point is critical to Propel’s growth, as owning a part of the consumer’s mind becomes increasingly important with the enhanced waters market expanding to include with more brands in recent years.  Even Pepsi themselves has plans on introducing a premium water brand – Qua – within the year. (article link here).  The competition within this segment is fierce, and owning a particular segment – the casual athletic segment – helps Propel stake its claim in enhanced waters.  With Gatorade also catering to the athletic segment, it would not be surprising to see more promotional efforts where Propel and Gatorade products complement one another.

Propel Water. In 2009 (L) and in 2014 (R).
Propel Water. In 2009 (L) and in 2014 (R).

The issue surrounding product perception could have been a tougher obstacle to overcome.  Propel was originally introduced under the Gatorade before moving away from the athletic consumer in 2011.  As consumers and their drinking habits evolved, the Propel brand followed the moving target to become more of a lifestyle water brand.  Instead of continuing to target males/females 25 and above, their core target demographic moved up to Boomers and Generation X.  Measured media spend to celebrate the new positioning was over $10 million.  Three years following this direction, Propel is changing their focus and advertising message.  Again.  If not for leveraging the Gatorade brand name, Propel may have a tougher time connecting to younger consumer segments after structuring the communication toward a difference audience.  With the sports drink’s backing, Propel has a stronger platform to broadcast their marketing message toward athletes and exercisers.

Regardless of the marketing message and target demographic, the product fits into the changing needs of consumers.  Propel is well-received as evidenced by their market position.  With the support of Gatorade, Propel’s path on the road to success becomes much less challenging.

Propel The Workout Water
Propel The Workout Water
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Rockstar Energy To Launch Energy Waters

courtesy of Beverage Digest's Twitter feed - October 9, 2012

At the National Association of Convenience Stores (NACS) show earlier in October, Rockstar Energy revealed that they plan on launching a line of energy water.  While the timeline has not be revealed, the initial assortment listed on the sell sheet image include the following flavors:  Tropical Citrus, Blueberry Pomegranate Acai, Orange Tangerine.  BevNet has some more information and a quick video on Rockstar Energy’s new products from the show (link here).

This launch from Rockstar Energy pits them against Coca-Cola’s glaceau vitaminwater lineup, and PepsiCo’s SoBe Lifewater and Aquafina Plus lineups.  The question becomes how Rockstar Energy can differentiate themselves against these already established brands.  Despite their positioning as “energy water”, it will be difficult for them to be considered a dissimilar product from flavored water.  It is still an enhanced water beverage and may very well be shelved alongside Aquafina Plus or SoBe Lifewater (Rockstar Energy products are distributed by Pepsi).  And since consumers already have certain expectations for the price point, the new energy waters will have to be priced in a similar range.  There really isn’t that much room for differentiation given what we already know.

So with Product, Place, and Price (the 4 P’s of the Marketing Mix) already determined and largely out of their control, Promotion is the remaining lever Rockstar Energy can use to stand out.  Even then it is still a uphill battle.  In Canada, Aquafina Plus has constantly been on price promotions, to the point where there’s also expectations for feature price points.  In the U.S., many retailers had ran similar promotions but also drove unit sales with a “$10 for 10” feature strategy.  How can Rockstar’s Energy Water stand out?  Featuring on price – especially for a new entrant – will only upset the market dynamics and reduce profitability.

Rockstar Energy Water Lineup

One option may be co-promoting with their energy drinks, which has an established presence that is much stronger than that of Amped, Nos or Full Throttle (possibly only Amped and Nos in the future, read about Full Throttle’s de-emphasis here).  Leveraging on their stronger identity in energy drinks, they can offer consumers an alternative or additional Rockstar beverage when they are in-store.  Enhanced waters also do not carry the negative stigma that energy drinks have, so transitioning the “energy” equity from energy drinks to energy water may be a tactic to completely re-position themselves.

Another option would be to fully leverage their entertainment and sponsorship properties to feature this new product – in tandem with their energy drinks.  Offering samples of their energy water at their music and sporting events will increase their exposure to a captive audience.  Especially when their competitive products (vitaminwater, lifewater, aquafina plus) are shut out from these venues.  Especially when they offer a differentiated product than Red Bull and Monster Energy, should it be a multi-sponsor event.

While this is a very unique expansion from Rockstar Energy haloing off their “energy” brand association, it will be interesting to see how it can defend against the pressures of larger and more established brands.  This impending product launch has a chance to succeed, but only if they can carve out their own niche against glaceau, SoBe, and Aquafina Plus.

Natural Sweeteners for Beverages – Stevia

Stevia Plant

With the growing health-conscious trend, both consumers and organizations are placing an increased emphasis on limiting the calorie content in a beverage.  First it was using cane sugar and high-fructose corn syrup (HFCS) to replace sucrose, and now it’s using natural sweeteners to replace cane sugar and HFCS.  Since stevia is the main natural sweetener used for beverages, BevWire is writing a short piece on the stevia natural sweetener.

First of all, what is stevia and why are we using it?  Stevia is a plant-based sweetener and is 200-300 times sweeter than sugar.  Extracted from plant leaves, stevia in its original form is found in the western parts of North and South America.  In addition to being sweeter, stevia also contains less calories (practically zero calories) making it a great alternative to replace cane sugar, HFCS, and sucrose.   With product commercialization and increased approvals from countries, stevia is now widely used in many countries as natural sweeteners, food additives and dietary supplements.  In North America,  stevia has been approved for use by Canada (Health Canada) and the US (FDA) in consumer goods.  Some notable names consumers may have heard are Truvia, PureVia, and SweetLeaf.  Truvia is the stevia brand that Coca-Cola uses in vitaminwater 10.  PureVia is the consumer brand of stevia found in Pepsi’s Aquafina Plus 10.

With all the health benefits related to stevia, why is it not being used by more companies and products?  One reason is cost.  It is not as widely cultivated as cane sugar or HFCS, and the product is still in the early acceptance stage, therefore making it more expensive to use compared to the other products.  Also, despite the health-conscious trend, consumers are still slow to accept natural sweeteners in replacement of their current beverage options.  The Sprite Green stevia-sweetened drink is a hit and miss depending on who you ask because the taste is different from what consumers are used to.  BevWire’s readers also commented that vitaminwater zero tasted vastly different from vitaminwater10.  Once consumers accept stevia as the healthy, low calorie sweetener for their beverages, the products manufactured with stevia will grow in number quickly.

Will Sobe Lifewater Come to Canada?

courtesy of thedieline.comIn the past, BevWire has blogged about glaceau’s vitaminwater leading the Canadian enhanced water beverage category, but what about Sobe Lifewater?  The current enhanced water category really only has two players right now, Coca-Cola’s glaceau vitaminwater, and Pepsi’s Aquafina Plus.  Vitaminwater has pretty much dominated the market landscape with more than 50% market share, stealing Aquafina Plus’ market share hand over hand.  What if Pepsi were to launch Sobe Lifewater into Canada?  Would that combat the market share decline for Pepsi in this category?  In the United States, while vitaminwater is the leader, Sobe Lifewater is a strong second.

In Canada, Aquafina Plus has done everything it can to try and appear like a strong second compared to vitaminwater.  They have made a bottle adjustment to provide easier grip (and also copy the Sobe Lifewater bottle shape).  They have changed the packaging copy to show more focus on the vitamins.  They have changed and enhanced the formula to include natural sweeteners and lower the calorie content (Aquafina Plus10).  Aquafina Plus has also gone to price reductions such as Buy One Get One offers to give consumers incentives to buy their product over glaceau vitaminwater.  However, these actions have only really led to a temporary increase in sales and market share.  Most of all, when the product is on a price reduction consumers that are price sensitive will choose Aquafina Plus and when the price rises again they will choose something else.

The Sobe brand itself has morphed a lot from when it was first introduced on the market as a ready-to-drink tea beverage.  It has also become an energy drink and an enhanced water.  The Canadian marketplace’s strongest brand association is tea, but even then Sobe had to re-brand itself.  Sobe has to revive the tea offerings through re-packaging from glass bottles to plastic bottles.  This indicates that even though Sobe’s strongest association in Canada is with tea, they are not the leader in this category (having to revive the brand and change the packaging).  Therefore, this may be the perfect time to introduce the Lifewater series and provide a stronger competitor against vitaminwater than Aquafina Plus.  And seeing Sobe Lifewater’s strength in the United States, Pepsi should strongly consider introducing this enhanced water beverage into Canada as well.

Segment or Brand – Article From Beverage Spectrum

An online article from Beverage Spectrum’s Gerry Khermouch sheds light on how some beverage categories are strong with opportunity to grow while others just have one strong brand while other competitors barely make a dent (article link here).  In the article, Gerry Khermouch mentions that vitaminwater, 5-Hour Energy, and Gatorade spawned a new beverage category (enhanced water, energy shot, sports drink, respectively) and copycat products eager to captialize on the category have entered the market but without much success.

“It implies that what appears to be abundant opportunity really is a solo success story, and all the pretenders are doomed to exhaust a lot of money, energy and credibility in a fruitless effort. That doesn’t mean there aren’t ways to build off that conspicuous success, but it won’t happen just by throwing your hat in the ring with your own version. ” ~ Gerry Khermouch

The article mentions that there has been success for other brands, but the success has not been easy to come by. Pouring lots of money to market the product doesn’t always bring success either (as seen by numerous enhanced water beverages, energy shots, and sports drinks in the marketplace).  Sobe Life Water, Red Bull, and Powerade have all seen limited success given the amount of resources they have put into growing their brands.  Competing on price doesn’t always help either.  If you have poured significant funding just to enter and compete on price alone, the likely result is that your product is no better than a private label product – so why bother entering the market?

The real opportunity to gain market share would be through innovation.  Innovation either improves on a beverage already on the market, or launches a new category altogether to meet a previously unmet need.  Let’s use the energy drink category to draw examples from.  Jolt Cola and Red Bull.  While Jolt Cola entered the market first in 1985 with their offering, Red Bull came in two years later with their version of an energy drink.  Red Bull improved on areas where Jolt Cola was lacking and quickly gained the majority of the energy drink market.  Jolt Cola may have contained more caffeine, or Red Bull’s marketing expertise helped them gain the leadership position.

Or Red Bull and 5-Hour Energy for another example.  Red Bull may have been the first to launch an energy drink and grow the category, but 5-Hour Energy innovated and spawned a segment within the category.  While other energy drinks entered the market to compete against Red Bull in the cold vault and cooler doors, 5-Hour Energy developed a small energy shot that was located at the till rather than where the rest of the energy drinks were.  Customers shopping on impulse would still see 5-Hour Energy at the checkout counter after the rest of the energy drinks are left behind in the cold vault.  As the article mentions, Red Bull’s energy shot offering is still fighting to gain significant market share.

As Gerry Khermouch says, “Healthy skepticism must be maintained about brands that are just expecting to cruise down the roads carved by segment pioneers.” You just cannot rely on your brand name to bring you success.  The beverage company has to work on developing a great product through innovation and market it properly in order to succeed.

Canada’s Enhanced Water Category in 2010

As of November 2009, the Canadian enhanced water beverage market was around $50 million dollars, and nearly half of that was Glaceau Vitaminwater sales.  Aquafina Plus controlled about 35%, and the remaining percentages was divided between Aquafina Flavor Splash, Dasani Essentials, Nestle Pure Life flavors, and the private label brands.

Some notable brand’s disappearing in 2010 include Dasani Flavors and Propel, with Dasani Essentials possibly being discontinued as well.  Not that it’s a surprise, but the overall number of players in this category are mainly Glaceau Vitaminwater and Aquafina Plus.  And Glaceau Vitaminwater has been gaining market share consistently since their release – while the enhanced water category itself grew nearly $20 million dollars, Glaceau Vitaminwater increased by close to $25 million dollars.  Not only is Glaceau Vitaminwater growing this category, they are taking it away from its competitors.  As a result, both Aquafina and Nestle have resorted to compete through pricing promotions, trying to limit their losses and temporary maintain their market share.  In the end however, both Aquafina and Nestle may be perceived as inferior brands because  of this.  They will be selling more product but still make less money, and consumers will still choose Glaceau Vitaminwater because it’s the “premier” brand of enhanced water.

So as we go forward into 2010 (actually when BevWire posts this it will already be 2010), what will happen to the enhanced water category?  BevWire sees the market stabilizing and continued growth, albeit at a slower rate.  Barring any major player coming in the landscape won’t change too much.  Sobe Lifewater does not have an expansion plans into Canada yet (maybe PepsiCo will run Sobe Lifewater and Aquafina Plus in the US, and just Aquafina Plus in Canada) so they aren’t a major factor.  Smartwater is still slowly being launched and promoted across Canada, and they are still not listed at a majority of retail chains which limits their market impact.

Any one want to venture a guess of what might happen to this category in 2010?