Coca-Cola muscles in on the sports sector

Coca-Cola Great Britain is to relaunch Powerade as it tries to muscle in on the UK sports drink market, which is dominated by GlaxoSmithKline’s Lucozade sport (MW last week).

The Powerade brand was first launched in the UK earlier this year, but was put on supermarket shelves without any advertising or in-store marketing support.

Now repackaged and reformulated, Powerade is being introduced across Europe in a move which, Coca-Cola claims, is its biggest launch on this side of the Atlantic since Diet Coke 20 years ago. Packaged in a resealable “sports cap” bottle, the drink comes in three flavours including the blue-coloured Ice Storm berry flavour – a colour which has proved a hit in the US for market leader (and PepsiCo-owned) Gatorade. In the UK, Coca-Cola plans to support the relaunch with a marketing campaign reportedly worth &£7m.

According to Zenith International, the energy drinks sector, which includes sports drinks as well as “functional” (consumed for energy, for instance Red Bull) and refreshment-oriented products (for instance Lucozade), was worth &£700m last year. Retail (for immediate consumption) and on-trade sales of energy drinks accounted for &£300m (AC Nielsen), of which sports drinks took 12 per cent.

Sports drinks are defined as products containing “isotonic” elements, designed to replenish carbohydrates and electrolytes swiftly and to rehydrate the body after exercise.

Coca-Cola estimates that the UK sports drinks market is worth &£47m. Lucozade Sport, launched in 1990, dominates the market, with &£34.3m in retail and on-trade sales last year. It is not going to cede share of what is a burgeoning market easily.

By volume, sales of sports drinks grew 19.5 per cent between 1999 and 2000. Not only that, but the core target market – health-conscious adults interested in keeping fit – is growing fast. The latest figures from Mintel show that gym membership grew 18 per cent last year with 3.4 million adults signed up as members at an estimated 2,600 private health and fitness clubs in the UK.

It is this exercise-driven 16to 24-year-old market which Coca-Cola hopes to tap into with an advertising campaign which will start with postcards and outdoor posters and then move to sites in gyms and health clubs. The campaign features the line “Get Up. Stay Up. Powerade” and statements about sport. Later, ads will appear on washroom panels, more posters and on TV.

The ultimate key to success is, as one analyst puts it, “credibility”, which means proving the product’s health claims and gaining endorsement from the sporting community. The necessity of the latter has prompted a scramble to sign up personalities and link-ups with events.

Coca-Cola has signed up athletes for the UK campaign and last weekend had a presence at the Ireland-New Zealand game in Dublin.

Lucozade Sport category marketing director Fiona Vigar says that the company has been expecting a rival launch for the past two years, but has had 10 years to forge links with the world of sport. It used footballer John Barnes for its TV launch and has a partnership with the FA Premier League and English Rugby Football Union. Its latest coup is a deal to become official sports drink for the London Marathon.

GSK aims to stay ahead of the game by launching new flavours, such as the grapefruit and mixed berry variant launched this year, and products such as sachet powder. Lucozade Sport also has a hefty marketing budget, with &£20m earmarked for 2002.

The gym market is playing a key role in Coca-Cola’s distribution plans. Powerade is being rolled out initially through gyms and fitness centres, with the aim of converting a core market before the drink is reintroduced into supermarkets next year. Lucozade Sport, which had a clear run at the sector, chose mass distribution from the beginning.

Vending machines have been developed for Powerade, and Coca-Cola marketing director Charlotte Oades hopes to have them installed at “strategic points of sweat”. But penetration is not going to be easy: for instance, fitness chain David Lloyd is taking Powerade advertising, but not the product, as it has a contract to put Lucozade Sport behind bars and in vending machines.

Oades says: “We are in the business of building a brand and making sure it stays relevant. It’s not just about availability, but experiencing the product for the first time in the optimum environment before we make the drink widely available.”

Coca-Cola has been criticised in the past for sending confused distribution messages – observers were puzzled by the handling of energy drink Burn, which launched in upmarket bars to foster an element of exclusivity about the brand and then appeared in middle-market pub chains.

The consensus from observers is that Coca-Cola now has to diversify from its core carbonated products and that in this case it is taking the launch seriously. One energy drinks expert says: “Powerade has a good chance. It’s a nice-looking product and the advertising is a little more off the wall than you traditionally find with Coke.”

Investec Henderson Crosthwaite Securities analyst David Lang points out that Coca-Cola has “a hell of a bottling system” so supply is not a problem: “It’s just a question of how much effort is put behind it and whether the consumer wants it or not.”

But as well as taking on Lucozade Sport, Coca-Cola will have to keep an eye on Gatorade. PepsiCo will not comment, but observers are on the lookout for a launch next year in the continuing battle for the hearts, minds and muscles of the UK.