Table of Contents

OVERVIEW 2

SPORTS DRINKS 13

PROTEIN DRINKS 86

ENERGY BARS 124

COMPANY PROFILES 155

<TI> The Sports Nutrition Products Market
<IN> Food and Beverages
<SO> Packaged Facts
<CN> United States
<DT> July, 1995
<NO>LA-39100

LA-39101 OVERVIEW

Products: Scope; Form

The Products

Sports Drinks, Protein Drinks, and Energy Bars

The Sports Nutrition Products Market comprises three

basic categories of food designed especially to improve
athletic performance. Although many of the consumers of
sports beverages are not athletes, the products are
formulated with improved athletic performance in mind. This
design is the key to their reputation as health foods, even
for nonathletes.
By far the largest of the three categories is sports
drinks. These beverages are consumed immediately before,
during, or after an event to ensure adequate hydration.
When consumed before or during an event, they are also used
to improve performance.
The category of protein drinks runs a distant second in
size. It includes beverages that supply protein or amino
acids (protein's chemical building blocks) to help build
strength and muscle in athletes and in those trying to lose
weight with the help of diet and exercise.
Energy bars, sometimes called "sports bars," are a
small, but fast-growing sports nutrition category.
Sometimes called "sports drinks in solid form," they are
marketed as providing much-needed energy during long
grueling athletic events. Since they supply protein and
vitamins, however, they address some of the same needs as
protein drinks.
The three categories are linked not only by their
sports-related purpose and history, but by the ingredients
they contain, the consumers they target, their advertising
and promotions, and the marketers and outlets that sell
them.

Report Covers Sports-Centered Products Only

Other so-called nutriceuticals or functional foods,

though they have a bearing on the market for sports
nutrition products, are not considered sports nutrition
products for the purposes of this report. Thus, the report
does not cover Quaker Oats' new caffeine-fortified breakfast
drink, Sunbolt; nor does it cover beverages that are vitamin
fortified and "healthy" but not marketed as sports drinks.
All Are "Designer Foods," With Carefully Calibrated Proportions
of Proteins, Carbohydrates, Fats, Vitamins, and Minerals

Most sports nutrition products are "designer foods,"

whose labels proudly display a long list of organic
chemicals in an attempt to improve on nature (even when each
individual ingredient is "natural"). To list the most
common ingredients carbohydrates, proteins, fats, vitamins,
and minerals is to list the basic ingredients of food. Even
white bread contains proteins, carbohydrates, fats,
vitamins, and minerals.
But in sports nutrition products, each ingredient has
its own purpose and is the subject of a particular
advertising claim. For example, it is a subject of
contention between marketers of sports drinks whether
glucose polymers are more readily absorbed by the body than
fructose. Ads for protein drinks argue the
"bioavailability" of whey protein versus soy or egg protein.
Marketers of energy bars differ about the need for protein
and fats in their products.
Finally, the inclusion of vitamins, minerals, and other
additives in sports drinks involves the products in claims
made for these ingredients within the vitamin and mineral
supplement market. For the most part, these claims may not
be made directly in advertising, but the reputation an
ingredient has for enhancing muscle growth, or burning fat,
is the reason for its inclusion in the product.
The ingredients used in sports nutrition products,
their purpose, and the controversies that surround them are
discussed in the individual sections on sports drinks,
protein drinks, and energy bars.

Product Forms: Liquids, Powders, and Bars

Sports drinks tend to be sold as ready-to-drink

liquids, but are also available as powders to be mixed with
water. Most protein drinks are sold as powders that are
subsequently mixed with water or milk by the consumer, but a
growing number are available in ready-to-drink form. Energy
bars are all solid and closely resemble regular candy bars.

Regulation; NLEA; Dietary Supplement Acts

Regulation Falls Hardest on Protein Drinks

The inclusion of vitamins, minerals, and herbs, and the

health claims made or implied for sports nutrition products
brings them (or did until the Dietary Supplement act of
1994, discussed below) under the jurisdiction of the Food
and Drug Administration (FDA) and the Federal Trade
Commission (FTC). In practice, the sports drink category
has escaped regulatory intervention by keeping overt
advertising claims to a minimum. Sports drinks quench
thirst and help hydrate the body; but whether they do so
better than water is open to debate. Partly in an effort to
minimize government scrutiny, early on the industry stopped
referring to the drinks as "isotonic."
In contrast, ads and promotions for protein drinks
regularly make claims that bring to mind the medicine shows
of the 19th century, when a strongman would break chains
with his chest, and his manager would then sell bottles of
the tonic that supposedly created this superman. The major
marketers in this category find themselves in frequent angry
contention with the federal government, which has forced
them to change advertising and labels, pull back on the
claims they make for their products, pay damages, and in at
least one settlement, to fund a study to help determine the
truth of claims.

Recent Changes Affecting Regulation of Sports Nutrition

Legislation passed in late 1994 is beginning to affect

the labeling and marketing of sports nutrition products.
The new law will have most of its immediate effect on the
protein drink category of the sports nutrition market, since
this is the segment that depends most on vitamin and mineral
supplements and claims made for them. It may ultimately
affect sports drinks as well, as loosened restriction
encourages marketers to expand the types of ingredients they
include in sports drinks.

1990 Nutrition Labeling and Education Act

Until recently, the law having the greatest effect on

the regulation of sports nutrition products was the
Nutrition Labeling and Education Act of 1990 (NLEA). Under
the NLEA, the packaging and advertising of food products
could not make health claims unless authorized by the Food
and Drug Administration, and these claims had to be based on
clinical tests, as in drug claims.
The FDA itself does not conduct clinical trials. It
reviews trials designed, conducted, and paid for by the
private sector, in a process that can take several years and
cost $200 million or more. For a company preparing to
market a drug over which it will have a patent, this lengthy
and expensive process can be worthwhile when it is done, it
will provide a march on the competition. Common food
ingredients (around for millions of years and not
genetically engineered) cannot be patented, so marketers
have no such incentive.
The industry complained loudly about this. "It's a
scandal that in a democratic society the trust in the public
is so negative that good scientific research is not allowed
on the label until the dumbest doctor believes in it," said
T. George Harris, former editor for American Health.

1992 Dietary Supplement Act

 The supplement industry often complains of its
powerlessness in comparison to the trillion dollar a year
drug industry. Their cries were finally heard in Congress,
resulting fairly quickly in the Dietary Supplement Act of
1992. This act, an intermediate piece of legislation, put a
temporary moratorium on enforcement of the NLEA on dietary
supplements.

Dietary Supplement and Health Act of 1994

In 1993, Senators Orin Hatch (R., Utah home state of

Weider Health and Nutrition) and Representative Bill
Richardson (D., N.M.) proposed legislation that would exempt
dietary supplements from the health claims provision of the
NLEA. In October 1994, this legislation, now called the
Dietary Supplement and Health Act of 1994, was signed into
law.
As passed, the law expands the definition of dietary
supplements to include sports nutrition and herbal products.
It provides that dietary supplements will not be regulated
by the FDA as food additives, and leaves the burden of proof
regarding the safety of supplements with the FDA. In
addition, it permits marketers to disseminate third-party
literature from credible scientific sources in support of
its products.

Health Claims Made Despite NLEA

The last item, while valuable to marketers in that it

forestalls future threats, will probably not have much
effect on their practices, since the 1993 act had already
shielded the industry from many of the strictures of the
NLEA, and the FDA has never been able to control health
claims for nutrients made by people who do not market the
products. While the product itself may say merely that it
contains creatine, as creatine phosphate, magazine ads are
often placed facing editorial content that touts the virtues
of creatine. It's no accident that several of the leading
marketers of protein drinks also publish magazines.
Another common way of evading the NLEA has been the
"name claim," whereby the health claim that the government
forbids in the advertising of the product is made in its
name. For example, a drink may be called "Muscle Building
Formula 2000," even though the law forbids the claim that
the drink builds muscle.

Market Size and Growth; Factors in Future Growth (1/2)

Market Size and Growth

Sports Nutrition Market Reached $1.2 Billion in 1994

Based on sales data from Information Resources Inc. and

estimates by beverage trade publications and health food
industry executives, Packaged Facts estimates that the
market for sports nutrition products reached a little over
$1.2 billion in 1994. The market grew by around $100
million or 9.5% between 1993 and 1994. The compound annual
growth rate was 10.2% over the course of the last five
years.
In the table below, market size and growth rates for
protein drinks were arrived at by balancing the "ballpark"
estimates of several marketers; they should not be taken as
precise.

Factors in Future Growth

Growth of the Market in the 1980s

The sports nutrition market in the United States grew

at percentage rates in the high teens in the 1980s, thanks
to hot summers, a boom in sports activity, and a heightened
interest in nutrition and healthy lifestyles on the part of
the American consumer. The acceptance of bodybuilding as an
almost mainstream sport boosted demand for protein drinks.
At the same time, a greater number of health food stores
increased the availability of these products to the
consumer. The contribution of energy bars to this growth was
minimal, since it is as yet a very small market. However,
since it is a new category, energy bars grew at fantastic
rates of over 100% a year.

Reduced Participation in Fitness, and Competition

From Other Categories, Slows Growth

Though still healthy in comparison with most food

categories, growth rates in the 1990s are slackening. Two
factors in combination seem to be contributing to this
slowdown. First, separate surveys by the National Center
for Health Statistics (NCHS) and the National Association of
Sporting Goods (NASE) show that fitness participation has
been declining since 1985. Participation went down 10%
between 1985 and 1990, according to the NCHS survey. It
continued to decline in the early 1990s, according to the
NASG survey.
Second, competition from other categories, discussed in
detail below, may be an even more serious brake on the
growth of sports nutrition products.

Factors in Future Growth (2/2)

Sports Drinks Rose Sharply in Late 1980s Despite

Fitness Decline

Amazingly, the retail market for sports drinks rose at

a yearly rate of 20% between 1985 and 1990, despite
declining sports participation. The category's remarkable
upstream progress may be partly explained by the fact that
in 1983 Gatorade came under the ownership of the Quaker Oats
company, putting new resources at the brand's disposal.
This one product is such a large part of the entire market
for sports nutrition that its rises and falls are closely
reflected by the market overall.
In hindsight, it looks as if the market for sports
drinks was far from mature when Quaker took the product
over.

Protein Drinks Suffer from Decline in Bodybuilding

Participation in bodybuilding, the sport that

contributes most to the demand for protein drinks has
declined, along with participation in other sports
activities. Just how quickly this market grew in the 1980s
is difficult to determine, since it is not well tracked by
sales auditing services, but individual marketers report
that sales here are slowing as well. Marketers have
responded by creating new products that promote weight-loss
rather than muscle increase.

Juice Drinks and Ready-To-Drink Teas

Juice drinks and ready-to-drink teas, the hot new

products of the late 1980s and early 1990s, compete with
sports drinks among athletes and other health-conscious
consumers.
Since sports drinks make up most of the sports
nutrition market, competition from New Age beverages has
become a powerful drag on the sports nutrition market
overall.

Vastly Increased 1994 Advertising Expenditures

Fail to Push Market to Old Levels

In 1994, a sharp increase in competition from giant

soft drink marketers more than doubled ad expenditures in
the sports drink category. Sales growth in 1994, though in
double digits, was disappointing considering this fact.

Growth Will Slow Further if Competitors Give Up on Sports

Drink Category

If Coca-Cola and PepsiCo are disappointed enough, they

will pull out of the market. Advertising and promotion will
fall, and the sports nutrition market as a whole will
suffer.

Projected Sales; Market Composition

Projected Sales

Sports Nutrition Market to Reach Around $1.75 Billion

in 1999

Based on the factors described above and elsewhere in

this report, Packaged Facts estimates the market for sports
nutrition products will grow at a rate of about 7.5% a year
between now and the century's end, reaching around $1.8
billion in 1999.
Though this growth is robust by the standards of most
packaged goods, it represents a significant slowdown from
the double-digit rates of the 1980s. The three basic
reasons for the slowed growth predicted are, in order of
importance: the maturing of the market, competition from
alternative beverages, and the end of the sports and fitness
boom.

Market Composition

Sports Drinks Represent 80% of the Sports Nutrition Products

Market

At $960 million in 1994, the sports drink category

represented almost 79% of sports nutrition products sales.
Protein drinks accounted for some 16% and the fast-growing
energy bar market for the remaining 5%.

Supermarkets Account for a Little Over a Third of Sports Nutrition

Sales

Supermarkets, mostly by virtue of their near-half share

of the sports drink market, account for between 35% and 40%
of sports nutrition products. Convenience stores come next,
with between 30% and 35%. Next in retail share come health
food stores, where most protein drinks are sold, with
between 10% and 15% of the sports nutrition market. Sales
remaining occur through numerous other outlets such as small
grocery stores, professional and amateur athletic teams,
factories, armed service PXs, prisons, gyms, gas stations,
sporting goods stores, and bike shops.

Market for all Three Categories is Seasonal

The market for all three sports nutrition products is

highly seasonal, with sales sharply higher in summer, and
advertising, promotion, and merchandising scheduled
accordingly. Sales of sports drinks in particular are
sensitive to the temperature levels of a given summer.

Sales Heaviest in South and West

All sports nutrition products sell best in the warmer

regions of the country, where summers are longest and there
is more athletic activity. Per capita sales are also
positively affected in states like California and Colorado,
which have a sports-oriented cultures.
 Marketers; Product Trends

The Marketers

Many Small Companies and a Few Corporate Giants

Well over 100 companies market sports nutrition

products. Most are relatively small, privately held
businesses whose products are marketed in health food
stores, gyms, and bike shops. A few are large multinational
corporations with operating revenues in the billions of
dollars with names like Coca-Cola, PepsiCo, and Quaker
Oats each of which markets a sports drink.

Smaller Companies More Likely to Have Products

in More than One Sports Nutrition Category

In general, the isotonic or sports drink category is

the only part of the sports nutrition market that has proved
itself lucrative enough to interest the largest marketers in
the field. Energy bars and protein drinks have been left to
the small fry. Quaker Oats made itself an exception to this
rule when it introduced Gatorbar, an energy bar, on a
regional basis in 1994.
In contrast, many of the smaller marketers of sports
nutrition products do compete in all three categories, often
including isotonic drinks, despite the formidable
competition. The smaller marketers are able to do this
because specialty stores provide them with a sheltered
market, where a special type of consumer comes in search of
alternatives to the more familiar brands. This specialty
market is dominated by companies like Twin Laboratories, a
vitamin and mineral supplement company; Weider, a company
with several lines of business linked to bodybuilding; and
GNC, a retail health food chain with many private label
products in sports nutrition.

Product Trends

Reaching Beyond the Athlete

Either in reaction to the decline of fitness

participation, or out of a sense that the athletic market is
saturated, companies in all three sports nutrition
categories seem to be reaching out to nonathletes more than
ever.
In sports drinks, this tendency has contributed to
sweeter, less salty, and "lite" low-calorie formulas.
Marketers of protein drinks have introduced high-protein
meal replacements aimed at the weight-loss market.
Marketers of energy bars have introduced better tasting
bars, lower in protein and vitamins, and have altered their
advertising to reposition the bars as a healthy snack
alternative.
 In all three categories, the realignment is partial and
equivocal, since the marketers do not want to lose their
core consumers.

Children's Segments in Sports Drinks and Bars

In a related movement, sport nutrition marketers,

responding to the recent baby boomlet, have introduced
products, packaging, and promotions aimed at children and
young teens. Most of this activity has occurred in the
sports drink category, where Quaker Oats and Suntory Water
Group appeal to youngsters with aseptic drink boxes and
grape flavors.
The children's segment in energy bars is still
embryonic. It is represented by one product, Inky-Dinky
FinHalsa, from the FinHalsa company, which also produces an
adult version of this bar.

Table: Estimated Retail Dollar Value*: Sports Nutrition

Products (1990-1994)

(In Millions)

Sports Protein Energy

Drinks Drinks Bars Total
Year $ Vol % Chg $ Vol % Chg $ Vol % Chg $ Vol % Chg

1994 $960 10% $200 4% $60 20% $1,220 9.5%

1993 870 8 192 4 50 20 1,112 8
1992 805 9.5 185 4 42 20 1,032 9
1991 735 15.5 177 4 35 50 947 14.5
1990 635 - 170 - 23 - 828 -

* Includes retail value of retail and institutional sales

Note: Sales and percentage change figures are rounded as

general approximations

Source: Packaged Facts.

Table: Projected Sales and Growth: Sports Nutrition

Products (1994-1999)

(In Millions)

Sports Protein Energy

Drinks Drinks Bars Total
Year $ Vol % Chg $ Vol % Chg $ Vol % Chg $ Vol % Chg

1999 $1,380 7.0% $250 4.5% $128 12.0% $1,758 7.0%

1998 1,290 7.0 239 4.5 114 15.0 1,643 7.0
1997 1,205 7.0 228 4.5 99 15.0 1,532 7.0
1996 1,125 6.0 218 4.5 86 20.0 1,429 6.5
1995 1,065 11.0 209 4.5 72 20.0 1,346 10.5
1994 960 - 200 - 60 - 1,220 -

Note: Sales and percentage change figures are rounded as

general approximations
Source: Packaged Facts.

Table: Selected Marketers of Products in More than

One Sports Nutrition Category

Sports Protein Energy

Company Drink Drink Bar

American Custom Carbo Force Amino Force; - -

Beverage/American Post-Workout
Body Building Critical
Mass

Champion Cytomax Heavyweight Super Heavy-

Nutrition Gainer weight Bar

General Nutrition Pro Carb Pro Pro

Center(GNC)/Pro Performance Performance
Performance High Energy
Opti Bar

Hoffman Products Super - - Hoffman

Energol Energy Bar

L&S Research Cybercharge Super Zero Carb

Corp./ Infinity Mega Protein
Cybergenics

MLO Products Co. - - Hard Body Hard Body

Muscle- Sports Bar
Zyme; Hard
Body Gainer

Myosystems, Inc. - - MET-Rx MET-Rx

Nutritional Energy Bar
Supplement

Nature's Best Perfect Outgrow Per Fect

Cuts; Weight Amino Acid
Carbo Coffee Drink; Bar
Protein
Shake
Optimum Nutrition Carb Mighty One; Pro-Amino;
Xcelerator; Anabolic All Sport
Fat-Burning Amino 2000 Endurance
Xcelerator; Liquid
Pro
Energizer
Drink

Quaker Oats Gatorade Gatorbar

Science Foods, Carbo Pump; Amino Mass; - -

Inc. Turbo Tea Dynamo;

Quaker Oats Gatorade Gatorbar

Science Foods, Carbo Pump; Amino Mass; - -

Inc. Turbo Tea Dynamo;
Muscle
Shake

Strength Systems Sport Cooler Whey Better - -

USA Protein

TWINLABS, Inc. Diet Fuel; Ripped Fuel; Gainer's

Hydra Fuel; Gainer's Fuel
Ultra Fuel Fuel; many
others

Weider Health and Breakthrough; Victory Tiger's

Fitness Enerquench line; Joe Milk; Tiger
Exceed Weider line; Sport Exceed
Pro Formance
line

Source: Packaged Facts

Table: Estimated Retail Dollar Sales: Sports Drinks (1989-1994)

(In Millions)

Year Dollar Sales % Change

1994 $960 10.0%

1993 870 8.0
1992 805 9.5
1991 735 15.5
1990 635 17.5
1989 220 16.0
Source: Information Resources, Inc.'s InfoScan; Packaged
Facts.This material used with permission.

Figure: Retail Dollar Sales of Sports Nutrition Products

by Product Category (1990-1994)

Graphical Information Can Be Obtained At No Charge From Publisher

Figure: Share of Sports Nutrition Retail Dollar Sales by Product

Category (1994)

Graphical Information Can Be Obtained At No Charge From Publisher

LA-39102 SPORTS DRINKS

Products: Definition

Market Parameters

Drinks Designed to Replenish Fluids and Improve Athletic Performance

Sports drinks are beverages designed to replenish

fluids, supply quick energy, and improve performance during
sweaty, energy-draining activities. Since fluid-replacement
is their most important function, sports drinks tend to be
lower in calories than regular soft drinks. Most contain
electrolytes, usually sodium and potassium.
A smaller class of sports drinks, the so-called carbo-
loaders are higher in calories, usually including both
simple and complex carbohydrates, and are consumed before
strenuous activity to supply sustained energy.
A few drinks that are marketed as sports drinks,
competing for the same consumer, are designed on a different
theory. These are the "fat burners," which have no calories
from carbohydrates, but contain ingredients that are
intended to help the body metabolize fat for energy.
This report recognizes three distinct types of sports
drinks:

- isotonic beverages, which supply calories from simple,

quickly metabolized sugars and are usually fortified with
electrolytes;

- carbo-loaders, which are high in calories from simple

and complex carbohydrates and are often consumed before
strenuous activity;

- fat-burning or "thermogenic" drinks, which have the

same purpose as thermogenic vitamin formulas but also
replenish fluids.

The great majority of sports drink brands currently

marketed are isotonic, and the overwhelming majority of unit
and dollar volume comes from this segment.

Other New Age, Functional, "Nutriceutical"

Beverages Are Not in the Category

Sports drinks are functional beverages, in that they

are designed to supply specific health and nutritional needs
and deliver needed minerals, and sometimes vitamins. For
the same reason, they might theoretically be classed as
"nutriceutical" food which aims to improve health through
nutrition and so serves some of the functions of a drug.
As shall be seen, sports drinks marketers are beginning
to broaden the appeal of their products and to target
consumers of such New Age drinks as Snapple. As marketers
of sports drinks often note, even in the "hot and sweaty
situations" for which sports drinks are designed, many
consumers turn to a soft drink like Coke, a bottled water
like Perrier, or a fruit juice like Motts.
These larger classes of products are important to the
sports drink category because they are part of its immediate
environment, and will be considered where relevant. But as
far as sales and brand descriptions in this report are
concerned, carbonated soft drinks, bottled water, fruit
juices, and ready-to-drink teas (other than tea-flavored
sports drinks) are not included in the category.
Drinks such as Sunbolt, the new caffeine-fortified
breakfast drink recently introduced by the leading sports
drink marketer, is clearly functional but not a sports
drink, though it is relevant to a discussion of that
company's marketing strategy.
Drinks that contain protein, which is used in weight-
gain, weight-loss, and bodybuilding formulas, are also
outside the usual definition of "sports drinks," but are
more closely related, and as such are discussed in Part III
of this report.
This definition of "sports drinks" is basically the
same as that used by beverage industry trade publications
and food retail sales auditing services.

Products: Use

Why Sports Drinks

The Biology of Work

Any type of sustained physical exertion causes the body

to heat up, because of the constant contraction of working
muscles. This heating up automatically sets off two primary
physiological responses: The body begins to perspire,
excreting sweat through the skin to provide a cooling
effect; and blood is directed away from the central areas of
the body to the surface, where the overheated blood is
cooled.
In one hour of sustained exertion, the body sweats out
anywhere from one to three quarts of water. The greatest
loss occurs in hot weather. If the water is not
replenished, the body will eventually halt the perspiration
process in order to conserve what water remains. At this
point, body heat begins rising to dangerous levels.
Therefore, it is necessary to drink some form of water
during sustained work or exercise.

Even Mild Dehydration May Impair Athletic Performance

While it is clear that extreme dehydration is dangerous

to health, more relevant to sports drinks is the fact that
even mild dehydration can adversely affect athletic
performance. According to James E. Wright, editor of Muscle
& Fitness magazine, "A 1% drop in bodyweight occurs before a
person even begins to feel thirsty." Losing only that 1%,
says Wright, can cause an individual's heart rate to
increase significantly and the heart to work harder to do
the same amount of work, while reducing the amount of blood
available to help muscles do their job.

Sweating Out Electrolytes

When the body perspires, it loses not only water, but

also small amounts of "electrolyte" minerals mainly sodium
(salt), but also potassium. The old solution to the problem
of electrolyte loss was to ingest salt tablets. Indeed, it
used to be common for athletes and industrial workers to
find salt tablets placed by the water cooler, especially
during summer.
Salt tablets were abandoned, however, roughly by the
early 1960s. They proved to be stomach irritants and were
poorly absorbed by the body. People also tended to ingest
them haphazardly, taking in either too much or too little
sodium.

Carbohydrates, Exercise, and Carbo-Loading

During exceptionally intensive exercise or work, water

and electrolyte losses are not the only concerns.
Carbohydrates are also depleted, which leads to fatigue.
Carbohydrates (sugars, both simple and complex) are stored
in muscle tissue in the form of glycogen. In order to
embark upon and continue any intensive physical activity,
glycogen must first be stored, then replaced by some form of
easily digestible carbohydrates.
Thus, a high carbohydrate diet for example, a diet
consisting of lots of pasta, an easily digestible source of
complex carbohydrates is recommended during the two or three
days prior to an athletic event. Some "carbo-loading"
sports drinks also operate on this theory. Carbohydrates
are also recommended after strenuous exercise to replenish
the body's store of glycogen.
 Controversy; Sports Drinks vs. Water (1/2)

The Controversy Surrounding Isotonic Drinks

Isotonic Drinks First Appeared in the Early 1960s

Isotonic drinks, designed to hydrate the body and make

up for electrolyte and carbohydrate deficits during
strenuous exercise, first appeared in the early 1960s.
"Isotonic" means muscle contraction without resistance, the
opposite of "isometric" (muscle contraction with
resistance). From the beginning, isotonic drinks were also
referred to as "sports drinks" or "energy drinks." The
sports drinks market has now expanded to include liquids
containing a wide variety of ingredients, including water,
electrolytes, other minerals, vitamins, complex polymer
carbohydrates, amino acids, and other nutritional
supplements.

Their Value Is A Matter of Controversy

Whether sports drinks are better than plain water for

fluid replenishment has long been a matter of dispute.
Critics of sports drinks contend that for the manual laborer
and the casual athlete, eating a balanced diet and drinking
water are sufficient to restore liquid, electrolytes, and
carbohydrates lost during average exertion.
In 1992, Time magazine summed up the critics' viewpoint
regarding the value of sports drinks:

Most medical experts agree that for those who exercise

moderately, plain water will do until the next meal,
which usually replenishes the essential carbohydrates
and minerals.

Sports Drinks' Components May Improve Fluid Absorption

The rationale for including carbohydrates and

minerals and for including particular kinds of
carbohydrates in isotonic sports drinks is not based solely
on the ability of carbohydrates to supply energy, however.
The makers of Gatorade cite laboratory studies to support
the claim that the ingredients in the product hydrate the
body better than pure water does. According to Dr. Robert
Murray, director of Gatorade's exercise physiology
laboratory, "In cooperation with researchers from the
University of Iowa, we were able to compare Gatorade and
water. We were happy to find out that Gatorade stimulates
more fluid absorption than water by at least 30%."
Sodium also enhances fluid absorption, the makers of
Gatorade maintain. According to Rog Rogowski, vice president
of Gatorade worldwide R&D, "The research work that has been
done shows that to get maximum absorption from the small
intestine, getting that water into the blood stream and
cells, the presence of sodium, glucose and other
carbohydrates provides more effective transport. And that's
the key, the active transport of fluids across the
membrane."
Thus, although sodium is sweated out during exercise,
this marketer's main argument for the inclusion of salt in
sports drinks is not to resupply the athlete's body with an
important mineral. Rather, it is that hydration improves
athletic performance, and sodium helps get the water to the
body's tissues.
To this extent, proponents and critics of sports drinks
may be talking at cross purposes. The critics often point
out that a healthy diet will soon replace electrolytes lost
during exercise there is no health danger. If Gatorade's
spokesmen are right, though, that is not the issue. The
question is whether sports drinks hydrate the body better
than plain water, and whether the difference results in
improved athletic performance.

Sports Drinks vs. Water (2/2)

Other Advantages of Sports Drinks vs. Plain Water

Even when in situations in which plain water would be

sufficient to hydrate the body, athletes may not drink
enough of it because water is not as appealing to the taste
buds as a sports drink. Liz Applegate, director of adult
fitness at the University of California at Davis, explains
"Drinking only enough to squelch a dry throat replenishes
only 60% of actual sweat loss. People are, however, more
likely to drink sufficient fluid if the beverage is
sweetened." Of course, not everybody prefers the taste of a
salty sports drink to the taste of water, but many
apparently do.
In addition, the Gatorade Sports Science Institute
claims that preliminary research indicates that sports
drinks modify the "gastric emptying rate" the rate at which
the stomach empties its contents into the small intestine.
They report that "gastric emptying is delayed if the
ingested drink contains more than 2.5% carbohydrates."
The same source sums up the attributes of the ideal
drink for those who engage in exercise: "The ideal fluid
replacement beverage is one that tastes good to the athlete,
does not cause gastrointestinal discomfort when consumed in
large volumes, promotes rapid fluid absorption and
maintenance of extracellular fluid volume, and provides
energy to working muscles."

A Compromise Rule: Exercise Under an Hour,

Water; Over an Hour, Sports Drinks

One way to resolve the debate over the value of sports

drinks is to acknowledge that the beverages are not
necessary for casual exercise or work, but are actually
helpful for those who seriously exert themselves.
A two-point rule of thumb could be formulated, based on
the available evidence: Any exertion lasting less than one
hour can be balanced by drinking plain water and eating a
decent diet; for any intensive work or exercise lasting for
more than an hour, consumption of sports drinks is
beneficial. This view has been expressed by Marion Nestle,
professor and chairman of nutrition at New York University
and former advisor to the United States Olympic team:
"Unless a person is exercising more than an hour, water
should work just fine." Peter Bruno, team doctor for the
New York Knicks, makes essentially the same point, "If you
work out more than an hour, you must replace both water and
sodium. But when you exercise for less than an hour, you
only need to replace the water."

FDA Regulatory Threat Influences Switch

from "Isotonic" to "Sports" Drinks

Although some of the energy drinks found on the market

today are still called isotonic drinks, technically speaking
they are not strictly isotonic because the addition of
substances that add flavor and taste also reduces the
isotonic effect.
The resulting "diluted" isotonic effect is intentional
on the part of marketers. At the time isotonics were
initially introduced, the industry generally believed that
if the drinks were formulated, labeled, and advertised as
isotonic, they would have to be classified as drugs because
they alter bodily functions. That, in turn, would involve
obtaining approval from the United States Food and Drug
Administration (FDA). Rather than confront federal
regulation, marketers formulated the drinks in a way that
would eliminate the need to go to the expense and trouble
involved in certification.
As a result, the term "isotonic" has generally been
replaced by a host of descriptive terms used by
marketers "thirst quencher," "body quencher," and of course,
"sports drink." Today there is no government regulatory
standard for use or content of sports drinks.

Major Ingredients

Ingredients

Major Ingredients

Sports drinks generally consist of water (the main

ingredient), carbohydrates, electrolytes, and flavoring
ingredients. Some also contain additional minerals,
vitamins, and nutritional supplements.

Electrolytes

Most sports drinks contain small amounts of the

electrolyte minerals sodium and potassium (although the
leading brand contains no potassium). A very few contain
calcium and magnesium.
The amount of sodium contained in sports drinks
generally ranges from 35 to 110 milligrams per 8 ounce
serving. The higher number is equivalent to the amount of
sodium contained in a cup of 2% milk.

Carbohydrates

Carbohydrates, in the form of either simple or complex

sugars, are contained in almost all sports drinks. The
simple sugars used include glucose, sucrose, and fructose.
Complex sugars include maltodextrin, glucose polymers, and
dextrose.

The Debate Over Simple vs. Complex Carbohydrates

There is some debate over the superiority of one form

of carbohydrate over another for the purposes of sports
drinks. Some experts maintain that the complex
carbohydrates are better than simple carbohydrates because
they provide slower but sustained energy as opposed to the
quick high and subsequent rapid crash associated with simple
sugars. However, according to the Gatorade Sports Science
Institute, "the type of carbohydrate ingested does not have
a major influence on the gastric emptying rate."

Fructose

The one exception is fructose, one of the simple

sugars. Research has shown that fructose is absorbed more
slowly than other carbohydrates and thus does not stimulate
as much fluid absorption. Proponents of fructose say this
slowness of absorption is good, as the body metabolizes it
more slowly. Opponents hold that, in the words of the
Gatorade Sports Science Institute, "Gastrointestinal
distress and osmotic diarrhea are common side effects of
drinking fructose solutions during exercise."

Amount of Carbohydrates

The ideal amount of carbohydrates in a regular

(isotonic) sports drink is also a matter of debate, with the
Gatorade Sports Science Institute supporting the 6% found in
Gatorade. According to the Sports Science Institute, sports
drinks containing under 5% carbohydrates are less likely to
provide benefits, while those exceeding 10% (like most soft
drinks) are associated with abdominal cramps, nausea, and
diarrhea.
Carbo-loaders, on the other hand, contain extremely
high quantities of carbohydrates, sometimes equivalent to
six or eight servings of pasta or potatoes. Although carbo-
loaders may supply electrolytes, their high carbohydrates
content requires too much digestion for them to be used
during exercise. Carbo-loaders are intended for use before
or after a workout, either to pump muscles full of glycogen
or to aid in recovery after glycogen has been depleted.
Carbo-loaders are also more likely to include vitamins in
their ingredient lists. They are targeted toward athletes
and are marketed almost exclusively in health food and
sporting goods stores.

Ingredients: Vitamins; Nutritional Supplements; Flavoring

Vitamins

A few sports drinks incorporate vitamins. The most

commonly used vitamins are C, B complex, and A. Vitamin C
is good for maintaining healthy bones, tendons, and
cartilage, and it enhances iron absorption. Vitamin C is
also an antioxidant, helping to reduce the generation of
oxygenated free radicals caused by, among other things,
intensive exertion.
The B complex vitamins help release energy from
carbohydrates and fats, aiding the body in using proteins
efficiently. According to an article in Food Processing,
vitamins B-6, B-12, and folic acid are especially important
B complex vitamins for athletes. Vitamin A in the form of
beta carotene is also important for athletes.
Though the value of these ingredients for general
health, and the athletes' special need for them, is widely
acknowledged, it is a matter of debate whether the presence
of any of them in a sports drink can make an immediate
difference in athletic performance.

Other Minerals

A few sports drinks contain minerals other than sodium

and potassium. These minerals include calcium, chloride,
chlorine, chromium, iron, magnesium, manganese, phosphorus,
and zinc. According to Food Processing, magnesium and
potassium can protect the heart, and the right balance of
other minerals in sports drinks can provide other protective
and preventative benefits for the athlete.

Nutritional Supplements

Also on the sports drink market are sports-type

specialty drinks containing nutritional
supplements proteins, herbs, and various extracts. Among
the supplements offered in specialty sports drinks are amino
acids, ginseng, whole grains, soy powder, bee pollen, and
spirulina (a sea algae with supposed digestive and energy-
enhancing properties).

Lemon-lime, Orange, and Fruit Punch

By Far the Most Common Flavors

The range of available flavors and best-selling flavors

in sports drinks is noticeably different from the flavors
available in other soft drinks. Though new flavor
introductions help expand the market, lemon-lime, fruit
punch, and orange are by far the most common.

Flavors Must Mask Bitter and Salty Electrolytes

The functional aspect of the beverage is what limits

its flavor. One industry analyst explains: "The make-up of
sports drinks is such that certain flavors help make the
bitterness caused by the minerals and vitamins in these
products better than others. You could come up with the
sweetest-tasting tangerine flavor you want, but blended in a
sports drink, it will end up tasting like hell."
According to Dr. Robert Peterson, director of Flavor
Development, Haarmann & Reimer, "Mineral salts are probably
the most difficult to mask, due to their astringency,
bitterness, and saltiness, with vitamins being a close
second due to their bitterness, sulphur notes (i.e.
thiamine), and overall foreign taste in the finished
product. Consequently, each base must be examined
individually. In general citrus flavors tend to be
acceptable with the mineral salts if acidity is adjusted,
which tends to offset the salty character."
The flavor range has gradually expanded, however, and
for two reasons. On the one hand, flavor technology has
improved in recent years, allowing a wider range of flavors
to be used in sports drinks. In addition, newer entries
tend to be sweeter and to contain lower amounts of salt, so
there is less to mask.
Today, sports drinks can be found in flavors as exotic
as lichee, mango, pi¤a colada, ginger, and kiwi. These are
pretty rare, but flavors such as grape (with its special
appeal to children) and iced tea (a response to competition
from ready-to-drink teas) have established themselves as
standard additions to the traditional flavor alternatives of
lemon-lime, orange, and tropical punch.
Note that carbo-loaders, which tend to be dairy-based
rather than water-based fluids, are flavored along the lines
of milk shakes vanilla, chocolate, strawberry, and banana.

Sweeteners

For the most part, the carbohydrates in sports drinks

act as sweeteners. Some sports drinks also include
artificial sweeteners, such as aspartame (NutraSweet) to
increase the flavor appeal of their drinks.

Most Sports Drinks Are Noncarbonated

High carbonation levels, as found in soft drinks,

impede rapid absorption of the fluid, so most sports drinks
are noncarbonated. A few high-profile marketers field
sports drinks that are lightly carbonated.
Low in Sodium or Carbohydrate or No-Additive Products

Some sports drinks are marketed on the basis of being

low in certain ingredients or being additive free. Several
sports drinks are marketed as low in sodium or low in
carbohydrates. A few contain no sodium at all. Additive-
free sports drinks include those that contain no caffeine or
artificial ingredients sweeteners, colorings, flavorings, or
preservatives.

Newest Sports Drinks Lower In Salt, Higher in

Carbohydrates

The leading sports drink derives its famous "sweaty

sock" flavor from its high-salt ingredient profile, and over
the years challenger brands have tended to imitate this
formula while mitigating its effects on the products'
flavor. This trend appears to be changing. "Up to now,
sport beverages were designed to replace electrolytes,
mainly sodium," says Max Blum, marketing manager, Food
Business Unit, Hoffmann-LaRoche. "But most people get
plenty of sodium in their diet. New products are coming out
with lower sodium."
The most important new brands of sports drinks are also
considerably higher in carbohydrates.

Products: Forms and Packaging

Product Forms and Packaging

Liquids and Powders

Liquid, ready to drink, is the basic form of the sports

drink, but most of the major brands are also available in
the form of powders, to which the consumer later adds water.
Powders and concentrated liquids are also available to
athletic teams and institutional markets where the mixing is
done in bulk.

Packaging and Labeling

The packaging of sports drinks is extremely varied,

since marketers compete for shelf space by appearing in as
many forms as possible. Sports drinks are available in
glass jars; aluminum cans, paperboard composite cans;
plastic PET containers, aseptic drink boxes of the kind most
often seen in children's beverages; and plastic pails (the
latter for powdered forms).
The most traditional package is a wide-bodied glass jar
with a metal screw-top lid. The mouth of the jar may be
wider-than-average for hasty guzzling. A glued-on paper
label wraps around the jar. On the side of the label meant
to face outward from the shelf, the logo and advertising
claims ("Natural Flavors" "Non-Carbonated" "No Caffeine")
are shown along with logos of athletic institutions that
endorse the product, a phrase about the endorsement ("The
Official Sports Drink of..."), and the volume of the product
in ounces and metric measures. Other parts of the label
show bar code, ingredients, mandatory nutritional
information, lot numbers, copyright, instructions
("refrigerate after opening"), and a toll-free number for
consumer information.
Increasingly, the glass jar is being replaced by a hot-
filled PET container of similar design.
Common sizes are 8.0 ounce, 16.0 ounce, 32.0 ounce, and
64.0 ounce. Aseptic drink boxes commonly come in an 8.45
ounce size. Aluminum cans are generally 11.6 ounces.
Plastic pails of powdered drinks come in sizes up to 10.0
gallons.
The smaller size glass and PET jars are sometimes sold
in cardboard-and-plastic three-packs or six-packs.

Market Size and Growth

Market Size and Growth

Market for Sports Drinks Reaches $960 Million in 1994

Based on Information Resources, Inc. (IRI) sales

figures for supermarkets as well as estimates, in beverage
industry and convenience store publications, of sales in
other retail outlets, Packaged Facts places the retail
market for sports drinks at $960 million in 1994, an
approximate 10% increase over the previous year.

Sharp Increase in Competition and Ad

Spending Yields Disappointing Gains

This 10% increase brings the sports drinks' rate of

growth into double digits, barely, for the first time since
1991. However, since it is occurring in a year of stepped-
up competition and at least doubled advertising
expenditures, the results must be considered disappointing.

Growth Faster in Convenience Stores

In convenience stores, where the new competitors, Coca-

Cola and PepsiCo, are strongest, and where growth has been
faster for the past few years, sales increases were steeper,
around 12% versus 8% in supermarkets.

Unit Volume Increases Faster than Dollar: Average

Price Declines

In supermarkets, according to IRI data, unit sales

increased 10%, from around 91 million gallons in 1993 to
around approximately 100 million gallons in 1994. Since
dollar volume in supermarkets went up only 8%, the average
price of a gallon of sports drinks decreased during this
period, from $4.57 to $4.50, probably as a result of
increased competition that slightly outran consumer demand.
(When discounts and coupons are figured in, the price drop
was undoubtedly greater.)
It is likely that unit volume also increased faster
than dollar volume in the market overall. Since
supermarkets represent a little less than half the market
for sports drinks, Packaged Facts estimates that between 200
million and 210 million gallons of sports drinks were
consumed nationally in 1994. This represents a slight
increase, not a sharp decrease in total consumption. Per
capita consumption of sports drinks remains stable at around
eight-tenths of a gallon.

Factors in Future Market Growth (1/3)

Stepped-up Competition Raising Promotion and Public Awareness

Soft drink beverage companies have found their

traditional profit centers eroding in the last few years,
during which carbonated soft drink sales have grown at much
slower rates than those noted for sports drinks. As a
result, these marketers have decided to make a serious run
at the sports drink category, which has up until now been
dominated by one company and one brand. As the May 1994
issue of Food & Beverage Marketing put it, "With the
carbonated soft drink market in the crapper at least as
compared to years past Pepsi, Coca-Cola, and Dr. Pepper/7-Up
have all decided that, in the sports beverage biz, they're
ready to ruuuummble!"

Market Reaches Critical Mass, Leading Competitors

to Increase Marketing Efforts

According to Mike Weinstein, president of the New York-

based beverage consulting firm Liquid Logic, at $1 billion
the sports drink market, though still only a fraction of the
size of the carbonated soft drink business, has at last
become large enough to warrant the spending necessary to
challenge Gatorade's domination.

40% of New Sports Drinks Appeared Since 1991

The sports drinks market has always tempted outsiders:

200 brands have appeared most have come and gone since 1980.
And around 80 of them, or 40% of those 200, have been
launched since 1991.
Category Ad Spending Has Reached Record Levels

As Coca-Cola and PepsiCo introduced their new brands of

sports drinks nationally for the first time, and Quaker
scrambled to defend its share, spending in the sports drink
category reached nearly $64 million in 1994, more than twice
the previous year, and 166% over 1992's spending level.

Cola's Loss Is Isotonic's Gain

If the poor showing of colas in the last few years has

brought carbonated beverage companies into the sports drink
category, this is probably because cola customers went there
first. A grocery merchandising director comments, "I think
a lot of the isotonic sales are coming from consumers who
are switching from cola drinks, looking for healthier
alternatives."

Factors in Future Market Growth (2/3)

Retail Far from Saturated

According to Quaker Oats executive Donald B. Williams,

Gatorade (which still is nearly synonymous with the market)
is available in 200,000 locations, while soft drinks are
available in 2 million locations. "Availability is going to
take this business from where it is today to another two- or
threefold increase in size."

Neither Is the Market According to the Marketers

"In a hot and sweaty situation," explains Williams, "we

have about a 13 share, bottled water has an 11 share and
soft drinks have about a 12 share." The remainder is, of
course, tap water. Therefore, reasons Williams, "we have
nowhere to go but up."
The average per capita consumption of sports drinks in
the United States is around 3 quarts per year. The average
per capita consumption of soft drinks, by comparison, is
somewhere between 195 and 200 quarts per year.
Despite this argument, it is not certain whether the
market for sports drinks is at least getting close enough to
saturation to slow its growth. Tap water, which is free and
nonfattening, may have yielded as much share as it is going
to yield to sports drinks. The same may be true of bottled
water and carbonated drinks, which have their special
advantages too.

Sports Drinks Starting to Be Seen as Health Drinks

Sports drinks can be viewed as the great pioneer of the

functional beverage, especially designed for a specific
nutritional need. Consumers know that sports drinks have
ingredients in them meant to improve athletic performance in
certain situations. They also perceive sports drinks as
healthy. This perception, and the growing interest in
functional beverages, gives marketers the opportunity to
expand the interest in sports drinks beyond the athlete at a
time when athletic participation is declining, but interest
in health and nutrition continues to rise.
As an article in a 1993 issue of Food Business put it,
"Many of the new sports drinks are positioned as lifestyle
beverages rather than as carbohydrate-packing potions for
serious athletes." Thus, many of the newcomers to the
category aim at stealing share not merely from the market
leader, Gatorade (a frustrating goal in the past), but from
children's drinks like Hawaiian Punch and Hi-C, or from
fruit juices or New Age beverages like Snapple.
"Sports drinks are something other than what they used
to be," says Tom Pirko, president of Bevmark, a Los Angeles-
based consulting firm. "People no longer live in health
clubs. Rather than having a sports drink after running a
marathon, you have it after mowing the lawn."
The recent multiplication of colorless, clear-as-water
sports drinks is an indication of marketers' aim to
reposition sports drinks as healthy lifestyle drinks.

Battle of the Brands Leads to Innovation

and More Consumer Appeal

New competition, using more creative approaches than

had been used in the past, has elicited an active response
from the brand leader. The result has been a general shake-
up in the category, many new flavors and forms, changing
appearance, and changes in packaging. The proliferation of
products and choices has added, and is continuing to add, to
the consumer appeal of sports drinks.

Global Warming May Aid a Category Tied to Warm Weather

The weather is an unpredictable, but influential,

factor in sports drink sales. Specifically, hot weather
promotes sales, as was evidenced during the extremely hot
summers of the late 1980s. This fact raises the possibility
that global warming may have a long-term influence on the
category.
Thanks to a couple of harsh winters and mild summers
early in this decade, the threat of global warming has
receded from the public mind, but to scientists the trend
toward higher average temperatures remains a reality.
According to a recent article in The New York Times, experts
ascribe this year's unusually mild winter (with many days of
record high temperatures) to a resumption of global warming
patterns. As a Gatorade spokesman points out, in the sports
drink category, for "every five degrees over 80ø degrees
Fahrenheit, sales make an incremental increase." Global
warming is likely to make a difference in higher unit and
dollar volume between now and the end of the century.
 Factors in Future Market Growth (3/3)

Potential for Foreign Expansion

As will be discussed in greater detail in the

Competitive Situation, per capita consumption of sports
drinks in Europe is a mere 0.53 quarts a year, around an
eighth of what it is in the United States. Failure to
spread the message about sports drinks, and difficulties in
penetrating the European convenience class of trade, has
made category growth slow there, but the potential is
enormous. The European market for sports drinks currently
around $165 million could climb to $500 million plus in the
next couple of years, according to the England-based market
research firm Leatherhead Food.

But: Sports Activity Declining in All Age

Groups, According to Survey Data

The fitness boom of the 1980s has definitely passed its

peak. According to a 1993 article in American Demographics,
sports activity declined 10% between 1985 and 1990. Surveys
by the National Association of Sporting Goods show that this
decrease in sports participation has continued in the early
years of the 1990s. Demographics cannot be blamed, at least
in any direct way, for the decline in activity, since the
decreased involvement affected all age groups. Fitness booms
have come and gone in regular cycles in the United States
throughout this century.
There is an encouraging note even in this piece of
apparently bad news, however. Sports drink consumption grew
at rates above 20% between 1985 and 1990, despite the 10%
decline in sports participation.

Increased Consumer Promotion May Erode Prices

While increased competition undoubtedly leads to

greater consumer awareness and trial of the products, it
also leads to discounting and even price wars, deflating the
results of unit sales gains.

Competition from New Age Drinks

Ironically, the same events that have led soft-drink

companies into the sports drinks arena the erosion of soft
drink sales by juices and other New Age beverages seem to be
acting as a brake on the growth of sports drinks sales as
well. The 10% growth in dollar sales from 1993 to 1994 is
unimpressive considering the enormous jump in sports drink
advertising.
Jim Stevens, president of the Suntory Water Group,
which has struggled in the category for years, is not
encouraging about the prospects for sports drinks. "I don't
think the category is moving very quickly at all." Stevens
predicts that competition from alternatives such as teas,
bottled water, juices, and New Age beverages will continue
to eat into the growth of sports drinks.

Poor Showing in 1994 Raises Doubts about Category's

Future

The year 1994 seemed to bear out Stevens's prediction.

Probably because of the many new alternatives beverage
consumers now have available, the market for sports drinks
did not grow at a rate commensurate with the money and
effort that three powerful corporations put into it. The
failure of the market to expand at more than 10% in a year
of more than double advertising and promotion outlays makes
it doubtful that the category will ever return to the 20%
growth rates of the 1980s.

Projected Sales

Sports Drinks to Reach $1.4 Billion by 1999

Based on the foregoing factors, Packaged Facts

estimates that the market for sports drinks will reach
approximately $1.4 billion by 1999, a compound annual growth
rate of about 7.5%. The assumptions governing the
projections given below are these: Increased competition in
the marketplace will yield a higher increase in 1995. But
then, dissatisfied with their gains, the major competitors
will either sharply reduce support of their brands or bow
out altogether. That year (whenever it may actually occur),
slower-than-average growth will reflect the disappearance of
tempting discounts and promotions. Thereafter, the maturing
sports drinks category will settle down to what may be
considered its "natural" rate of increase for the late
1990s.

Market Composition; Sales by Distribution Channel; Use by Region;

Per Capita Consumption

Sports Drinks Represent Around 3% of Total Soft Drink Sales

Sports drinks comprise only a small portion of total

soft drink sales. Trade estimates place sports drinks dollar
sales at approximately 3% of all soft drinks sold in 1994.

Liquids Outsell Powders More than 10 to One

Sports drinks in liquid form outsell powders by a

little over 10 to one.
The ratio is shifting even further in favor of liquids since
sports drinks moved into convenience stores, where emphasis
is on the impulse purchase of a ready-to-drink product.

Nearly One Out of Every Three United States

Adults Drink Sports Drinks

According to Simmons Market Research Bureau data, in

1994, around 56 million (nearly a third) United States
adults sometimes consume sports drinks. Most are under 40
years old. Three out of five of them are male which means
that a far from negligible two out of five are female.

Sales by Distribution Channel: Retail Dominates

The retail market for sports drinks accounted for 93%

of the total value of 1992 sales, according to Beverage
World. The athletic/institutional market for sports drinks
accounted for around 6.5% of sales, while the industrial
market generated just 0.5%.
Since 1992, the competition for the consumer dollar has
heated up, and new products have tended to be those that
have more appeal for the amateur athlete than for the
professional athlete. It is probable that retail is
continuing to expand at a faster rate than either the
athletic or the industrial channel.

Supermarkets Sell about Half of Sports Drink Volume

Supermarkets account for roughly half of sports drinks

sales through retail outlets. Convenience stores and
smaller grocery stores register approximately 40%. Thus,
food stores overall account for 90% of retail share. The
remaining 10% of retail sales trace to health food stores,
gyms, vending machines, gas stations, sporting goods stores,
and other outlets.

Use by Region

Sales and per capita use of sports drinks is heavily

skewed to the South. With about 35% of the United States
population, the South is home to 41% of sports drinks users.
The Midwest and Northeast are weakest in sports drinks use,
both with lower user bases than their percentage of the
United States population.

Per Capita Consumption of Sports Drinks in Florida Nearly

Twice United States Average

In Florida, the home of the Gators (the Florida State

University football team) and origin state of Gatorade, per
capita consumption of the product is twice what it is on the
national level. Since Gatorade is still at least 75% of the
sports drink category, Florida is also the state in which
per capita consumption of sports drinks are highest.

Sports Drinks Sell Best in Summer

As would be expected, sports drinks are a highly

seasonal item. Most consumption occurs in the late spring
through the summer months, April through September. "A good
summer makes everybody's marketing plan look brilliant,"
observes Jesse Meyers, publisher of Beverage Digest.

Marketers: Overview; Leaders

The Marketers

Over 30 Marketers

Over 30 companies compete in the sports drinks arena.

They range in size from quite small companies that sell
mostly to specialty health food stores to multibillion
dollar corporations. Several are beverage companies, but a
number of them approach sports drinks from the "sports" or
"functional," rather than the "drink," side. These include
vitamin companies and sports equipment companies.

Quaker Oats Dominates the Sports Drinks Category

Quaker Oats, whose Gatorade, the dominant brand in the

market, is often used as a synonym for sports drinks, is one
of the nation's largest food marketers. In its origins a
cereal company, Quaker Oats acquired Gatorade with the
purchase of Stokely Van Camp in 1986. With the 1994
acquisition of the rapidly-growing New Age beverage Snapple,
Quaker Oats has announced a goal of ultimately doing half
its business in beverages.

Coca-Cola and Pepsi Cola Are the Most

Serious Challengers to Quaker Oats

Quaker Oats, a household name, faces its most

significant competition from two other household names, Coca-
Cola, with PowerAde, and PepsiCo, with All Sport. These
brands, introduced on a regional basis in 1990 and 1991
respectively, were launched nationally for the first time in
1994.

Suntory Water Group Focuses on Children's Niche

In the years prior to 1994, the company with the second-

largest brand share in the category was Suntory Water Group,
a division of Suntory International of Japan, with the
product 10-K. In 1993, 10-K repositioned itself as a sports
drink for children aged 6-12, and gained share by targeting
this special market segment. But 10-K lost ground in 1994
when the two cola companies stepped up their marketing
efforts.

Major Competitors in Health Food and Sports Stores

Dozens of brands of sports drinks are marketed solely

in health food stores and athletic specialty stores. For
these marketers, sports drinks are frequently just one item
in an extensive line of sports nutrition products. Several
of these companies are discussed in greater detail in this
report in connection with the market for protein drinks and
energy bars. They include Twin Laboratories, with Ultra
Fuel and Hydra Fuel, and Weider Foods with Exceed.

Significant Minor Marketers of Sports Drinks

Outside health food stores and athletic specialty

stores, minor marketers of sports drinks a number of which
are majors in other categories include Royal Crown Bottlers
(Enduro), White Rock Products (Workout), Dr. Pepper/Cadbury
(Nautilus Plus), and Shasta Beverages (Body Works).

Of Four Leading European Marketers,

Only One Is a Beverage Company

In Europe, marketers of sports drinks are more likely

to be drug companies than soft drink companies. Major
brands include Gatorade, from Quaker Oats, which is still
thought of as a cereal marketer, Lucozade, from SmithKline
Beecham Plc, and Isotar, made by Sandoz AG's Wander unit.
Only Coca-Cola, a relative newcomer to the European sports
drink market with its Aquarius brand, is primarily a
beverage company.

Brand Shares

Quaker Oats/Gatorade Leads, But Supermarket Share Drops Six Points

Based on Information Resources Inc.'s InfoScan audit of

sports beverage sales at supermarkets, it is estimated that
Quaker Oats' Gatorade had a share of 82% in these outlets in
1994, a six point drop from its 1993 share of 88%. In the
face of the toughest competition in the brand's history,
Gatorade clocked about 1% growth in sales volume, an
additional $4 million, in a market that grew more than 8% in
supermarkets.
This time, Coca-Cola's PowerAde and PepsiCo's All Sport
have certainly hit home, winning share from Gatorade, and
not just from minor marketers. It is not a very hard hit,
however, considering the price paid. Gatorade remains the
only major brand in the category.

Gatorade Share in Other Outlets around 78%

Retail sales in convenience stores, delis, mom & pop

groceries, health food stores, gyms, and vending machines
are not as well tracked as those in supermarkets.
Nevertheless, Quaker Oats spokespersons and beverage
industry analysts agree that Gatorade's share in these
outlets is somewhat smaller than at supermarkets, probably
around 78%.

PepsiCo's All Sport in Second Place at around 6%

PepsiCo's All Sport pushed ahead in supermarkets in

1994, to more than a 6.0% share from its 1993 share of about
1.5%. All Sport's sales increased 354% to around $28.0
million in supermarkets. It should be noted that PepsiCo's
1994 measured advertising for the brand was $11.6 million
dollars: almost a three to seven ratio of measured ad
dollars to sales.

Coca-Cola's PowerAde in Third Place at 5.3%

PowerAde was the third place brand in 1993, after

Suntory 10-K. In 1994, it is still in third place in
supermarkets, with $13.2 million in measured advertising
expenditures, having crept ahead from little more than a 2%
share to a 5% share. Total retail supermarket sales of
PowerAde were about $23.0 million, less than twice the
amount of measured advertising for the brand.

Suntory's 10-K Sinks in Ranking, Share, Volume, and

Dollar Sales

Suntory's 10-K, which has cut back advertising and

promotion in the face of aggressive competition from the two
biggest soft drink marketers in North America, saw its
supermarket brand share sink from nearly 4% to less than 3%.
According to IRI, 10-K's supermarket sales dropped around
$3.7 million to $12.6 million.

Private Label's Share around 1%

According to Supermarket Business, private label has

made little headway in the sports drink category; its share
of retail sales stands at around 1%.
No other sports drink brand had a significant share of
the sports drinks category in supermarkets in 1994.
Minor Brands and All Other Brands Do Somewhat
Better in Nonsupermarket Outlets

Though numbers for convenience stores and other small

outlets are hard to obtain, it must be assumed that minor
brands (including those fielded by the major marketers) are
doing somewhat better in these outlets, where, moreover,
sports drinks as a category is growing faster than it is in
supermarkets. If Gatorade's claim of 78% is anywhere near
correct though, the handful of share points Quaker has given
up cannot be very satisfying to the likes of Coca-Cola and
PepsiCo, a pair of lions unaccustomed to eating scraps and
gnawing bones.

The Competitive Situation: Leaders

Latest of the Sports Drinks Wars in Progress

A single brand, Quaker Oats' Gatorade, has ruled the

sports drink category since the late 1960s, for most of that
time holding on to a brand share of between 85% and 90%. In
the words of Jesse Meyer, publisher of Beverage Digest,
"There is not a beverage category in any country of the
world that is so dominated by one producer." Meanwhile, the
category's extraordinary growth has made it tempting to
beverage marketers. Over 200 brands have come up against
Gatorade in the past 20 years.
The sports drink wars have heated up and cooled down
periodically over the years. The current period is the
hottest yet, with 80 of the aforementioned 200 new sports
drinks introduced since 1991. Measured advertising expendi
tures in 1994 were more than double what they had been in
1993.

1994 the Hottest Battle Yet, As the Cola Giants Go National

The latest battle is of greater intensity than previous

efforts because the beverage giants, experiencing lean years
in their main brands (carbonated soft drinks grew 1.5% in
1992), have selected sports drinks in their search for new
profit centers.
In 1992 and 1993, Pepsi and Coke had only partial,
regional distribution of All Sport and PowerAde, their
latest challengers to Gatorade. Introducing these products
in the warm regions of the country, where per capita consump
tion is highest, they fine-tuned their images and ad
campaigns, and began chipping away at Quaker Oats' brand
share.
In 1994, All Sport and PowerAde arrived in earnest on
the national scene, and their owners, PepsiCo and Coca-Cola,
began to show what they can really do. With advertising
budgets of $11.6 million and $13.2 million respectively, All
Sport and PowerAde have reduced Gatorade's share from 88% in
1993 to 82% in 1994. Gaining share partly from Quaker Oats
and partly from other minor players, PepsiCo's All Sport
tripled its share to 6%, and Coke's PowerAde more than
doubled, to 5%. Clearly a blow to Gatorade, but delivered
at a high cost to the competitors. Figuring in unmeasured
advertising and promotion and remembering that the companies
sell syrup and powder at wholesale prices not fluid at
retail prices, both companies undoubtedly took a loss on
their sports drink brands.
Expenditure on this scale is meant to establish a
brand, which ought to develop some momentum of its own and
win consumer loyalty; whether this is happening remains an
open question. Jim Stevens, of Suntory, whose 10-K has been
shoved aside by the battle of the titans, thinks not:
"Considering the expenditure, it's a disaster."

Basically a Three-Way Conflict: Gatorade, All Sport, PowerAde:

10-K Takes Cover In "Tween" Niche

Suntory's 10-K, which has hung on in the shadow of

Gatorade for years, was the second leading brand though a
very distant second for a few years until 1994. In 1993,
frustrated by failure to make progress and with a glance at
emerging demographic trends, Suntory recast 10-K as a brand
for "tweens" children aged 8-12, with a new formula, new
flavors, and new packaging and advertising aimed at
achieving this position. When the storm came in 1994, 10-K
trimmed its sails, reducing its measured advertising 20%.
Its president, Jim Stevens, who initiated the "tweens"
strategy, seems disillusioned with the sports drink
category.
With Suntory cutting its advertising the year that Coca-
Cola and Pepsi arrived in force, the war for sports drinks
dominance has become a tough three-way conflict.

Shakeout of Minor Marketers Seems to Be Underway

One result of the intensified competition appears to be

the destruction of minor-league hopefuls such as Cadbury
Schweppes, which dropped Everlast in 1994 and Dr. Pepper/7-
Up, whose Nautilus survives only as Nautilus Plus, in the
small powdered segment of the market.

Competitive Situation: Challengers

Advantage of the Challengers: Formula to Suit Changing Market

The challengers have one advantage that derives from

their sheer newness in the sports drinks category. They
have been free to invent and reinvent themselves, to devise
a formula that will fit the changed nature of the sports
drink market. Gatorade, by contrast, is committed to its
theory of the sports drink and to retaining the loyalty of
its customer base.
 In formulating their brands, Coke, Pepsi, and Suntory
seem to be betting that the future lies with a sweeter, less
salty sports drink, one that is better tasting and has
appeal beyond serious athletes. Gatorade has the lowest
number of calories of the four brands. None of the
challenger brands approach the salt content of Gatorade.

Another Advantage of Challengers: Distribution

An advantage that Coke and Pepsi have always had though

it had not in the past been enough to beat Quaker Oats is
their bottler networks. Quaker Oats, a grocery company, is
well established in supermarkets but weak in other outlets.
Lately, in its effort to get closer to the "points of
sweat," which means closer in time and space to actual
athletic events, Quaker Oats has been courting the
convenience store trade. Coke and Pepsi, through their
other products, already have full access to convenience
stores. As David Goldman, an analyst with Oppenheimer &
Co., puts it, "Quaker's distribution extends primarily to
supermarkets. They don't have distribution expertise in
nonsupermarket trade channels."
In addition, Coke and Pepsi are well represented in
vending machines, and could push their products through that
channel more easily than Quaker Oats could.
According to Andrew Christon, of the Atlanta-based
beverage consulting firm, Christon & Co., "Right now, I
can't get Gatorade in vending machines, and it's not
prominently displayed in the grocery stores." Christon
attributes this to the fact that Quaker Oats is not
primarily a beverage marketer. "You give a bottler that has
exclusive rights to a territory a new product and a little
media support, and he will find ways to sell it."

The Competition Goes Beyond Sports Drinks

Any discussion of the competitive situation in sports

drinks must consider that the competition is not only
between Gatorade and its sports drinks competition, but also
between all sports drinks and other beverages, including
soft drinks, fruit juices, coolers, and ready-to-drink
teas. The beverage industry is constantly revolutionizing
itself. Consumers have become used to seeing rapid change
and to trying new products; brand loyalty is not what it was
in our fathers' day.
It is interesting to consider Quaker Oats' recent
purchase of Snapple in light of the importance of juices and
New Age beverages as competitors for sports drinks. While
Snapple is obviously a desirable company in its own right,
it also hedges Quaker Oats' bets.

Competitive Focus: Quaker Oats and Gatorade (1/2)

"The Marketing Story of the Century"

 Gatorade, which has been called "the marketing story of
the century," is among the most successful products in the
history of American packaged goods. It has thoroughly and
completely dominated a strongly growing market for over 25
years.
Since it is Quaker Oats' number one brand, Gatorade is
sure to be aggressively defended whenever a challenge
arises indeed, 200 challengers have arisen over the last
quarter of a century.

"We Didn't Have Gatorade"

The product was developed in 1964 by Dr. Robert Cade

for the Florida State University football team, the Gators.
The brand began its rise to greatness on New Year's Day
1967, when the Gators defeated Georgia Tech in the Orange
Bowl, and Georgia Tech's coach Bobby Dodd complained to
reporters, "We didn't have Gatorade. That made the
difference."
That same year Cade sold the brand to Stokely-Van Camp.
At first, Stokely sold Gatorade only to the institutional
market. Then in 1969, the brand was introduced nationally
into retail channels, and Gatorade took off in sales.
A prime factor in Gatorade's successful introduction
was the distribution that Stokely-Van Camp was able to give
the product. Within nine months of its launch, Gatorade was
available in all of the 50 states except Alaska. Before
1969 ended, retail sales of the product totaled $10 million.

Quaker Oats Acquires Stokely-Van Camp and Gatorade in 1983

In 1983, Quaker Oats acquired Stokely-Van Camp and

Gatorade. At the time, a spokesman for Quaker Oats stated
that the company's main interest was Gatorade, and Quaker
Oats was willing to bid for this brand alone. "Of all
Stokely-Van Camp's businesses, Gatorade was the most
attractive because of its well-known consumer name and its
good return."

Line Extension Activity Accelerated After Quaker Takeover

After Quaker Oats acquired Gatorade, new product and

line extension activity increased. More new flavors were
added to the line, along with a new light version called
Citrus Cooler. Since then, updated packaging, revamped
labeling, and new products have all helped make Gatorade the
biggest-selling and most profitable brand of the entire
Quaker Oats company.

Gatorade's Package Size Expansion Strategy

Asked by U.S. Distribution Journal (January 1994) to

name major factors that helped make Gatorade grow tenfold
over the course of a decade, David B. Williams, vice
president of sales in the United States and Canada, named
"size expansion" first.

When we [Quaker Oats] bought the business, it was

essentially a 32 ounce business; it came in a glass
bottle and that was it. Then we introduced a 64 ounce
in plastic, which increased the average purchase and
again grew the business exponentially. Then we
introduced the plastic gallons.

Packaging innovation taking it from three or four SKUs

and adding major new sizes with appeal has been a
major factor in driving the business. Beverage
consumers are very package and size loyal and we
learned that very well over time.

The variety of packaging available reflects the

continuing creativity that Quaker Oats applies to the
Gatorade brand. As an example, it once added a one-quart
reusable plastic bottle with a twist-off cap. The marketing
hook was a white line across the bottom of the bottle with
print saying "Property of," leaving the user to fill in his
or her name.

Gatorade's Flavor Multiplication Strategy

Since its purchase of the brand, Quaker Oats has

expanded Gatorade from three to eight flavors, and found
that every new flavor introduction permanently increased the
size of the brand. In the early 1990s alone, Gatorade
introduced tropical punch (1991), grape (1992), and iced tea
(1993). The currently available Gatorade flavors are lemon-
lime, lemon ice, orange, citrus cooler, fruit punch,
tropical fruit, grape, and iced tea.

Gatorade Flavors Are in Part Responses to Challenger's Flavors

To a certain degree, Gatorade's flavor introductions

are probably reactions to flavor introductions by Gatorade
challengers, who have led the way in broadening the flavor
palette for sports drinks beyond the traditional salt-
masking lemon-lime, fruit punch, and orange. The
introduction of an iced tea flavor is a reaction to
competition from another category entirely the new ready-to-
drink teas that have increasingly been marketed to consumers
in the very same "hot and sweaty situations" for which
Gatorade is designed.

Gatorade's Sports Promotion Strategy

Effective sports promotion has been a key to Gatorade's

success as far back as the early days when Stokely-Van Camp
marketed the product. Almost from the beginning, Stokely-
Van Camp initiated a program of working with sports
trainers. The idea was not only to increase institutional
sales, but also to capitalize on the acceptance of the
product by sports figures as a stepping stone to increased
retail sales.
Stokely-Van Camp obtained endorsements from amateur
events, running events, selected PGA and LPGA golf
tournaments, the National Basketball Trainers Association,
and the National Football League. As part of the arrange
ment with the NFL, Stokely was given permission to try to
work out promotional tie-ins with various NFL teams.
Unlike amateur teams, who received free Gatorade cups
and coolers, pro teams had to pay for them. According to
the deal with the NFL, for example, teams sponsored by
Gatorade had to purchase the isotonic drink for both
practice sessions and games. For each televised NFL game,
Gatorade was provided in huge coolers with the Gatorade logo
printed on both sides of the cooler in letters so large they
were visible to the thousands of fans attending the game, as
well as to the millions of TV viewers watching the game at
home.
When Quaker Oats took over, these promotional programs
were expanded greatly. The Gatorade promotions have paid
off most in football. For years, TV cameras throughout the
games have been shooting at the bench off and on, each time
revealing one or more players on the sidelines drinking
Gatorade from the huge coolers marked "Gatorade," and in
cups also imprinted with the Gatorade logo. And in 1987, at
the close of a nationally televised game, Harry Carson,
captain of the winning New York Giants, dumped the contents
of a Gatorade cooler on the head of Coach Bill Parcells.
This gesture was broadcast on local and network news and
sports programs throughout the United States. It became a
ritual on the part of team captains from that time on to
dump Gatorade on coaches.

Gatorade's Tightening Advertising Focus: the "New Warriors"

With the advent of increased competition, Gatorade has

tightened the focus of its advertising message. According
to Williams, "Five years ago [1989] we used to do very broad
advertising of Gatorade. Today, we are very, very careful
where we advertise. It's a very focused message, very
targeted to people we consider to be our core user the `new
warriors.'"
Marketers in the sports drinks arena use the term "new
warriors" to refer to the current generation of young men
who throw themselves into amateur sports.

Quaker Oats and Gatorade (2/2)

Gatorade's Convenience Store Retail Strategy

Quaker Oats has made a concerted effort to move more of

its product in convenience stores, not only because it is
another underutilized outlet, but also because the company
considers it is the best outlet to reach the sports drink
consumer. The convenience store is closer to the "points of
sweat," the places where, as a Quaker Oats spokesman
[Williams] puts it, "the new warriors are playing
basketball, playing football, where they've just completed a
run, where they're playing tennis, golf where the `thirsts'
are."
As Gatorade spokesmen often repeat, salty noncarbonated
sports drinks taste best when they are consumed during or
immediately after strenuous exercise. A drink purchased at
a convenience store is much more likely to find the consumer
in that condition, since convenience stores are designed for
rapid, in-and-out impulse shopping. As noted below on page
117, sports drinks' failure so far to penetrate the
convenience store trade in Europe is an important factor in
the sluggish growth of the category on the continent.
Says Donald B. Williams, "Today we think we have about
200,000 points of availability. A major soft drink will
probably have somewhere in the range of 2 million."
Williams believes that room remains for the entire sports
drink business to expand dramatically through increased
distribution. "But we've got to get beyond 200,000."

Broker Network Fights the Battle for Convenience Store Space

In the meantime, Gatorade has struggled successfully to

increase the amount of space allotted to its products within
convenience store coolers. In addition to the
multiplication of brand line extensions detailed earlier,
Gatorade has expanded its broker network, which "covers
about 50,000 convenience stores at least once a month,"
according to Williams. Gatorade's space in convenience
store coolers increased at least 35% between 1991 and 1994,
and the total SKUs allotted to it increased by around the
same amount.

Gatorade's New Florida Distribution Strategy: DSD

In November 1993, as another method of ultimately

increasing availability of its product, Gatorade began what
it regards as a sort of experiment in a direct-store
delivery system (DSD). From then on, exclusive distribution
to "cold channels" of Gatorade's 16, 32 and 64 ounce
packages would be handled by two bottlers in Florida.
If the experiment succeeds, Gatorade may ultimately
apply it on a national scope. Florida was chosen to test
the system because Quaker Oats sees it as a relatively self-
contained market "surrounded on three sides by water," and
the place where Gatorade is most available. Per capita
consumption of the product in Florida is around 8 quarts per
year, compared with 3 quarts in the rest of the United
States. If the market for Gatorade and for sports drinks is
saturated anywhere in the United States, it is in Florida.
If DSD increases sales in Florida, then it will have proven
to be a powerful tool.

In Other 49 States, Gatorade Expands Relationships with Wholesalers

By switching to direct-store delivery in one state, and

widely publicizing its purpose as a means of evaluating the
system, Quaker Oats puts its wholesalers in the position of
competing with the experiment itself an incentive to improve
distribution to save their businesses.
However, the relationship with wholesalers is not based
solely on threat. In the rest of the country, the company's
aim, according to Williams, is to broaden the relationship
"with the wholesaler so they become a value-added
proposition, not only to me, the manufacturer, but to the
retailer."
In 1991 and 1992, Gatorade initiated a "buy-in" program
with disappointing results. In this program a wholesaler
who reached a given volume level would receive,
retroactively, a specified cash incentive tied to the number
of cases shipped. "And what did you have to do to qualify?"
says Williams. "Ship the cases. That was it. It sure
didn't work for us. We've got to prioritize every dollar we
spend these days. So this year's (1994) program is not
geared toward the volume shipped in; it's tied to activities
that can generate more volume through existing points and
volume through new points of availability."
Even while talking somewhat vaguely about these new
wholesaler programs (retail coverage programs, cash
incentives to help move Gatorade into a new market such as
golf courses, "partnering with a wholesaler that has a
vending arm that can get us into new points of
availability"), Williams sounds a note of suspicion and
disenchantment. "What wholesalers have got to be careful
about is not talking programs, but delivering programs. If
the programs don't perform, I'll get out of them as fast as
I got in them."

Gatorade Responses to the New Competitive Challenge

In response to the challenges from Coke, Pepsi, and

Suntory, Gatorade spent a record $37 million in measured
media expenditures in 1994. The company modernized its
logo, issued new point-of-sale materials, and initiated new
national ad campaigns featuring its spokesman, basketball
superstar (and for a brief interval, baseball player)
Michael Jordan.

Gatorade Reaches for Preteen Consumer with Advertising

and Packaging, but Not with Reformulation

Noticing in the rapidly growing numbers of preteens a

potential for expanding sales, Gatorade has attempted to
appeal to preteens with advertising campaigns such as the
"Be Like Mike" commercials showing hero worshipping children
with Chicago Bulls Star Michael Jordan, and with ads in
women's magazines recommending Gatorade for children. In
1988, well in advance of Suntory's repositioning of 10-K,
Quaker Oats market tested an aseptic package called
Gatorbox. It has also sponsored Little League Baseball,
and, according to Brandweek, has lent "nutritional support
to the kids game" which sounds like free-sampling.
A problem for Gatorade that has been exploited by the
competition (see discussion of Suntory, PowerAde, and All
Sport following) is that its high-sodium formula and "sweaty-
sock" flavor does not appeal to children. Despite the fact
that children prefer other products to Gatorade in taste
tests, Quaker Oats has thus far not released a sweeter,
"Gatorade, Jr." version of the product, maintaining that
what children "want to drink is what they see professionals
drinking and that's Gatorade."

Why Quaker Oats Purchased Snapple

In November 1994, Quaker Oats purchased Snapple, the

remarkably successful (though, in 1994, struggling) New Age
beverage company for around $1.7 billion. The purchase
transformed Quaker Oats into the third largest soft drink
company in the United States, with $2 billion in annual
sales from beverages. It also pits Quaker Oats against Coca-
Cola and PepsiCo in another fast-growing soft drink arena,
for the two cola marketers have been taking aim at Snapple
just as they have at Gatorade.
Some analysts think that Quaker Oats paid too much for
Snapple, around 17 times the company's corporate earnings,
when 10 or 11 times earnings is the usual price for
acquisitions in the beverage industry. Others point out the
match is a good one and serves several purposes. For its
$1.7 billion, Quaker Oats becomes not only a large beverage
company, but also one that is present only in the fast-
growing beverage markets (sports and New Age) and not the
slow-growing ones (colas). Further, the Snapple acquisition
makes a takeover of Quaker Oats much less likely (rumors
that Coke or Pepsi might be about to engulf the cereal
company had been common during the preceding year).
Finally, Snapple and Gatorade can assist each other in an
area of obsessive interest to Quaker Oats expanding
distribution. Snapple has excellent penetration of the very
convenience stores, delicatessens, and small retailers
Gatorade is trying to reach. In return, Quaker Oats can
leverage its new brand into supermarkets.
Snapple's own entry in the sports drinks arena, Snapple
Snap-up, recently relabeled Snapple Sport, is discussed
briefly on page 111 below.

Competitive Focus: PepsiCo's All Sport

PepsiCo's All Sport, a Reformulation of Mountain Dew Sport

 PepsiCo's All Sport, today the second best-selling
brand of sports drink, is a reformulation of PepsiCo's less
than successful 1989 entry into the category, carbonated
Mountain Dew Sport. That product was dropped after a
successful test in Wisconsin and a less successful regional
introduction accompanied by between $10 million and $20
million in advertising and promotion.
As it turned out, PepsiCo was just getting warmed up.
In summer 1991, the company debuted its new "advanced
formula" drink called All Sport. All Sport contains less
than half the carbonation of its predecessor and is more
rapidly absorbed. It remains the only carbonated leading
brand available in four flavors: fruit punch, lemon-lime,
orange, and lemon-lime light. All Sport is packaged in wide-
mouth plastic bottles. Sizes are 16, 32, and 64 ounces.

All Sport Tries to Offer Better Taste and Broader Appeal

"Sports drinks aren't known for their great taste," a

Pepsi spokeswoman observed in late 1993, giving the
rationale behind All Sport's formula. Initial ads told
viewers: "There's no reason a sports drink can't taste
good."
As with Coca-Cola's PowerAde and Suntory's 10-K, All
Sport has achieved an improved taste over Gatorade by
including less sodium per ounce (in the case of All Sport,
half) and more carbohydrates.
All Sport also reaches beyond the core "athletically
active male" consumer of Gatorade. As Ad Age observed in
1993, "All Sport has tried to differentiate itself by
appealing to women." It is the only sports drink offered in
a lemon-lime "light" version, sweetened with aspartame, with
only two calories per 8 ounce serving.

All Sport Tested Regionally First

PepsiCo distributed All Sport slowly at first,

concentrating in the South and holding the brand steady at
25% distribution for a year before gradually moving the
product out to the Chicago area in early 1993. In 1994,
PepsiCo moved the product into national distribution.

Ad Theme Changes Twice

Each time Pepsi has pushed All Sport into a new

distribution area, the move has been marked by a change in
advertising theme. The Pepsi Generation-like theme Change
Your Game, which made the case that a lot of things had
changed in sports since the days when grandpappy started
drinking sports drinks, gave way to "Fuel the Fire" when All
Sport moved into Chicago in early 1993. By the time of All
Sport's national rollout the theme had changed again, though
the positioning had not. Commercials set in the future
featured basketball superstar Shaquille O'Neal telling his
grandchildren of basketball in the days before the 20 foot
tall basket and 300-point games, a quaint, almost forgotten
time, when hard as it is to believe, All Sport did not have
a 100% share of the sports drink category. The advertising
theme in 1994 was more modest: "Try All Sport."
The choice of Shaquille O'Neal, who is Pepsi's regular
spokesjock, to endorse All Sport highlights a potential
contradiction in the effort to position All Sport as broadly
as possible. "Basically, All Sport is Shaq's brand when
he's out playing and doing his active work. And when he's
relaxing, he's drinking Pepsi," reasons Pepsi vice president
Bill Cobb. But it does seem as if the brands' territories
overlap considerably.

NCAA Sponsorship Links All Sport with Many Sports

For All Sport, Pepsi has reached a corporate

partnership with the National Collegiate Athletic
Association (NCAA), an institutional endorsement that deftly
underlines the idea inherent in the brand's name. All
Sport's association with NCAA events will link the product
to a broad range of college sports.

Five-Year Agreement with Association of Quality Clubs

At the same time, Pepsi is reaching out to health

clubs. The company has a five-year agreement with the
Association of Quality Clubs to bring All Sport, as well as
other Pepsi products, to 2,000 health and fitness clubs
nationwide.
The agreement is supported with a cross-promotion offering
free one-month memberships at the clubs.

Measured Ad Expenditures for All Sport More Than Double in 1994

Pepsi moved into national distribution in the spring of

1994 with $11.6 million in advertising , more than double
what it had spent the previous year. And according to a
beverage industry executive quoted in Brandweek, PepsiCo
spent "another $50.0 million at retail."

Competitive Focus: Coca-Cola's PowerAde

PowerAde the Latest in a Long Line of Coke's Sports Drinks

Coca-Cola's PowerAde, first introduced into test

markets in 1990, is the latest in a long line of Coca-Cola
sports drinks, none so far successful enough to last.
Preceding it in the 1980s were Puma, which never got out of
test marketing; Olympiad, timed to coincide with the 1984
summer Olympics; and Max, a product positioned for serious
athletes, which like the others, never got off the ground.
 Coca-Cola does market a relatively successful sports
drink, Aquarius, in Europe and Asia, and despite its
failures throughout the 1980s, the company keeps trying to
crack the United States sports drink market.

PowerAde Originally Introduced As a Defensive Maneuver

PowerAde, Coca-Cola's most recent entry, was originally

seen as a defensive move to counter both PepsiCo's 1990
entry of Mountain Dew Sport, and against Gatorade, which was
beginning to be dispensed at convenience store fountains.
PowerAde was at first sold only through convenience store
fountains.

PowerAde, like All Sport, Goes for Sweeter Taste, Broader Appeal

During PowerAde's initial national rollout in 1993,

Coca-Cola USA spokesman Bob Bertini based his case for
PowerAde's superiority on differences between its formula
and that of Gatorade: "PowerAde has 33% more carbohydrates
for energy and less sodium than the category leader. Also,
it doesn't have that salty aftertaste consumers associate
with sports drinks."
Since the carbohydrates in question come from sugar,
this means that PowerAde is a much sweeter beverage. And
since the sodium that gives Gatorade its salty taste is one
of the sports drinks' isotonic excuses for being, PowerAde
is less of a sports drink, and more of an uncarbonated soft
drink. With PowerAde, Coca-Cola may be reasoning that many
of the people who purchase a sports drink really want a soft
drink.

A Product for "Today's Athletes"

Ralph Kytan, director of marketing for PowerAde,

described the appeal he hopes it will have in terms that
bring to mind the "generation" argument used for, yes,
generations, by Coke's traditional rival. "Unlike the
category leader, created in the mid-1960s as a successor to
water, PowerAde is for today's athletes."

PowerAde Reaches Beyond Athletes

Also like All Sport, PowerAde clearly wants to position

itself as more than a sports drink. The "points of
sweat" where Coca-Cola made the product available in its
initial regional rollout of PowerAde included industrial job
sites, where work, not play makes the consumer sweat.

PowerAde Introduced First in South and Southeast

Like All Sport, PowerAde was introduced on a regional

basis first, with advertising "in parity to Gatorade in the
markets we were in," according to Coke spokesman Rob Baskin.
PowerAde was available to 70% of the United States
population by June 1993, according to reports in the trade
press. Full national distribution with full national
advertising did not come until May 1994.
As the warm months began, Coke purchased prime-time
spots during the NBA playoffs for the brand, as well as on
beach volleyball games that were aired on Saturday
afternoons by NBC.

Coke's Powerful Bottling and Distribution

System is at PowerAde's Disposal

Ultimately, Coca-Cola is banking on its powerful

bottling system and distribution network to make PowerAde a
success. Says Pierre Ferrari, senior vice-president of
marketing for Coca-Cola USA:

We will be approaching the sports drink category

differently than our competitors by utilizing the
power of our bottling system and its access to a wide
variety of outlets and channels. This should change
the dynamics of the entire category and significantly
expand it further.

Coke will undoubtedly lean heavily on its vending machines

for PowerAde distribution, a venue in which Gatorade has
virtually no presence.

PowerAde's Goal: 20% of the Market in 1994 Not Achieved

"Our goal," Coke spokesman Rob Baskin told Beverage

Industry in April 1994, "is to capture up to 20% of the
market this year on a national basis."
The phrase "up to" leaves a lot of room for
interpretation, of course, but with measured advertising
expenditures in excess of $11 million, the 5% supermarket
share actually achieved by Coke in 1994 must come as a disap
pointment. At any rate, this is how it looks to competitor
Jim Stevens of Suntory, who comments, "It's too little
volume for too much investment in too many SKUs."

Competitive Focus: Suntory's 10-K (1/2)

Suntory's 10-K, A Veteran in the Wars Against Gatorade

First introduced in 1986 by Kentwood Spring Water of

New Orleans, 10-K was the most successful challenger to
Gatorade until 1994. The product contained the amount of
sodium recommended by the American College of Sports
Medicine, yet had no salty taste. Initially, its main
product feature was that it was made with 100% natural
spring water an emphasis that was later dropped.
Distributed to 14 southern states, 10-K soon ranked
number two in the South behind Gatorade, with a 30% share of
market in its home state of Louisiana. In 1987, Kentwood
was acquired by Suntory Waters Group, a division of Suntory
International of Japan, an international beverage giant.
Backed by Suntory's marketing muscle, the brand's share
doubled from approximately 2% to 4% in 1989. In 1990, its
distribution was increased from 14 to 28 states.

In 1993, Suntory Repositioned Itself for Preteens

Growth slowed for 10-K in the early 1990s. Like most

Gatorade challengers, it tried to compete using a Gatorade-
like product and Gatorade-like advertising: The brand went
after the core sports drinks consumer, active men who
participate in sports. Getting nowhere with this group,
Suntory kept trying for a lot longer than most Gatorade
challengers. Nevertheless, according to James M. Stevens, a
former top executive at a major Coca-Cola bottler who became
president of Suntory in 1992, "We just couldn't beat our
heads against the unbelievable image of Gatorade."
Soon after hiring Stevens, who was involved with
Perrier in creating the market for bottled water in the
United States, Suntory repositioned its product to appeal to
preteens a daring narrowing of focus that aimed at a weak
spot in the Gatorade armor. "Gatorade really hasn't been
challenged on the taste front," said Stevens in a 1993
article in The Wall Street Journal. The drink's slightly
salty, "sweaty-sock" taste does not appeal to kids in grade
school.

10-K Reformulated for Grade-School Palette

So, to please the palettes of those, like Stevens's own

daughter, who would drink the product during soccer games
but would not touch it at home, Suntory reformulated 10-K as
a less salty, sweeter-tasting drink emphasis less salty.
The company hired a New York-based market research
company, Topline Research Corp., to conduct taste tests
comparing 10-K with Gatorade. Suntory executives were
pleased to learn that two-thirds of preteens preferred 10-
K's orange, lemon-lime, and fruit punch flavors to the same
flavors of Gatorade. In other good news from the study, 70%
to 85% of the preteens said they would ask their mothers to
buy 10-K.

A Demographic Motive Behind the Suntory Repositioning

Another justification for Suntory's repositioning of

the market beyond the fact that no one has every beat
Gatorade at its own game is the ongoing baby boomlet, which
has increased the population of preteens and young teens.
Competing With Kool-Aid

The repositioning, combined with the reformulation,

means that 10-K is less of an isotonic beverage, a beverage
that theoretically improves performance in grueling,
electrolyte-leeching athletics, and more of a soft drink
that capitalizes on the popularity of sports. The Wall
Street Journal estimates the kids drink market at $7
billion.
In a health conscious, sugar conscious era, 10-K may
have a special appeal to mothers as well: At 60 calories
per eight-ounce serving it has about half the calories of
such competing children's drinks as Kool-Aid and Hi-C.
At the time of its reformulation, an analyst for
Beverage Marketing Corp. commented, "Taking a sports drink
to kids is a very intriguing idea, and one I suspect will
work very well."

Suntory's 10-K (2/2)

Suntory Dramatically Increases Ad Expenditures for New Positioning

To launch its reformulation, Suntory raised its

measured advertising expenditures by a factor of nearly
10 from around $100,000 in 1992 to $1 million in 1993,
according to Leading National Advertisers. The company's
television commercials, aimed at children aged 6 to 12, went
all out for the kid vote with the line "Really Really Good
Stuff" and depicted little leaguers, rather than adult
sports figures. Ads appeared on children's cable channels
like Nickelodeon.

Suntory Addresses Needs of Its Young Consumer with 300-ml

Aseptic Carton

Suntory's decision to seek a preteen audience was

reflected in its packaging, as the company made its product
available in aseptic boxes. This package type, which is
very popular with preteens and with their mothers because of
its great convenience, portability, and disposability, has
helped increase sales of Motts apple juice and Nestl‚'s
Quick. The experiment was successful enough for Suntory to
introduce the cartons in another 20% larger, 300 milliliter
size. "The aseptic package and larger straw makes it easier
and more convenient to enjoy 10-K at school, sporting events
or in any other on-the-go situations," said a company
spokesman at the time.

Suntory's Youthful Flavor Strategy

To increase the kid-appeal of its 10-K aseptic cartons,

Suntory introduced them in orange, fruit punch, and
strawberry flavors that in the past have proven more popular
with children and young teenagers than the lemon-lime and
lemonade of traditional sports drinks (i.e., Gatorade).

Suntory's Two-Pronged Media Strategy: Kids and Moms

To help reposition 10-K as a preteen beverage, Suntory

advertised in children's media like the cable TV station
Nickelodeon, and also in mothers' media like women's
magazines. As Suntory president Jim Stevens put it, "The
key to any beverage product is getting it into the
refrigerator. Once it's there, the whole family will use
it."
In 1994, Suntory switched even more of its advertising
to Nickelodeon, much of it in support of a special Guts
action-and-sports program, and an instant-win sweepstakes
promotion.

With National Launch of All Sport and PowerAde in 1994,

Suntory Pulls Back

In 1994, when Coke and Pepsi each supported their sport

drink entries with ad budgets well over 10 times what
Suntory was able to muster in 1993, Suntory reduced its ad
budget. As his remarks quoted earlier in this report
indicate, Suntory president Jim Stevens seems disillusioned
with the category and believes that competition from New Age
beverages, teas, and juices will act as a drag on growth in
the coming decade.

10-K Is Still a Regional Brand

Most Suntory distribution is concentrated on the United

States coastline. "When you're a small guy, you go where
the business is highest," explains Suntory's president Jim
Stevens.

Competitive Focus: Minor Marketers (1/2)

Gold's Gym

Everfresh, Inc., a major juice marketer and subsidiary

of Canadian brewer John Labatt, Ltd., has become quite
active in sports drinks in the 1990s. In 1992, after its
first entry, Cool Down (an all-natural product aimed at
women), flopped, the company returned to sports drinks with
Gold's Isotonic Quenchers, under a licensing agreement with
Gold's Gym Enterprises. At first, the drink was sold
exclusively at Gold's Gyms, a 400-outlet chain. In 1993,
Everfresh formed a subsidiary, Golden Era Products, to
market the sports drinks along with a line of ready-to-drink
teas. The two products were launched in 7-Eleven and Wal-
Mart outlets. Everfresh announced plans for national
distribution by fall 1993, and reported its intention to
spend $3 million to $5 million to advertise both lines
(sports drinks and teas) and with pardonable optimism set
first year sales goals of $125 million.
How close this prediction has come to accuracy is
difficult to tell, since its initial rollout has
concentrated in the convenience store and drugstore classes
of trade. Gold's seems also to be well represented in
health food stores. Still, it is unlikely that sales were
anything like $125 million. Further, the measured
advertising expended on behalf of the product in 1994
actually came to under $100,000, according to Leading
National Advertisers.

Beverage Group's Spalding Looks for a Niche

A marketer that clearly does not see itself displacing

Gatorade in sports drinks, Beverage Group has seized the
opportunity of licensing the well-respected Spalding name
and putting it together with a slightly unusual formula and
packaging, in the hope of carving out a niche within the
billion-dollar category.
"We're positioning this as an alternative to carbonated
beverages, more so than as an alternative to Gatorade,"
Craig McGonigle, president of Beverage Group, told Beverage
World in 1993. "We see the brands that are trying to go
against Gatorade; we'd rather have a wider spectrum and go
for the average consumer who's looking for an alternative to
what's out there. Spalding Sports Refresher is a great
beverage for the hard-core sports enthusiast, but we also
think it's great if you're out bicycling, relaxing, playing,
or whatever."
The product was launched in 1993 and seemed to have
achieved national distribution by the spring of 1994.

Cross-Promotions with Spalding Products Are Key to Spalding's

Marketing Efforts

The connection between the beverage and Spalding's

sports equipment goes beyond the name. Exploiting the links
between the products and reinforcing the drinks'
identification with the trusted line of sports equipment,
the drinks have been cross-promoted with Spalding's sports
merchandise and included in promotions for other Spalding
sports products, including sports events sponsorships.
According to Beverage Group executives, they are offering
generous sales incentives to retailers, encouraging them to
cross-promote the brand.

The Latest Casualties: Nautilus, Everlast, and Snapple

A shakeout of recent candidates from the early 1990s

has occurred in the wake of increased marketing efforts by
Coca-Cola, PepsiCo, and Quaker Oats.
In slightly different ways and for slightly different
reasons, Nautilus, Everlast, and Snapple all ceased to
compete in sports drinks.

Nautilus Plus Available Only Regionally, Only As a Powder

Nautilus, introduced in 1990 by Dr. Pepper/Cadbury

Beverages and rolled out regionally in 1992, never achieved
national distribution. Nautilus came in three flavors
(orange, lemon-lime, and punch) and two versions (regular
and Nautilus Plus). The regular version was lightly
carbonated, low calorie (two calories per 8-ounce serving),
sweetened with aspartame (NutraSweet), and enriched with
vitamin C. Nautilus Plus had 60 calories and was sweetened
with high fructose corn syrup. The low-calorie version,
Nautilus, has been withdrawn. The Plus version is available
only in powdered form, and only in California and the
Northeast, markets where powdered drinks sell better.

Everlast KO'd

With similar high hopes, A&W debuted its new sports

drink, Everlast, in the fall of 1992 after seven years of
research. Like Nautilus, Everlast is linked by its name to
fitness equipment, in this case boxing, which A&W hoped
would give the product a distinctive profile to help it find
a niche. The name would appeal to a young "macho male
market." Everlast was withdrawn from the market in 1994.

Minor Marketers (2/2)

Snapple Purchased by Competition

The Snapple Beverage Corporation is probably the most

successful New Age beverage marketer. In 1991, after three
years of testing, it introduced an all-natural energy drink,
Snap-Up, touting it as the "Dom Perignon" of sports drinks.
Snap-Up was a noncarbonated fluid and electrolyte
replacement drink that contained maltodextrin, fructose,
water, and electrolytes, and tasted somewhat like a fruit
juice and water mixture. It was available in five flavors:
lemon-lime, lemon, orange, fruit punch, and tea. Early in
1994, it was renamed Snapple Sport.
Snapple Sport has not made much of a dent in the sports
drink category. Clearly it was not fear and trembling over
this product that led Quaker Oats to purchase Snapple later
that year. It is possible that Snapple Sport will be
allowed to survive. Quaker Oats has in the past fielded
products that were competitive with Gatorade (including, in
1990, FreeStyle, an all-natural, juice-added premium product
that never emerged from test markets).

Jan-li-bo Pure Energy

 Gatorade's only challenger from the People's Republic
of China is a lightly carbonated sports drink containing
honey and natural fruit flavors (mandarin orange, lemon-
lemon, wild kiwi, country pear, and manchurian mango) as
well as sugar and electrolytes.
A product of the Jianlibao Group Company of China,
which was formed specifically to market it, Jan-li-bo's
beginnings in China are reminiscent of Gatorade's beginnings
in Florida. It was created by its present company chairman,
Li Jing Wei with the help of the Beijing Medical School,
expressly for the Chinese athletes at the 1984 Olympics in
Los Angeles (just as Gatorade was created for the Florida
State University Gators). Li offered his new sports drink
to the government for free, betting that the successes of
China's athletes would make it a commercially viable
product. This hopeful prediction proved accurate, and the
company grew from sales of 70 million yuan ($14 million) in
1986 to 2 billion yuan ($400 million) in 1992.
In China, Jan-li-bo is promoted in a style that
Americans would find very familiar, with endorsements by
Chinese spokesjocks, sponsorship of Jianlibao Cup
competitions in a wide variety of sports, television ads,
and point-of-purchase displays. In addition, it is the
"sports drink of state banquets," and here in the United
States it has been photographed in the hands of the
Clintons.
The product's base of operations in the United States
is Jianlibao America Ltd. in New York, created in late 1991.
The American operation devoted the first year to market
research. It announced plans to get its redesigned line on
the shelves by the end of January 1993, with initial
distribution in New England and the Midwest.
Despite its Gatorade-like, hardcore sports drink
history, Jan-li-bo is not being marketed principally as an
isotonic. According to company director and general manager
Lin Qi Shu:

Jan-li-bo is more of an energy drink than a sports

drink. Gatorade may be good for the heavy-duty
athlete. Jan-li-bo is also for the guy working in the
garden or mowing the lawn or doing light exercise.
Gatorade doesn't help you if you're not exercising.
Jan-li-bo will give you a burst of energy whether
you're exercising or not.

Jan-li-bo's distributor cites its main competition as

not just Gatorade, but also Snapple, the natural soft drink.
This statement was made prior to Quaker Oats' purchase of
Snapple, and is even more interesting now.

Twin Laboratories with Hydra Fuel and Ultra Fuel

Twin Laboratories, whose prominence in the protein

drink category is discussed elsewhere in this report, is
also a leading marketer of sports drinks in health food
stores. Aimed at the serious athlete, its Ultra Fuel, a
vitamin-fortified carbo-loader, was introduced in 1989. In
1990, the company followed up with a complementary product,
Hydra Fuel, a vitamin-fortified sports drink.
Both Ultra Fuel and Hydra Fuel have come to dominate
sales in health food stores, where Twin Laboratories has
substantial influence. The products are also strong in gyms
and sporting goods stores. The TWINLABS sports drinks have
received substantial advertising support in athlete-oriented
consumer magazines, including Twin Laboratories' own
publication Muscular Development.

Private Label Cloning Sports Drinks

Retailers are also beginning to enter the sports drink

market with cloned versions of Gatorade. For example, the
food store chain Schnuck Markets (St. Louis) began selling
Schnuck's Thirst Quencher in 1992. This private-label
sports drink is sold in a 64-ounce plastic bottle for $2.
It comes in orange, lemon-lime, and fruit punch flavors.
Schnuck's Thirst Quencher was sampled in-store and featured
in weekly advertising supplements when it was first rolled
out.
Another recent private-label entry is Stew Leonard's
Wow. It is sold in half-gallon milk cartons for $1.29 two
for $2.00 in lemon-lime and orange flavors. According to
the Connecticut independent food store operator's president:
"Stew Leonard's only carries its own sports drink now and no
longer sells Gatorade. We don't like to compete with
ourselves."
Still, according to a Supermarket News survey published
in July 1994, only a small proportion of retailers have
private labels of sports drinks at present. These tend to
limit their offering to the 64-ounce size, attractive to the
economy-conscious consumer who is likeliest to reach for a
private label. "We think the 64 ounce size is the way we
ought to be," said a buyer for the Top-10 chain. "That's
our niche for private label. It sells as well as all the
other brands such as PowerAde and 10-K, but nothing like
Gatorade."

Competitive Focus: International Sales: Sales in Eight

European Countries; Sales in Germany; European Ad Campaigns;
Failure to Penetrate European C-Stores

Sports Drinks in Eight European Countries

Total $166 Million, Up 10% From 1993

According to a February 7, 1995 article in The Wall

Street Journal, based on data supplied by A. C. Nielsen,
sports drinks sales in eight countries came to $166 million
in the 12 months prior to November 1994 almost a 10%
increase over the previous year.
While 10% might look good in a more mature market,
sports drinks are so new to Europe and the penetration of
the market is so small that analysts consider this a very
poor showing.
According to the Journal, "The products still have
relatively low rates of use among Europeans. Indeed, per-
capita consumption of sports drinks in Europe is less than a
half liter (0.53 quarts) a year. That compares with an
estimated four liters in the United States and nine liters
in those Asian markets where the product is sold."
Packaged Facts' estimate of per capita consumption of
sports drinks in the United States is somewhat smaller a
little over three quarts but still around six times per
capita consumption in Europe.

Germany Is the Largest Market in Europe

The largest market for sports drinks in Europe is

Germany, where sales surged 45.0% to $59 million in 1994.
Italy represents the second largest market, but suffered a
sales decline of 15.5% to under $40 million. Britain ranks
third with 1994 sales of close to $31 million, 7.0% higher
than year earlier figures. Sales of sports drinks in Spain
exceeded $16 million in 1994, about 14.0% above 1993's
level. The remaining four countries for which sales were
reported were each credited with less than a $10 million
market.

European Ad Campaigns Misfire

So far, the great majority of Europeans participating

in sports and fitness activities quench their thirst with
water or soft drinks. According to Steven G. Gregg, a
research scientist for Quaker Oats Europe Inc., "Consumers
in Europe don't understand the benefits. People need to
understand that when they're active they lose fluids, and
it's not related to just elite sports."
That European consumers consider sports drinks of
interest only to professional athletes may be the fault of
badly thought out ad campaigns. At least, Gatorade
executives feel that way, and blame the competition for
spoiling the market by confusing the customer as to the
purpose of sports drinks. According to Steven G. Gregg, "A
lot of the advertising from the companies other than
ourselves reinforced an elite sports positioning using
testimonials from athletes. People started seeing it only as
a pure sporting drink to be used during sports occasions."
Gatorade itself contributed to this trend, relying more
heavily than usual on the endorsements of professional
athletes such as Ivan Lendl, the tennis star, and world
class cyclists and marathoners.

Failure to Penetrate European C-Stores Blamed for Slow

Growth in Europe
 Analysts also blame distribution problems for the
sluggish growth of sports drinks in Europe. As Quaker Oats
learned in the United States, the convenience store is a
more desirable outlet for sports drinks than supermarkets,
where the products first made their appearance at retail.
The convenience store is closer to the "points of sweat" so
the theory goes, where the "young warriors" even Europeans,
presumably go on impulse to quench their thirsts.

Most of the Major Marketers Are Not Beverage Companies

One reason why penetration of convenience stores has

been slow is that of the four major marketers in the
category, only one Coca-Cola is a beverage company. Quaker
Oats' strength is in cereal. While Quaker has achieved good
penetration of convenience stores in the United States in
recent years, this has come relatively late, considering
convenience stores' importance to the market. Sandoz, the
maker of Isotar, and SmithKline Beecham, the marketer of
Lucozade, are drug companies with little experience or clout
in food store distribution, let alone convenience store
distribution. It is easier for a marketer to convince
retailers to push aside juices and carbonated soft drinks to
free up shelf space for a sports drink if it already has a
profitable product on the shelf and a distribution system to
the stores in question already in place.

International Sales: Coca Cola's Aquarius Leads in Belgium

and Spain; Gatorade is Aggressively Expanding Internationally

Coca-Cola's Aquarius Leads In Belgium and Spain

And in fact, Coca-Cola's experience and standing appear

to have helped it. In Belgium, Aquarius is the market
leader, with a brand share of 36.8%, up from 27.3% the
previous year. Aquarius's share in Spain, in the 12 months
prior to November 1994, was a commanding 49.0%, a 43.0%
increase on 1993.
But Germany, during the same period, Aquarius's share
went from 27.6% to 21.2%, as all leading brands lost share
to private label and minor marketers.

Gatorade Is in Process of Aggressive International Expansion

Gatorade sees expansion into global markets as

essential to maintaining its brand share (perhaps the
closest it comes to admitting that it could lose a few more
points in the United States). According to the June 1994
Beverage Industry, Gatorade has full marketing and
distribution efforts in place in 23 countries, and on
average adds a new country to the list every 60 days.
Gatorade expects to have a presence in more than 40
countries by the century's end, according to James F. Doyle,
president of Gatorade Worldwide and senior vice president
for the Quaker Oats Company. (The projection of 40, not 50-
plus at this rate by the end of the century, seems to
acknowledge the reality that not every rollout is
successful.)
The approach is systematic, says Doyle, taking account
of the climate and culture of the countries concerned, as
well as their distribution and marketing infrastructures.
Overseas, Gatorade is promoted through international
sports such as the Olympics, soccer, basketball, and
baseball. Using these techniques, the company has scored
some large successes. In Japan, for example, the per capita
consumption of Gatorade is higher than it is in the United
States. Quaker Oats has had more difficulty penetrating
European markets, however, and in 1993 elected to withdraw
from France and the United Kingdom.
In February 1994, Philip Marineau, president and CEO of
Quaker Oats, predicted that Gatorade's sales outside the
United States would total $200 million that year and $1
billion by the year 2000.

Gatorade Introduced to Italy in the Late 80s: Now Has 80% of

$40 Million Market

Quaker Oats introduced Gatorade to Italy in the late

1980s. Advertising for the product depicted ordinary active
people sweating in the hot Italian sun and gratefully
gulping down the refreshing drink. With almost $40 million
in sales, today Italy is the second largest market for
sports drinks in Europe; Gatorade enjoys an 80% share of
that market. But, according to an article in the February
7, 1995 Wall Street Journal, total sports drinks sales in
Italy actually declined by some 15% in 1994.

Gatorade Pursues Distribution Relationships

Joint ventures have become increasingly common in the

beverage industry. In 1992, Gatorade was frustrated enough
with its progress in overseas convenience stores to begin
talks offering Coca-Cola the right to distribute Gatorade in
some foreign markets. Ultimately, though, the talks came to
nothing, probably because Quaker Oats was unwilling to meet
Coca-Cola's demands for profit and control.
Gatorade continues to pursue distributor relationships
with other companies around the world. In North Korea,
which is gradually opening its doors to the United States,
Quaker Oats has formed an alliance with a local bottler to
distribute Gatorade. It has an arrangement with a local
Pepsi bottler to distribute the product in Spain. Gatorade
executive James Doyle comments, "The Coca-Cola system is
unquestionably the best in the world. But it isn't the only
system, nor is it infallible."
In June 1994, Bill Vail, in charge of production and
distribution at Quaker Oats' Dallas plant, said that
shipments of Gatorade to Mexico grew "by leaps and bounds in
the prior three years. At this point, we can handle the
demand, but if they continue to grow at this rate, we would
have to do something."

Marketing and Product Trends (1/3)

Younger Consumers Targeted

A trend of selling sports drinks to children and early

teens, which began with General Food's abortive Kool-Aid
Sports Kooler, is well under way.
The baby boomlet of the 1980s ensures a steady supply
of "tweens," as children aged 8 to 12 are sometimes called.
While Suntory's 10-K has done so most directly,
repositioning itself as a tweens product, all major
marketers have made some attempt to exploit this growing
market segment. "Nautilus Plus is great for kids and family
outings as well as athletes," enthuses David Clapp, vice
president of new products for Dr. Pepper/7-Up. Like 10-K,
Nautilus Plus includes generous amounts of vitamin C, and
its high vitamin fortification has mom appeal. Quaker Oats,
though it has not introduced a formula aimed at younger
consumers, initially responded to the threat from Kool-Aid
with an aseptic drink box ("Gatorbox"), and has recently put
into this kid-oriented package a kid-oriented flavor, grape.
Drink boxes are popular with children and with their
mothers, for convenience, portability, and disposability;
they have helped increase sales of Motts apple juice and
Nestl‚'s Quick. Sold in 3-packs with bright colors and
sports themes, the Gatorboxes appeal to youngsters. Quaker
Oats has endorsement and sponsorship arrangements with
Little League Baseball.
Meanwhile, a smaller marketer, Energy Foods, Inc., of
Westlake Village, Calif., has taken aim at the kid segment
of sports drink with its Mighty Morphin Power Rangers Power
Drink.

Flavors Multiplying As Electrolyte Content Goes Down

In a related development, marketers are tending to

offer a wider range of flavors. As mentioned earlier, in
the past the minerals in sports drinks have tended to limit
flavors to those that do a good job of masking the taste of
these ingredients especially lemon-lime, orange, and fruit
punch.
Grape, introduced recently, now has an estimated 12%
share of sports drink flavors, according to an article in
the April 1994 issue of Beverage World. The article quotes
Bob Fox, sales and marketing representative at Foodcrown
Products Corporation: "Grape has always been a popular
flavor with young children, and that's exactly who grape
sports drinks are targeting."
The sweeter, low-electrolyte formulations have some
advantage in reaching the younger crowd with new flavors,
since they contain more sugar and have fewer electrolytes to
mask.
Tea as Flavor Counteracts Competition by Ready-to-Drink Teas

Who would have thought in 1980 that one day there would
be a Gatorade Iced Tea Cooler? Very few people, because to
do so they would have had to predict the rise of ready-to-
drink teas, to which many people turn in the "hot and sweaty
situations" where Gatorade seeks to be the drink of choice.
By mid-1994, tea flavored products comprised around 9% of
sports drinks sold.

Marketing and Product Trends (2/3)

Clear Sports Drinks

Clear drinks have been a trend throughout the beverage

industry (not to mention skin care products and hair gels)
for several years. Even though pure crystal clear hydro
chloric acid can burn away skin, to the consumer, clear
signifies pure and natural, and marketers turn to it when
they want to send this signal. Thus, the tendency for
sports drinks marketers to introduce clear line extensions
reflects the gradual repositioning of sports drinks as
healthy lifestyle beverages.
Everlast, the sports drink introduced by A&W with the
slogan, "the clear champion" also boasted no artificial
flavors, colors, or preservatives. Suntory 10-K introduced
its grape flavor as a clear beverage. "It's a little New
Age in a way," said Suntory president James Stevens in 1993.
"We wanted to have grape, but we didn't want to have the
coloring because it takes away from the more healthful
appearance." Since grapes, in nature, are red or green, or
most of all a rich purple, this is a bit illogical, but
Suntory may be right about consumer perception. In any
event, 10-K grape flavor now appeals to children by means of
the grape flavor, and their mothers via the clear
appearance.
Since most mothers do laundry as well as shop for
beverages, a clear grape-flavored sports drink may offer an
additional benefit as a nonstaining alternative to grape
juice.
Quaker Oats, also recognizing the symbolic power of
clearness, has introduced its new Lemon Ice, an improvement
on Gatorade's old lemonade flavor, in a form as clear as the
tap water that is sports drinks' biggest competitor.

"Fat-Burning" or "Thermogenic" Energy Drinks

A number of popular vitamin and mineral supplements

containing chromium and L-carnitine are marketed as
"thermogenic" or "fat-burning" formulas in health food
stores. Several new sports drinks also marketed in health
food stores contain fat-burning formulas. "Even bodybuilders
are using them, along with women who do aerobics, and
joggers," says Mark Sawall of Sawall Health Foods in
Kalamazoo, Mich.
Among the products available in this segment are
American Body Building Products' Cutting Force, Maximum
Nutrition's Maximum Fat Burner, Nature's Best's Perfect
Cuts, and Science Foods' Diet Down.

Sports Drinks for Women Only Appear Periodically

From time to time, women's-only sports drinks appear,

but thus far none have met with much success. A recent one
was Everfresh Inc.'s Cool Down, withdrawn from the market in
1992. Cool Down was a natural-ingredient, fruit-flavored
sports drink. "You don't have to be a macho athlete with a
strong stomach to drink Cool Down," a company spokesperson
explained. In 1994 American Beverage took aim at this same
target with Ladies First Fitness Drink, available in peach,
raspberry, and lemon-lime flavors.

Additive-Free and "Natural" Products

Many new products in recent years have been additive

free free of artificial flavors, colors, and preservatives.
Among the products formulated without additives are Snapple
Sport, Workout, Pro-formance, and Spalding.

Marketing and Product Trends (3/3)

Higher in Carbohydrates

Most new products are higher in carbohydrates than

Gatorade, and some are positioned on this basis. The best
known is Coca-Cola's PowerAde: Advertising for PowerAde
mentions its 33% higher carbohydrate level than Gatorade,
which contains about 6% carbohydrates.

Fructose Becoming More Common as Carbohydrate Source

Fructose has long been spurned by many sports drink

makers because it is absorbed more slowly than dextrose
(which is used in Gatorade). However, fructose is sweeter
than any other natural sugar and thus provides a better
taste. It also works well in combination with other
sweeteners, particularly sucrose.
Bill Miller, who invented the first diet beverage (Diet
Rite) as well as the sports drink Enduro, points out that
fructose is a good fit for sports drinks used by people who
exercise less strenuously, such as golfers and walkers,
"people needing a slow release of energy over an extended
period of time. If you're a sprinter, you'll want to use
Gatorade, which contains dextrose and gives you a quick
burst of energy that dissipates quickly."
Miller predicts fructose in a 50/50 combination with
sucrose will become more popular as a carbohydrate source in
the future.
The makers of Gatorade maintain that the central
purpose of a sports drink is to promote fluid absorption,
and that drinking fructose during exercise can lead to
indigestion and diarrhea.

Vitamin Fortified

In recent years, more and more sports drinks entering

the market have been fortified with vitamins, particularly
with vitamin C. This trend continues as several new
products, including Nautilus Plus and Spalding, contain
Vitamin C.

Light Carbonation

All Sport, Jan-li-bo, Enduro, and Ting are all products

now on the market that feature light carbonation. This is a
somewhat controversial development, as it is widely believed
that carbonation impedes digestion. However, all four
marketers stress that their products are only lightly
carbonated and therefore do not create gastrointestinal
distress.

Measured Advertising Expenditures (1/2)

Most Ad Spending is Unmeasured

Because of the premium marketers of sports drinks place

on sports sponsorship and sports-related promotions, most
spending in the major companies' ad and promotional budgets
is unmeasured. In addition, two important marketers to
health food stores, Twin Laboratories and Weider, advertise
for next to nothing in bodybuilding magazines, which they
own or control.
Estimates in beverage industry magazines and marketing
or advertising trade magazines like Brandweek have generally
been extremely high. This is because of misinformation from
company spokespersons or confusion of promotion and ad
budgets.

Measured Ad Spending Nearly $64 Million in 1994

Coke's and Pepsi's battles with Quaker Oats pushed

measured ad spending in the sports drink category to $63.5
million in 1994, more than twice the amount expended the
previous year (+119%), and a 161% increase over 1992
spending of $24.3 million.

Top Three Spenders Responsible for 97% of 1994 Spending

 Based on data supplied by Leading National Advertisers
(LNA), the top three marketers Quaker Oats, PepsiCo, and
Coca-Cola were responsible for 97% of measured advertising
in 1994. During the 1992-1994 period, six advertisers
consistently purchased advertising of more than
$100,000 Quaker Oats, PepsiCo, Coca-Cola, Suntory, Twin
Laboratories, and Weider.

Quaker Oats Doubles Spending in 1994

To defend Gatorade's brand share, Quaker Oats doubled

its measured advertising spending in 1994. This was made
somewhat easier by the fact that Quaker had let spending
slide the previous year, to $18.6 million, down nearly 13%
from 1992's level. Quaker Oats' spending in 1994 was
comfortably ahead of the combined spending of the
challengers Coca-Cola and PepsiCo. Quaker Oats' share of
total category spending in 1994 was 55%. Its share of
spending in 1992 was 87%, much closer to its brand share at
the time.

Quaker Spent around Half on Network Television

In 1994, Gatorade put around $20 million, or 53% of its

advertising support for Gatorade in network television.
Another $9 million, or 24%, was divided almost evenly
between spot, syndicated, and cable television. Magazines
received the next largest share, around $5 million or 13% to
14%; outdoor advertising got around $3 million or 8%, and
the remainder went to spot radio.

Measured Advertising Expenditures (2/2)

Coca-Cola Next Largest Spender at $13.2

In 1994, Coca-Cola supported PowerAde with $13.2

million in measured advertising, according to Leading
National Advertisers (LNA). This is about 3« times what
Coca-Cola spent on the brand in 1993, when PowerAde was
still in regional distribution. Coca-Cola's share of catego
ry spending in 1994 was 21%.
According to LNA, Coca-Cola relied heavily on
television for its support of PowerAde in 1994, spending
$12.5 million or 95% of its measured advertising in that
medium: $6.3 million or 50% on network; $3.9 million or 31%
on spot; $1.7 million or 13% on cable; and $0.6 or a little
under 5% on syndicated. Coca-Cola bought no radio and only
small amounts of print and outdoor advertising in 1994.

PepsiCo is Third-Place Spender

According to LNA, PepsiCo spent $11.6 million in 1994

to support its national launch of All Sport, around 18% of
category spending, and a 205% increase on its 1993 spending
of $3.8 million.
Of the three major sports drink advertisers, PepsiCo
concentrated the most heavily on television, to the tune of
more than $11 million or 97%. About 45% was placed on spot
television, 36% on network, and 16% on cable. PepsiCo put
small amounts on outdoor and newspaper advertising behind
the brand in 1994.

LNA's Record for Suntory Much Smaller than Industry

Estimates

Some published estimates of Suntory's advertising

budget for 10-K have put the company's spending as high as
$14 million in 1993, which would have made Suntory the
second-place spender in 1993, with expenditures 75% as great
as those of Quaker Oats that year. Information from Leading
National Advertisers does not support these estimates.
According to LNA, Suntory was the fourth place spender in
1993, with $1 million dollars. In 1994, its mass media
spending on 10-K was reduced to about $800,000.

Many Small Advertisers

A long list of smaller marketers, advertising in the

tens of thousands of dollars, included Abbot Labs (for
Exceed, which it subsequently sold to Weider), Cadbury
Schweppes Plc (which spent nearly half a million in 1993 in
the unsuccessful launch of Everlast), Champion Nutrition,
Dr. Pepper/7-Up, Nature's Best, and Pro Muscle Management
($45,000 in 1994 for Gold's Energy Drink, a tiny fraction of
the $3 million to $5 million promised).

Advertising Positioning

Athletic Endorsement and Scientific Formulation

The benefit of a sports drink is that it may improve

your athletic performance. Secondarily, it will make you
feel like more of a serious athlete than if you are drinking
a Coke.
In advertising for sports drinks, the first of these
benefits is attested to by two kinds of proof: science and
athletic endorsements.
Sports drinks are effective because of the ingredients
in the products, which are supposed to be arrived at through
research, formulated on a scientific basis, meant not
primarily to taste good, but to do the job.
Improved athletic performance is even more powerfully
attested to by an athlete saying, "This is the product that
put me on top and this is my favorite flavor." Since the
second benefit makes you feel like an athlete is also
supported by a popular athlete's association with the drink,
it is easy to see why athletic endorsement receives more
emphasis than scientific formulation in advertising for
sports drinks. Both points are made. Endorsement just
comes on stronger.
Sports figures endorse sports drinks both as role
models and as experts. Athletes of the stature, literal and
figurative, of Michael Jordan (signed by Quaker Oats to
endorse Gatorade in 1991) endorse just about everything from
shaving cream to ocean cruises. However, they are more
persuasive when touting a sports-related product that they
might know more about than consumers do. In 1994, Pepsi
employed its own basketball superstar, Shaquille O'Neal, to
push All Sport in a national television advertising campaign
that began on March 17, with commercials aired on NCAA
college basketball championships. Coca-Cola's PowerAde
commercials feature Emmit Smith "working out."

Science Is a Secondary Proof of Efficacy

Arguments from science, though not as prominent as

sports imagery and endorsements, are usually present in some
form in sports drinks advertising.
For example, Gatorade advertising in 1993 pointed to the
results of a recent study, showing that Gatorade is absorbed
into the body 30% faster than plain water. The scientific
point is made, though, in a jocular, take-it-or-leave-it
style, as the "physiology" lesson in the commercial "Going
to School With Michael Jordan."
Meanwhile, in the PowerAde commercial "Emmitt Smith
Working Out," the announcer reminds us that this product has
"33% more carbohydrates for energy than Gatorade," and the
All Sport commercial "Shaq in 2044" makes the same point in
almost the same words: "...a third more carbs than Gatorade
for energy."

All Sport and PowerAde Position Themselves Against Gatorade

Commercials for All Sport and PowerAde position both

brands directly against Gatorade. Both name Gatorade, and
do not name any other competitive brand (such as each
other).

"Pepsi Generation" Approaches in All Sport Commercials

PepsiCo's All Sport commercials appeal to youth in a

spirit reminiscent of the white-bearded "Pepsi Generation"
theme, a staple of the company's cola advertising practi
cally since grandpa courted grandma. Ads that launched the
product regionally used the theme "Change Your Game," and
contrasted, as Brandweek put it, "lumbering sports scenes
from the 1960s with the frenetic pace of athletics today."
These ads, though clearly intended to position the
product as a more youthful alternative to the traditional
Gatorade (the same stance that Pepsi has always taken in
relation to Coke), were seen as not youthful enough. They
were replaced by a new campaign with the theme "Fuel the
Fire." Prior to the new 30-second spots' release, Pepsi
spokesman Andrew Giangola described the All Sport
commercials as "high energy and more Pepsi more youthful."
A third generation of All Sport commercials, "Shaq in
2044," makes essentially the same point a bit more obliquely
and humorously. The present, contrasted with the past in
the old All Sport commercials, is now contrasted with the
future. Children (a new generation) are shown with
basketball star Shaq O'Neal in the future, grandchildren on
his knee. It becomes clear from the conversation that a
half century earlier (in our time) something happened to
revolutionize the game of basketball, apparently by giving
the players superhuman powers. That something was the
introduction of All Sport.

Ads Aimed at Preteens

Suntory, which in 1993 reformulated 10-K to a sweeter,

relatively low-salt version and repositioned it as a
children's sports drink, targets this audience with
advertising that has a distinctly more juvenile tone than
the competition. The reformulation was launched with the
headline, "Really really good stuff," and depicted grade-
school children engaged in sports.
Gatorade has also attempted to reach out to youngsters
in ads. Gatorade's ads team up hero-worshipping kids with
Michael Jordan in the "Be Like Mike" TV spots.
In the All Sport commercial, "Shaq in 2044," Shaq is
talking to kids, too. The ad's science-fiction creative
approach may have been judged to have more kid-appeal than
the "games of yesteryear" theme that preceded it.

Creative and Design Approaches Are Youthful, "MTV" Style

As sports drinks seek out a younger audience, sports

drink commercials are starting to use stylistic devices
currently fashionable in youth-oriented advertising (note
especially Gatorade's "Going to School With Michael
Jordan"): jumpy camera work that suggests amateur
camcorder technique, print and writing in a variety of jazzy
typefaces and handwriting, and superimposed words that
contrast with, instead of echoing, words spoken in the
commercial.
Examples of consumer advertising for sports drinks are
found in Appendix II.

Consumer and Trade Promotions (1/2)

Event Sponsorships and Endorsements by Players

and Teams Are Most Common Promotions by Far

Endorsements by players and teams are obligatory for

sports drinks; they influence, and are used as themes, in
all other promotional efforts. Gatorade has Michael Jordan,
and every Gatorade label shows the logos of some of the
sports associations it is linked with the NFL, NBA, NHL,
NASCAR, and Major League Baseball. Dr. Pepper/7-Up's
Nautilus Plus is named for the well-known line of gym
equipment, whose trademark it licenses for the purpose. All
Sport is endorsed by Orlando Magic star Shaquille O'Neal as
well as by the NCAA. PowerAde is endorsed by the double-
threat athlete "Neon" Deion Sanders, and is the official
sports drink of numerous teams and associations including
the Atlanta Braves and the Olympic Games.

Endorsements Link Promotion, Advertising, Sometimes Even Package

Athletic endorsements, which testify to a product's

merit, surround the product with a glamorous sports
atmosphere, expose a target audience to the product at
sporting events (live or televised), are central to the
image-making of sports drinks, and serve to integrate
several aspects of a brand's marketing.
For example, a few years ago when Gatorade repositioned
its Citrus Cooler as Michael Jordan's "#1 Flavor," his
picture was put on the package along with a message from
him: "Now Citrus Cooler has an even bolder, more refreshing
taste! Taste why Citrus Cooler is my #1 flavor!"

Endorsement Can Backfire

In Europe in the early 1990s, testimonials by

professional athletes were widely used to promote the
category too widely, some industry analysts now think, since
European consumers were led to think that sports drinks were
strictly for sports and even strictly for pros. Though
Gatorade executives complain about the effect of this
practice on the market, Gatorade helped contribute to it,
obtaining endorsements by world class cyclists, marathon
runners, and the tennis star Ivan Lendl.

Event Sponsorship

Team endorsement is usually linked to event

sponsorship, which ensures the sports drink's logo will be
prominently displayed to audiences at sporting events, and
be picked up by cameras for the benefit of the home viewer.
Since Gatorade is the official sports drink of almost every
major professional and amateur sports league and all of the
big city marathons, Quaker sponsors about 5,000 athletic
events and organizations annually. Spalding sponsors local
10-kilometer runs and volleyball tournaments.

Sponsorships Targeted to "Tweens"

Suntory, in its quest for the "tween" dollar, and

Quaker Oats, in its response, have both recently initiated
partnerships aimed at preteen consumers. Gatorade has made
its pitch by sponsoring Little League Baseball. In late
July 1994, Suntory sponsored a 17,339-mile coast-to-coast
road trip to 28 Major League Baseball parks by four
students. The trip helped raise money for charity, and was
therefore covered by the local media at every stop of the
journey. In exchange for sponsorship, the students wore 10-
K T-shirts and caps, rode in a van with a 10-K logo, and
mentioned the product frequently. Though the students were
college age, Suntory reasoned that much of the audience for
the event would be preteens who look to the college students
as role models.
The cost-effectiveness of this sort of promotion was
highlighted by Jim Stevens, the president of Suntory Water
Group: "When you get in front of the news media in 28 major
cities around the country, that's really almost national
exposure. To buy that would be rather expensive."

Consumer and Trade Promotions (2/2)

Image Building: the Gatorade Sports Science Institute

A noncommercial academic institute, the Gatorade Sports

Science Institute (GSSI), funds studies and produces
educational material on sports nutrition and physiology. It
also brings glory to Gatorade and helps buff the product's
high-tech sheen.
Mitchell Kantor, director of GSSI, notes: "One of the
keys to our growth is that consumers understand that
Gatorade is a scientifically formulated product." While the
30 or more articles published yearly by GSSI (on subject's
like intestinal fluid absorption and ergogenic aids) are
free of direct plugs for Gatorade, the information and the
funding provided by GSSI are very good for the corporate
image of Gatorade within professional sports and sports
medicine and nutrition.
GSSI also helps keep Quaker Oats close to research that
might lead to changes in Gatorade's formulation. Better
GSSI gives the company ammunition for disputing competitors
claims about the comparative value of their ingredient
mix for example, whether Coca-Cola is right (from the
standpoint of sports science) to include less sodium and
more carbohydrates in PowerAde.

Free Gifts and Sweepstakes

Sports drinks are occasionally promoted with

sweepstakes and free gifts. For example, in 1994, Dr.
Pepper/7-Up's Nautilus Plus was introduced with an
inflatable raft giveaway promotion. An All Sport promotion
that same year, which was linked with its drive for represen
tation at health clubs, offered consumers a free one-month
membership in participating clubs.
Gatorade held a "Be Like Mike" sweepstakes, coinciding
with the 1992 Summer Olympics in Barcelona. More recently,
Spalding Sports Refresher was supported with sweepstakes
that included other Spalding products.
In 1994, Suntory supported 10-K with instant-win games
geared to its target audience of "tweens." Specially marked
16, 32, and 64 ounce PET bottles of 10-K contained under-the-
cap instant win game pieces, with prizes including sets of
tattoos, squeeze drink bottles, watches, T-shirts, and
mountain bikes with helmets. The grand prize was a trip to
a taping of Nickelodeon's athletic game show, Guts.

Discounts, Coupons, and Free Sampling Becoming More Common

Traditional techniques like discounts, coupons, and

free sampling, though not unknown, have been somewhat
neglected in sports drinks because athletic endorsement has
used up so much of the promotional budget. But increased
competition from Coca-Cola and PepsiCo seems to be changing
that. All Sport has arranged in-store taste tests between
All Sport and Gatorade, saying "We know we are up against a
very entrenched competitor in Gatorade. So our initial
marketing goal is to get people to try All Sport. All Sport
has also offered special discount multipacks ("3 for 99›")
of All Sport and two other beverages.
Gatorade supported its new Lemon Ice flavor with free
sampling and in-store coupons. Suntory supports 10-K with
price reductions. Publicity for Ladies First Fitness Drink
for Women announced that it would be promoted with 40 cent
coupons in free standing inserts.

Trade Promotions Are Standard

Trade promotions for sports drinks are frequent and

follow the standard approaches:

- case discounts for retailers for early payment or

quantity purchases;

- co-op advertising allowances;

- advertising kits with "slicks" that give retailers the

materials they need for local ads; and

- merchandising displays (that is, counter or floor

units, endcaps, and shelf extenders or "talkers") for use at
point-of-purchase.

Examples of Trade Ads

For examples of trade advertising, which appear quite

regularly in food and beverage industry trade journals, see
Appendix II.

Packaging and Labeling Trends (1/2)

Marketers Vary Packages and Sizes for Shelf Space and Consumer Appeal

Marketers of sports drinks particularly Gatorade use

varied packaging and sizes as a way to secure more SKUs on
store shelves, and to preempt competition.

Aseptic Drink Boxes to Appeal to Children and Young Teens

The 8.45 ounce aseptic drink box with

straw environmentally not too sound but very convenient has
helped expand the market for apple juice and Nestl‚'s Quick.
In 1988, responding to a threat from General Foods, which
had launched a Kool-Aid Sports Kooler in aseptic boxes,
Quaker Oats packaged Gatorade in its own aseptic Gatorbox.
In 1993, release of a product in this type of container
helped Suntory reposition 10-K as the preteen sports drink
of choice, and Suntory was happy enough with the results to
roll out a 300 milliliter drink box.

Possible Trend to Larger Aseptic Boxes

Suntory introduced the 300 milliliter version of its

aseptic 10-K box in December 1993. Susan Levine, speaking
for Combibloc Inc. of Columbus, Ohio, which manufactures the
boxes, suggested hopefully that sports drinks marketers
would soon be battling for position by means of different,
and increasingly larger, box sizes. "We expect our 300
milliliter carton to be another single-serve option which
will bring new users into the category. We see continued
expansion of the aseptic beverage category with our 350 and
500 milliliter sizes to satisfy even larger thirsts."

Gatorade Sports Bottle

Innovative packaging has always been a key to

Gatorade's success. One of its recent packaging answers to
the need to be closer to the "points of sweat" was the
introduction in 1994 of the Gatorade Sport Bottle, a 20
ounce plastic, squeeze top bottle that fits into bicycle
beverage racks, gym bags, and backpacks.

Packaging and Labeling Trends (2/2)

Extra-Large Sizes for Warehouse Clubs: the "Gator Gallon"

Sizes continue to increase. The "Gator Gallon," an

extra large size introduced by Quaker Oats, was originally
designed for sale in warehouse clubs, but seems to be
catching on in supermarkets. Dr. Pepper/7-Up's Nautilus
Plus powder is available in supermarkets in the Northeast
and California, exclusively in 10-gallon plastic pails.
Multiflavor Packs

Multipacks cardboard and plastic packages that contain

single-serving containers of three or more different
drinks have become increasingly common. The beverage
companies use them to cross-merchandise their new sports
drinks with other beverages. For example, PepsiCo in 1994
offered a discounted three-drink pack cross-merchandising
All Sport sports drink with Ocean Spray Lemonade and Lipton
Original. Gatorade uses them to encourage trial of new
flavors, with "rainbow," or mixed-flavor packages.

PET Containers

Suntory claims that 10-K was the first to use PET

bottles, which it introduced at the beginning of 1990. The
move was calculated to win the loyalty not only of
environmentally conscious consumers (the bottles are
recyclable), but also of those who are on the move and do
not want to lug around the heavier glass bottles.
Gatorade/Canada switched from glass to PET in 1992.
According to Rick Casement, materials buyer, "The weight and
clumsiness of glass, and in some cases, restrictions against
its use in public places, all contributed to the decision to
look at alternative means of packaging." The honey-flavored
Jan-li-bo is also available in PET containers.
A movement toward soft, unbreakable containers makes
sense in terms of the sports drink marketers' goal of
getting as close as they can to the places "where the
thirsts are." As Quaker Oats Vice President of Marketing,
Margaret Dyer, said in 1993, "The new lightweight, shatter-
resistant bottle allows people to take Gatorade with them to
more places because of the portability and safety of plastic
packaging."
10-K's April 1994 instant sweepstakes promotion was
linked to specially marked 16, 32, and 64 ounce PET bottles
of 10-K.
PET containers will probably become more and more
widespread in sports drinks.

Private Label Favors 64 Ounce Containers

Executives at two supermarket chains polled by

Supermarket News said they favored 64 ounce containers for
their private labels. "We promote the 64 ounce because it's
a bigger ticket item," said a buyer for Top-10. Mark
Polsky, Senior Vice President of operations at Magruder
Inc., of Rockville Maryland commented, "The big size 64
ounce in a plastic jug is the best-seller. It is light,
easy to carry and easy to hold."

Distribution: Retail, Institutional and Industrial Markets

Retail and Institutional Markets Supplied Differently

There are two major sports drink end-markets: the

retail market and the institutional market. In addition,
there are two minor markets: the industrial market and the
foreign market. The retail and institutional markets are
each supplied via different distribution channels.

The Retail Market

The retail market consists primarily of food stores;

these include convenience stores and health food stores,
both of which receive their sports drinks directly from the
marketers or through wholesalers or distributors.
Large supermarkets will warehouse Gatorade. Other
products are delivered directly to the stores. All Sport,
for instance, is sent store to store via Pepsi's trucks.
In the case of smaller convenience stores and mom-and-
pop shops, sports drinks are purchased from wholesalers who
sell a full range of grocery products. Some of the
wholesalers provide direct delivery, while others are
strictly "cash and carry." In a cash-and-carry arrangement,
the individual retailers bring their vans or trucks to the
wholesaler's central location where they purchase sports
drinks and other grocery products, and transport them back
to their stores. Health food stores operate under much the
same principle, except they are supplied by wholesalers or
distributors who specialize in health food products and
vitamins.

The Institutional Market

The institutional market consists chiefly of athletic

teams (both professional and amateur), health clubs, and
fitness centers. Also included in this market are food
service and catalog sales.
Depending on the type of outlet, distribution is either
direct, through sporting goods dealers, or through
wholesalers.

The Industrial Market

The industrial market is small. The major customers

are companies that operate in either very hot climates or
high-temperature conditions, where replenishment of fluids
and minerals makes for better working conditions and health
maintenance. According to Quaker Oats' public relations
department, the company's "heavy industry" category
comprises sales to steel mills and coal mines.

Distribution: Direct Store Delivery

From Direct-Store-Delivery to Intermediaries and Back

 Direct-store-delivery (DSD) from bottling companies to
stores was the norm for major sports drink distribution for
two decades. During the early 1990s, however, distribution
began to shift to wholesalers and brokers. Gatorade, for
instance, began to move to middlemen in 1990. This was
because individual bottlers were not flexible enough to keep
up with packaging trends.
There are signs the tide has turned; direct-store-
delivery may once more become the normal distribution
method.
Two developments are pushing this trend. Quaker Oats'
powerful new challengers in the sports drink arena, Coke and
Pepsi, are renowned for their powerful bottling networks,
and will not switch to middlemen. At the same time, to
judge by the remarks of Quaker Oats executive Donald B.
Williams, the company is dissatisfied with the wholesaler
relationship. "What wholesalers have got to be careful about
is not talking programs, but delivering programs.
Wholesalers have to change as they look to the future. If
their role is going to be one of purely distributing
products, then that's a limited role that has much less of a
value to me compared to one in which they become an active
selling agent for me as I go to market."

Quaker Oats Returns to Direct-Store-Delivery in Florida

In November 1993, Quaker Oats turned over exclusive

distribution of its 16, 32, and 64 ounce packages to "cold
channel" outlets to two bottlers in Florida to test the
direct-store-delivery system. As mentioned earlier,
Gatorade chose Florida for its distribution experiment
because it is a relatively isolated market, and consumption
of the product is high there, making it theoretically a high
hurdle for DSD to jump. The system may be applied elsewhere
if it is successful.
Wholesalers in Florida are understandably upset to have
lost the business.

Incentives to Wholesalers Have Not Always Paid Off

Elsewhere in the United States, Gatorade is trying to

expand availability with existing wholesalers who are, in a
sense, in competition with the Florida experiment that may
replace them.
Gatorade's past attempts at using incentives to get
wholesalers to push the products into new "points of
availability" have proved unsatisfactory for the company.
Earlier programs rewarded wholesalers for cases shipped
above a certain volume. According to Williams, "It ended up
being a warehouse-loading, diverting incentive for the
convenience store wholesaler. We came to understand that
neither of us made money; we lost money because of what it
cost us to load product in and have it shipped around the
country. Probably the only person who made any money on
that was the diverter." New programs are tied to
"activities that can generate more volume" for Quaker Oats.

Retail: Outlets; Shelf Space; Product Size

At the Retail Level

Food Stores Account for 90% of Retail Sales

Food stores account for approximately 90% of retail

sales. Supermarkets represent about half of food store
sales, with the remainder divided between convenience stores
and grocery stores. These proportions may start to change
if All Sport and PowerAde begin to appear on a large scale
in vending machines. Over time, the convenience store share
can also be expected to grow, since these outlets are less
saturated than supermarkets.

In Many Food Stores, Gatorade is the Only Brand Stocked

Packaged Facts estimates that 75%-80% of aggregate

supermarket shelf space for sports drinks goes to Gatorade.
In many food stores, Gatorade is the only brand stocked.
However, assortment tends to vary by season, with minor and
regional brands carried in addition to Gatorade in the
summer months.
Marketing efforts by Coca-Cola and PepsiCo are prodding
many retailers to create permanent sports drink sections
that give Gatorade a more modest share than it previously
enjoyed. But some retailers remain skeptical of the
newcomers. "We're not necessarily going to add both the
Pepsi and Coke sports drinks," a retailer for an East Coast
chain told Supermarket News in July 1994. "We will wait and
see. We may take just one of the two."

Bottle Sizes and Container Types Varied

Supermarkets often carry a range of bottle sizes and

types, from 12 ounce to a gallon, six packs, powder packets,
and aseptic containers. The 64 ounce containers seem to be
very popular in supermarkets, and this is the size most
often used for private labels. During the winter months and
early spring, when demand lessens, the preference is for the
16 and 32 ounce bottles.

Sports Drinks Are Located in Beverage Aisle and Refrigerators

Sports drinks are most often shelved in two sections in

supermarkets: in the shelf-stable beverage aisle and in
refrigerator cases. Occasionally, sports drinks are
featured in freestanding displays at the end of the beverage
aisle.
 Retail: Displays; Margins; Pricing

Marketers Tailor Displays to Convenience Store Trade

Gatorade, which looks for most of its increased Unite

States business in convenience stores, is altering its
marketing programs to suit the convenience store style of
business. "We've put together point-of-sale merchandising
pieces and programs that drive business through the
convenience store, that probably wouldn't work beans in a
grocery store."

Number of SKUs

The number of sports drinks stock keeping units (SKUs)

in supermarkets rose rapidly over the early 1990s, by as
much as 350% from 30 to 107. This reflects both the
increase in flavors, container types, and sizes of the
dominant brand, Gatorade, as well as the growth in
competition to Gatorade.

Margins

Margins on sports drinks are relatively high for

beverages averaging 29.6% in supermarket chains, according
to Supermarket Business. Note, however, that this average
reflects the overwhelming dominance of Gatorade, which
hovers in the 29.0%-31.0% range in chain and independent
food stores. Newly introduced Gatorade flavors (such as
Lemon Ice) and special packaging (such as aseptic boxes)
often command higher margins in the 30.0%-40.0% range.
Minor national and regional brands yield much higher
margins than the Gatorade average often over 40%. 10-K, for
example, yields margins between 43% and 47%. Weider's
Exceed has margins ranging all the way up to 50%. Margins in
convenience stores (noncompetitive outlets) and specialty
outlets (health food and sports stores) are on the average
much higher than average supermarket sports drink margins.

Pricing

In its Cergro Blue Book, Certified Grocers of California

publishes detailed information on sports drinks products
sold in California supermarkets. This includes data on
package sizes, case sizes, competitive pricing, margins, and
promotional discounts.

The Consumer (1/2)

About 56 Million Users

 In the 1994 Simmons Market Research Bureau Study of
Media and Markets, almost 56 million (or 30%) United States
adults reported they used thirst quenchers or sports drinks
at least on occasion.

Gatorade Most Widely Used Brand By Far

Almost 45 million adults, or some 80% of category

users, indicated they use Gatorade as a thirst quencher or
sports drink. The next most frequently reported sports
drinks were Snapple's Snap-Up and 10-K, each of which was
selected by about 6 million adults, or 11% of users. A
number of other brands were selected, but each by a smaller
number of adults.
It should be noted that because of the timing of the
survey, many respondents reported brand preferences before
All Sport and PowerAde were nationally available. This
undoubtedly unfavorably affected the standings of these
brands.

Age and Sex Are the Chief Factors in Sport Drink Use

Since Gatorade still comprises around 80% of the market

for sports drinks, it should not be a surprise that the
profile of Gatorade users closely parallels that of category
users. As will be seen, category and brand consumption is
skewed heavily toward the younger part of the United States
population, and somewhat less heavily toward males. Most
other variations from the norm geography being the most
important exception are attributable to the youth of the
Gatorade drinker.

Male Drinkers Outnumber Women About Three to Two

Roughly six of every 10 adult product users are men.

Though males outnumber females around three to two, thinking
of sports drink users as exclusively male and trade journals
often talk as if they are is obviously an error.

The Consumer (2/2)

Use Inversely Proportional to Age

As might be expected in a product tied closely to

strenuous sports activity, the percentage of drinkers in a
given group is inversely proportional to the group's age.
Those aged 18 to 24 are likeliest to use, those 25 to 34 are
less likely though still more likely than average, and so on
until use drops to below average after age 45. About half
of all adult sports drink users are 18 to 34 years of age,
although this age group represents little more than a third
(35%) of the adult population in this country.
High Rate of Full-Time Employment

Users are much more likely to be employed and somewhat

more likely to be employed full time than the average United
States adult. Age contributes to this trend. A user is
less likely to be retired or semiretired than the average
United States citizen.
Gender is also a factor tending to raise the employment
level of the Gatorade user, since a higher proportion of men
than women are employed part time and especially full time.

More Blue Collar than White Collar

It is to be expected, given the youthfulness of sports

product drinkers, that there would be fewer than average
professionals and managers among them, and the data support
this prediction. Among the lower echelon job choices, there
is a skew toward "precision/craft" and away from
"technical/clerical sales."

African-Americans More Likely to Use

Almost 40% of African-Americans are reported to be

sports product drinkers, about 30% of United States whites,
and a similar proportion of Americans Simmons classes as
"other." Though African-Americans were significantly more
likely to drink this product than whites, white drinkers
considerably outnumber black drinkers.
Probably a more useful way to look at sports drink use
by race is to say that of the total users, around 82% are
white; 15% are African-American, and 3% are "other."

More Likely to Live Sunbelt

Simmons's survey confirms the data widely reported in

beverage and business trade periodicals that sports drink
use is heaviest in the sunbelt. Those living in the South
are most likely to use a sports drink, while those living in
the Midwest are least likely of all. Since the South has a
much larger population than the other census regions, it
also encompasses the largest proportion of users, 35%.

Household Size and Age of Children

The likelihood that an adult uses a sports drink

increases with household size and is also notably higher in
households where children are present. Both these
conditions are undoubtedly tied to the age skew of product
use.

Table: Projected Sales and Growth of Sports Drinks (1994-1999)

 (In Millions)

Year Dollar Sales % Change

1999 $1,380 7%
1998 1,290 7
1997 1,205 7
1996 1,125 6
1995 1,065 11
1994 960 -

Source: Information Resources, Inc.'s InfoScan; Packaged

Facts.This material used with permission.

Table: Use of Sports Drinks: By Census Region (1994)

% of % of Per
U.S. Capita
Region Adults Users Index

South 34.7% 41.2% 119

Midwest 24.0 19.4 81
West 20.7 20.9 101
Northeast 20.6 18.5 90

Sources: Simmons Market Research Bureau; Packaged

Facts.This material used with permission.

Table: Leading Marketers of Sports Drinks: Major and Minor

Marketers (1/2)

Marketer/Brand Description

MAJOR MARKETERS

Coca-Cola Corp.

PowerAde High Energy

Thirst Quencher
70 calories, 19 carbohydrate
grams, 55 mg. sodium, 30 mg.
potassium, no other electrolytes,
vitamins, or minerals. Flavors
include lemon-lime,orange, and
fruit punch.

PepsiCo

All Sport Body

Quencher 70 calories, 20 carbohydrate
grams, 55 mg. sodium, 55 mg.
potassium, no other electrolytes,
 vitamins, or minerals. Lightly
carbonated. In fruit punch,
lemon-lime, orange, and lemon-lime
light varieties.

Quaker Oats

Gatorade Thirst
Quencher The leading sports drink. 50
calories. 14 carbohydrate grams,
110 mg. sodium, 30 mg. potassium,
no other electrolytes, no other
vitamins or minerals. In
lemon-lime, lemon ice, orange,
citrus cooler,fruit punch,
tropical fruit, grape, and
iced tea flavors.

Gatorade Light A version of Gatorade with

half the calories, sweetened
with glucose and saccharin. 80
mg. of sodium.

Suntory Water Group

10-K 60 calories, 15 carbohydrate

grams, 55 mg. sodium, 30 mg.
sodium. In eight flavors
including lemon-lime, fruit
punch, and grape.

MINOR MARKETERS

American Body Building

Products

Cutting Force Fat burning drink with 40 calories,

10 grams carbohydrates, no electrolytes,
"anabolic" vitamin and mineral fortified.

Carbo Light 125 calories, 31 carbohydrate grams, 35 mg.

sodium, 99 mg. potassium, with magnesium
succinate, 30 mg. vitamin C, no other
vitamins or minerals.

AVI/Ultima Foods
Tough Energy Carbo-loading drink in ready-to-mix powder
Drink Mix form, fortified with vitamin C.

Beverage Group
Spalding Sports
Refresher A natural-ingredient drink positioned as
a healthier alternative to carbonated
beverages as well as a sports drink.
Fortified with vitamin C, in honey
 lemon, citrus, cherry-raspberry, and
fruit punch flavors.
Champion Nutrition

Cytomax A carbo-loader, with 160 calories, 32

carbohydrate grams, 128 mg. sodium, 240 mg.
potassium, with magnesium and calcium.

Daily Juice Products

Lady's First Fitness

Drink for Women Sports drink formulated just for women
"with extra potassium and B vitamins"
and "less sodium...naturally low in
calories."

Dr. Pepper/7-Up

Nautilus Plus Fortified with vitamins and minerals

including and calcium. Available only
in powder form, and only in Northeast
and California.

Energy Foods, Inc.

Mighty Morphin Power
Rangers
Sports drink positioned
toward children. Tropical
cooler, fruit punch, orange,
and grape flavors in single
serving, recyclable plastic 8
fluid oz. "sport" bottles
with push-pull spouts.
Naturally flavored and
vitamin C fortified.

Everfresh/Nutriceutical
Products
Gold's Isotonic Quencher
70 calories, 18 carbohydrate
grams, with 100 mcg. chromium
picolinate, 120 mg. sodium,
no potassium, with magnesium,
chloride, and calcium.
Gold's All Day Energy
Time-released energy drink,
with carbohydrates from
fructose and glucose
polymers, in kiwi lime,
passion peach, mountain
raspberry, fruit punch, and
mandarin orange flavors.
Gold's Performance Tea
76 calories, 19 carbohydrate
grams.

GNC/Pro-Performance
 Pro Carb A carbo-loading beverage,
with 450 calories in an 18 oz.
serving. In iced tea,
strawberry, fruit punch, and
grape flavors.

Hoffmann Products/York
Barbell Company
Super Energol An unusual, milk shake-like
energy drink made with
linoleic and linolenic
unsaturated fatty acids and
fortified with vitamin E.

Source: Packaged Facts

Table: Leading Marketers of Sports Drinks:

Minor Marketers (2/2)

Marketer/Brand Description

Inter-American
Foods, Inc.
Sports Shot Sports Drink
Several flavors of sports
drinks available in half
gallon clear plastic bottles,
at a retail price of 79
cents.

Jianlibao America Ltd./

Guangdong
Jianlibao Group of China
Jan-li-bo The sports drink of the Chinese Olympic
team, sweetened with honey,
in several "all natural"
flavors, lightly carbonated,
with electrolytes.

Kali's Bakery
Rapid Quench All-natural, sugar-free drink,
sold in 32 fl. oz containers,
with 10% juice, low sodium.

King Juice
Pit-Stop Sports Refresher
Sports drink targeted toward
the "racing community," sold
in plastic squeeze bottles.

Maximum Nutrition
Maximum Fat Burner 0 calories, 0 carbohydrates in
16 oz serving, a "fat
burning" drink.
Musashi North America
Growling Dog Energy Mix
Vitamin- and mineral-
fortified drink with ATP,
creatine, and inosine.

Nature's Best
Perfect Cuts Fat-burning drink, 40 calories
per serving, 10 grams
carbohydrates, no
electrolytes, fortified with
"anabolic" vitamins and
minerals.

Carbo Coffee A carbo-loading beverage, ready-to-

drink in cans, 11 fluid
ounces, 420 calories.

Ocean Beverage
Sportade Low sodium
sports drink available in
fruit punch, lemon-lime, and
orange, in clear plastic
bottles with push-pull
spouts.
Optimum Nutrition
Fat Burning Xcelerator
Zero calorie fat burning
formula, with choline,
inositol, l-carnitine, and
vitamin B6. In fruit punch,
orange, grape, and raspberry
tea flavors.
Carb Xcelerator
Carbo-loading drink with 110
calories per serving, in 18
fl oz. bottles in fruit
punch, grape, orange,
strawberry, lemon lime, and
watermelon flavors.

Pro Energizer Drink A complex carbohydrate energy

and recovery drink with real
fruit juice.

The Q.K. Corporation/

Cramer, Inc.
Quickick An isotonic
sports drink available in two
forms: powder is packaged in
pouches and sold through
sports stores; concentrate is
packaged in plastic
containers and distributed
through food stores
nationally.
Quaker Oats/Snapple Natural
Beverage Company
Snapple Sport Snapple's
Snap-up sports drink renamed.
All natural, available in
fruit punch, lemon, lemon-
lime, and orange.

Science Foods
Diet Down 24 calories
and 2 grams of carbohydrates
in 16 oz. serving, a "fat-
burning" drink fortified with
additives meant to help user
lose weight. No
electrolytes.

Lite Carbo Pump A carbo-loader with 132

calories, 32 grams of
carbohydrates per serving. 30
mg. sodium, no other
electrolytes.

Turbo Tea Free 0 calories, 0 carbohydrates,

with stimulants. 35 mg.
sodium, no other
electrolytes.

Jump Start 44 calories, 11 carbohydrate

grams, with stimulants.
Magnesium and calcium, but no
salt or potassium.

Spike USA
Spike Sports Drink A low-price sports drink
associated with athletes, who
part-own the company that
launched the product.
Available in fruit punch,
orange, lemon-lime, clear
grape, and clear tropical
punch.

Sports Beverage Company

Carbo Cooler Sodium free sports drink. 8 oz.
serving contains B "stress"
vitamins, 60 mg. potassium,
12.5 mg. magnesium, 30 mg. C.

Strength Systems
Sport Cooler 9 calories, 25 carbohydrate
grams, 30 mg. vitamin C, 100
IU beta-carotene, 5 mg.
sodium, 55 potassium, with
magnesium.

Twin Laboratories
 Hydra Fuel Vitamin-fortified isotonic drink. 16
oz. serving contains 132
calories, 99 mg. potassium,
25 mg. magnesium, 77 mg.
chloride, 25 mcg. chromium,
240 mcg. phosphate
(advertised as a "lactic acid
buffer"); and 60 mg. C.

Ultra Fuel Vitamin-

fortified carbo-loading
drink. 16 oz.. serving
contains B "stress" vitamins,
99 mg potassium, 25 mg.
sodium, 400 calories, biotin,
panthatonic acid.

Weider Foods
Exceed Energy Drink 70 calories, 17 carbohydrate
grams, 50 mg. sodium, 45 mg.
potassium, with magnesium,
chloride, no calcium.

Tiger's Milk Tiger Sport

A line of carbo-loading
drinks, "Carbo 100 Complex
Carbohydrate Drink" available
in grape, orange, fruit
punch, and lemon-lime.

Joe Weider's Breakthrough

Energy Drink
Isotonic sports drink, ready-
to-drink in cans. An 8 oz.
serving has 80 calories, 60
mg. sodium, 45 mg. potassium,
1.6 mg. calcium, 86 mg.
chloride, 4 mg. magnesium.
Lemon flavored.

Source: Packaged Facts

Table: Brand Share of Sports Drinks in Supermarkets (1993-1994)

% Share
Brand/Marketer 1994 1993

Gatorade/Quaker Oats 88% 82%

All Sport/PepsiCo 2 6
PowerAde/Coca-Cola 2 5
10-K Suntory Water Group 4 3
All Others 4 4

Source: Information Resources, Inc.'s InfoScan.

This material used with permission.
Table: Formulas of Gatorade and Challengers Compared

Salt Potassium
Product Calories (mg) (mg)

Gatorade 50 110 30
Suntory 10-K 60 60 30
All Sport 70 55 55
PowerAde 70 55 30

Source: Packaged Facts.

Table: Sports Drinks in Europe: By Country

(Year ended Nov. 1994 vs. 1993)

Country 1993 1994 % Change

Germany $40.0 58.8 47.0%

Italy 46.9 39.7 -15.4
Britain 28.8 30.7 6.6
Spain 14.3 16.3 14.0
Belgium 7.9 8.0 1.3
Austria 5.5 7.1 29.1
France 7.6 5.0 -34.2
Ireland 0.1 0.2 100.0

Total Above 151.1 165.8 9.7

Source: The Wall Street Journal, Feb. 7, 1995 (based on

A.C. Nielsen data). This material used with permission.

Table: Selected New Sports Drinks (1993-1995)

Marketer/Brand Description
1995
American Beverage Corp. Inc.
1st Ade
Reintroduced as a "great
tasting" sports drink
positioned toward
children. Said to be
fortified with vitamins A
and B and to be low in
sodium. Available in
punch, orange, lemon-lime,
and blue raspberry flavors
in color-coded 16 oz.
squeeze bottled as well as
64 oz. resealable bottles.
Coca-Cola Co.
PowerAde Sports
drink line extended with a
variety called Mountain
Blast.

HealthTek International
Rebound Heavily
vitamin-fortified sports
drink, packed in 20 oz.
stippled glass bottles,
with vitamins A and C. In
grapefruit-orange,
strawberry-melon, orange,
and fruit punch.

Quaker Oats Co.

Gatorade Thirst Quencher
Watermelon, Cool Blue
Raspberry, and Wild Apple
are new flavors.
Watermelon comes in all
package types, other two
flavors only in 20 oz.
sports bottles.

1994

American Beverage Corp./

Daily Juice Products
Lady's First Fitness Drink
for Women Sports
drink formulated just for
women "with extra
potassium and B vitamins"
and "less
sodium...naturally low in
calories."

American Dairymen Inc.

Sport Shake Dairy-
based sports drink in
vanilla and chocolate.

Dr. Pepper
Nautilus Plus Powder in 10
gallon pails
Fortified with vitamins
and minerals including C
and calcium. Available
only in powder form, and
only in Northeast and
California.

Quaker Oats
Gatorade Lemon Ice
 New Gatorade flavor.

Snapple
Snapple Sport New
name for Snapple Snap-Up.
Positioned as "Dom
Perignon" of sports
drinks.

1993
Energy Foods
Mighty Morphin Power
Rangers Power Drink
Sports drink positioned
for children.

Jianlibao America Ltd./

Guangdong
Jianlibao Group of China
Jan-li-bo The sports
drink of the Chinese
Olympic team, sweetened
with honey, in several
"all natural" flavors,
lightly carbonated, with
electrolytes.

Quaker Oats
Gatorade Iced Tea
New flavor for Gatorade.
Spalding Sports Refresher
Positioned as a healthier
alternative to carbonated
beverages as well as a
sports drink. Fortified
with vitamin C.

Source: Packaged Facts.

Table: Measured Advertising Expenditures:

Sports Drinks (1992-1994)

(In Millions)

Marketer/Brand 1992 1993 1994

Quaker Oats Co./Gatorade $21.3 $18.6 $37.2

Coca-Cola Co./PowerAde Ready-to-
Serve Sports Drink 0.2 3.9 13.2
PepsiCo/All Sport Flavored 2.1 3.8 11.6
Drink
Suntory Ltd./10-K Ready To 0.1 1.0 0.8
Serve Beverage
Twin Laboratories/Ultra Fuel
and
 Choline Cocktail Drink 0.3 0.4 0.2
All Others 0.3 1.3 0.5
Total $24.3 $29.0 $63.5

Source: Leading National Advertisers; Packaged Facts.

This material used with permission.

Table: Brands of Thirst Quencher and Sports Drinks Used by

Adults

(In Millions)

% of % of
Brand Adults Adults Users

Gatorade 44.8 23.9% 80.6%

Snapple Snap-Up 6.2 3.3 11.2
10-K 5.9 3.2 10.7
All Sport 4.0 2.1 7.1
Mountain Dew Sport 3.9 2.1 7.0
PowerAde 3.4 1.8 6.2
Freestyle 1.2 0.6 2.1
Everlast 1.1 0.6 1.9

Note: Percentage of users adds up to more than 100 because

some people use more than one brand.

Sources: Simmons Market Research Bureau.

This material used with permission.

Table: Sports Drink Consumers by Region

No. Adults % Who % of

in Region Drink Sports
(In Sports Drink
Millions) Drinks Users Index

Northeast 77 16.1% 12.2% 60

Midwest 103 24.8 27.5 114
South 124 43.3 44.1 129
West 78 15.8 16.2 76

Source: Simmons Market Research Bureau. This material used

with permission.

Table: Demographic Characteristics Favoring Use of Sports

Drinks and Gatorade
Factor Sports Drinks Gatorade

Sex Male Male

Age 18-34 18-34

Education NS NS

Employment Full-time Full-time

Occupation Blue collar Blue collar

Family Status Single Single

Region South South

Locality NS NS

Race African-American African-American

Household NS NS
Income (000)

Household Size 3 or more 3 or more

(No. of Persons)

Children in All ages All ages

Household (Age)

NS means factor is not significant.

Source: Simmons Market Research Bureau; Packaged Facts.
This material used with permission.

LA-39103 PROTEIN DRINKS

Products; Definition

The Products

High-Protein and/or High Carbohydrate Drinks

Aimed at Increasing Muscle Mass

Protein drinks are meal replacement products high in

proteins and sometimes in carbohydrates as well. Most
protein drinks are used by athletes, especially
bodybuilders, to help build muscle mass with a minimum of
added fat. These drinks are often fortified with vitamins,
minerals, herbs, and organic molecules believed to enhance
performance. Amino acids, the chemical building blocks of
proteins, are included in the category. Internally the
category can be broken down into the following types of
products, each with a somewhat different formula and
purpose:

- high calorie weight-gain drinks high not only in

 protein but also in added carbohydrates, used by
bodybuilders and others wishing to gain weight;

- pure protein powders for bodybuilders and others

needing to supplement their protein intake;

- whole meal replacement diet drinks with extra protein,

a new and growing segment. These products are similar in
purpose to diet drinks like Ultra Slimfast, but are much
higher in protein; and

- liquid amino acid supplements.

Carbo-Loaders Not Included

In general, protein drinks promise an improvement in

long-term performance, appearance, and physical
capabilities. They do their job over weeks and months, not
hours. Even though some of the drinks include staggering
amounts of calories and carbohydrates, they are different in
purpose and formulation from carbo-loading drinks, which are
designed to give athletes energy and staying power during
sports activities. Carbo-loaders are discussed in the
Sports Drinks section of this report, along with fluid-and-
electrolyte-replacing ("isotonic") drinks.
On an abstract level, this distinction is less than
perfect, since some protein drinks are fortified with
ingredients that have the reputation of improving
performance in an immediate way, in the short term. After
all, one of the ways users of the products generally seek to
increase their muscle mass is through harder, more energetic
workouts. For practical purposes though, the product
categories are well defined and distinct. Even the carbo-
loading drinks aimed at the bodybuilding market, by
companies who make high protein drinks for that market, are
advertised and packaged in a different way from the same
company's high protein drinks.

Solid Food Versions Exist, but Are Not Included

A few protein drinks have counterparts in candy bar

form, bearing the same brand name as the drink. One company
markets a version of its powdered drink product as a powder
that is consumed directly without being mixed with a liquid
(as some children eat Kool-Aid right out of the packet) and
also as a spray version. Protein and amino acids are also
available in pill and gelatin capsule form.
These products will be discussed when relevant, but
they are not considered part of the market when it comes to
estimated sales and growth. There is also a close
relationship between the market for protein drinks, many of
which are fortified with vitamins and minerals, and the
market for other sports supplements. Many of the same
companies market both to the same target consumers; both may
be mentioned in the same ad, and are occasionally included
in the same "weight-gain kit." These products too will be
discussed where relevant to protein drinks; but they are not
considered in estimates of category sales and brand shares.

Products: Use (1/2)

Closely Related to Bodybuilding and Its Enthusiasts

Though the exact proportion cannot be precisely

quantified (see Market Composition below), most of the
athletes using protein products are bodybuilders: some
amateur, some competitive.
Fitness seekers who go to gyms and health clubs, even
if they work out with free weights or with resistance
machines, are unlikely to seek the tremendous increases in
muscle mass promised by most protein products. They also do
not burn calories at the rate users of these products do a
daily dose of most weight-gain products would turn a
nonathlete obese in short order.
The boom in exercise, however, has made bodybuilding
less of a fringe phenomenon, and raised standards of fitness
have undoubtedly drawn many young people to the sport and
thus to the protein drink category.

Sport or Beauty Contest?

Fans of the Olympics can attest to a large subjective

element between a score of nine and a score of 10 in
competitive figure skating or synchronized swimming.
Bodybuilding, on the other hand, is the only sport whose top
competitive event is essentially a beauty contest. This, no
doubt, is an important reason why the Olympic committee has
long resisted petitions by bodybuilding organizations and
enthusiasts to add it to the list of Olympic sports.
Nevertheless, bodybuilders must work very hard to ready
themselves for these contests. Their training, like the
training of an Olympic runner, extends the limits of
physical achievement. Perhaps those who call it an art
("body sculpting") come closest to the truth.
A glance at the body of any Mr. Olympia of recent
years, so extreme-looking even to eyes conditioned by the
screen success of Arnold Schwarzenegger, makes one thing
clear: Whatever else it may be for the rest of the world,
for the participant, bodybuilding is an obsession.

Do Protein Drinks Work? Are They Necessary?

Do high protein and vitamin supplements do any more for

those who use them than boost their confidence? Federal
Trade Commission actions have made marketers wary of making
absolute claims.
Just as cigarette companies must warn of health hazards
in their advertising, marketers of protein drinks protect
themselves legally by accompanying their dramatic before-and-
after pictures with disclaimers attesting that supplements
were not the cause of the muscle gains described and
depicted in the ad. Oftentimes, however, the editorial
environment surrounding the ad is designed to make the
viewer ignore the disclaimer.
Whether or not consumers are wise to use these products
is a matter of controversy, even among parties who have no
monetary interest in the outcome.

Manufacturers of Supplements Point Out That Athletes

Have Unusual Nutritional Requirements

Exercise at the extreme levels practiced by

bodybuilders and other athletes places stress on the body,
sometimes in less than obvious ways. Exercise leeches
vitamins and minerals that are needed for many purposes; the
muscular stress that leads toward muscle enlargement can be
viewed as a process of minor injury and repair, and it calls
on the action of the body's repair systems.
A pamphlet, Health, Sports Performance and Nutrition,
published in 1990 by Weider Health and Fitness (a highly
interested party, it should be noted), maintains that
balanced diet without food supplements, while adequate for
most people, is insufficient for an athlete's needs. The
pamphlet notes that in a six-month study of long-distance
runners in New Zealand, "supplemented athletes experienced
81% fewer infections than nonsupplemented runners, 35
percent fewer injuries, and logged greater performance
improvement."
Says Jerzy Meduski, M.D., quoted in the Weider
pamphlet:

It is not just a question of more calories for fuel,

but of bodily maintenance at the limit of exhaustive
physical ability. This requires a disproportionate
and increased need for certain vitamins, minerals,
fatty acids and amino acids directly related to
exercise, endurance, muscle breakdown, reconstruction
and immunity which are not adequately supplied even if
you eat more.

Products: Use (2/2)

A Healthy "Fast Food"

Marketers also point out that even if a well-balanced,

nonsupplemented diet can supply an athlete's special
nutritional needs, it is unrealistic to expect most athletes
to live on such a diet. Most athletes are young men who
love all that is worst in the typical American diet. After
a workout, chances are they are not going home to an
elaborate meal they are going out to the nearest Burger King
or McDonald's. In real life, athletes may consume enormous
quantities of food 14,000 calories a day, the weekly ration
for an ordinary man, is not unusual and still suffer from
nutritional deficiencies.
In this light, the powdered shakes and drinks can be
viewed as a healthy "fast food," as convenient as hamburgers
and donuts, but much better for the athlete's health and
performance.

How They Work (If They Work)

If protein drinks work, they do so in several ways.

The simplest is by supplying protein, calories, and
essential nutrients with a proportion of fat much lower than
supplied by the average diet. The benefits of this regimen
are uncontroversial, though critics argue that athletes
could achieve similar results for a fraction of the cost by
planning their meals a little more carefully.

The Process of Muscle Growth

Growth in muscles occurs within each individual muscle

cell. The muscle cells react when hard work disrupts
cellular walls and internal cellular microfilaments, among
them actin and myosin. These microfilaments are believed to
be responsible for the muscle cell's ability to shorten to
produce the flexions and contractions of exercise. In
other words, as one would guess from the soreness that
follows strenuous exercise, the individual muscle cells are
slightly injured by it. When the soreness begins to wane
after a day or two, a second stage is reached the muscle
begins to rebuild within each individual cell, and the cells
rebuild with more muscle protein than they contained before
the stress.

Reaching a Performance Plateau

As in many other sports, bodybuilders commonly reach a

plateau of performance, beyond which a mere increase in
weights or repetitions (reps) is of no avail in adding to
muscle mass. It is as if the muscle cells have caught on to
the fact that they are living inside a body whose owner is
just going to up the ante, so why keep going? At this
point, some bodybuilders vary their workout, and some reach
for protein supplements.

Anabolic vs. Catabolic

The phrases "anabolic," "catabolic," and "anti-

catabolic," are ubiquitous in advertising for protein drinks
and in articles read by bodybuilders. It is assumed that
enthusiasts are familiar with this scientific jargon, which
has acquired a special power from its association with the
forbidden magic of "anabolic steroids." The meaning of these
words is unmysterious, though.
Webster defines "anabolism" as "the constructive part
of metabolism concerned especially with macromolecular
synthesis"; "catabolism" is "destructive metabolism
involving the release of energy and resulting in the
breakdown of complex materials within the organism." From
the bodybuilder's point of view, anything that builds muscle
is "anabolic"; anything that breaks muscle down is
"catabolic." "Anti-catabolic" is another way of saying
"anabolic."
Different ingredients in protein products are valued
for their reputation as "anabolic" substances, with varying
degrees of scientific support.

Products: Ingredients: Protein; Designer Proteins and

Amino Acids

Ingredients: Protein

Since muscles are made of protein, it has long been

assumed that eating protein will contribute to muscle
development. In the past, bodybuilders and other athletes
wishing to add muscle mass quickly were encouraged to eat
enormous quantities of steaks and eggs; protein drinks
provide the same protein without large amounts of fat and
cholesterol. However, some experts simply doubt that
ingesting extra protein makes a difference in building
muscle, while others have suggested that high protein intake
stresses the kidneys and can therefore be damaging to
health.
According to Peter W.R. Lemon, a professor of applied
physiology in Kent, Ohio, who has done several studies of
protein intake:

The results are inconclusive, which I suppose has

worked to the advantage of food-supplement companies.
There are certainly a tremendous number of athletes
who are convinced that without excess protein they
can't build muscle mass. And there is no proof that
excessive amounts of protein can be damaging to
internal organs over a long period of time.

"Designer" Proteins and Amino Acids

Believers in proteins distinguish between different

forms of proteins, rating their effectiveness in terms of
Protein Efficiency Ratio (PER), Biological Value (BV), or
Net Protein Utilization (NPU). Each term is measurable in
numbers, and is referred to generally as "bioavailability."
A marketer will maintain, for example, that "the
bioavailability of vegetable protein is 10% lower than meat
protein."
Marketers offer the consumer an assortment of proteins
from different sources egg whites, meat, vegetables (soy and
casein), and whey and promote products based on the supposed
extra bioavailability of a particular protein made possible
by particular manufacturing techniques. For example, since
heat is believed to cause cross-linking in protein
molecules, which in turn may slow down protein digestion
time, some marketers boast of their low heat manufacturing
processes. On this basis, whey as a source of protein is
promoted as superior to egg-white because high heat is
necessary to protect against salmonella in egg whites
protein.
The human body breaks up proteins into amino acids
before reassembling them into new proteins. Amino acids
make it possible to skip this step and may therefore be even
more "bioavailable" for muscle building than the best
protein. Amino acids are sold as supplements in tablet and
liquid form. In addition, certain types of amino acids (the
BCAA or "branched chain" amino acids L-leucine, L-
isoleucine, and L-valine) are believed to be especially anti-
catabolic. Some protein drinks are fortified with extra
quantities of these amino acids, and marketers tend to point
out their presence in whole proteins that could not help but
include them.

Products: Ingredients: OKG, Colostrom, Vandyl Sulfate;

Creatine

Other Ingredients

One very heavily fortified protein drink, boasting that

it is "the equivalent of swallowing 30 pills," contains
virtually the entire panoply of vitamins, minerals, herbs,
and chemicals used in these products. The list includes:
OKG (ornithine a-ketoglutarate), creatine, vanadyle sulfate,
chromium picolinate, colostrum, royal jelly, smilax,
sterols, ginseng, saw palmetto, Mexican yam, transferulic
acid, yohimbe, inosine, digestive enzymes, arginine
pyroglutamate, orhic, magnesium, zinc, potassium, and
dibencozide.
Ongoing research into the effects of various nutrients
on muscle growth is monitored by the major marketers in the
field, and results favoring a particular chemical are widely
publicized. As a result, consumers tend to be aware of the
latest hot new chemical. Some of the ingredients that have
been especially in demand in recent years are described in
more detail below.

OKG, Colostrum, Vanadyl Sulfate

OKG, colostrum, and vanadyl sulfate three organic

ingredients sometimes offered together (and with nothing
else) in a single product are valued for the stimulating and
maximizing effects they are believed to have on IGF-1
(insulin-like growth factor-1), a growth hormone molecule
involved in stimulating muscle growth.

Creatine
 Creatine, a substance formed in the liver and kidneys,
appears to enhance the body's manufacture of adenosine
triphosphate (ATP), the molecule crucial to the basic
cellular process by which sugar is turned into energy. Just
as carbo-loading is believed to add to an athlete's
endurance during a single event, creatine is believed to
make possible a more intense workout, leading to sorer
muscles (at first) and larger ones (eventually). According
to Robert Maughan Ph.D, an exercise physiologist quoted in a
1995 Men's Fitness article, "there's now little doubt that
creatine can improve performance."

Products: Forms; Regulation

Product Forms: Mostly Powders

The majority of protein drinks are sold as powders that

are mixed or dissolved in water or milk; often the products
do not mix easily and a blender is required. A few drinks
in this category, especially amino acids, are offered in
liquid form. There are several protein drinks and amino
acid drinks packaged as ready-to-drink soft drinks, one
powdered product meant to be eaten right out of the package,
and a few chewable gels.

Protein Drinks Are Regulated as Diet Supplements

Under the provisions of The Dietary Supplement and

Health Act of 1994, which is discussed in greater detail in
the Overview section of this report, sports nutrition
products, including protein drinks, will be regulated as
diet supplements, rather than as food additives. The new
law and the reclassification gives marketers greater freedom
as to the ingredients they may include in protein drinks,
since the burden of proof regarding the safety of
ingredients now rests with the FDA.

Cardboard Cans, Plastic Tubs, and Plastic Containers

with Handles

Protein drinks are available in a wide range of sizes,

most varying between five and 25 pounds, and in many
different package forms. The most popular include:

- cardboard cylinders with a metal base, a foil seal and

a flexible plastic lid that snaps into place to resecure the
can once the foil seal has been broken;

- plastic tubs, slightly wider at top than bottom, with

foil seal and snap-on plastic lid. Some of these have wire
or plastic strips attached just below the lid for carrying;

- plastic tubs, roughly cylindrical but rounded at the

top, with screw-top lids of the same material. These
 containers also have foil seals to retain freshness;

- some brands, in especially large sizes, are available

in squarish plastic containers with molded handles, like the
containers used for emergency gas refill kept in the trunk
of your car;

- cardboard boxes, within which powder is presorted into

individual packets;

- individual one-serving paper packets sold separately;

and

- glass bottles with wide-mouth, screwtop steel lids, for

ready-to-drink protein drinks.

Market Size and Growth

Market Size and Growth

Most High Protein Powders Sold at Outlets That

Sales Auditing Services Do Not Monitor

Precise market size and brand share data for the

protein drink category are not available. Most of the
products are sold at health food stores and gyms, and
neither of these retail outlets is served by sales auditing
firms such as those that track product movement in food and
drug stores. In addition, since nearly all of the marketers
are private companies, it is difficult to infer sales from
reported earnings. The marketers themselves tend to give
widely varying estimates of market size.
The numbers in this report were arrived at by canvasing
numerous product managers as well as distributors and
writers in trade magazines for their estimates, and making
adjustments for individual biases. Although by no means
precise, the numbers are intended to give a general picture
of size and trends in the category.

United States Sales Around $200 Million in 1994

Packaged Facts estimates that combined sales of low-

calorie protein powders, high-calorie weight-gain powders,
high-protein diet powders, and liquid amino acid supplements
equaled $200 million in 1994.

Moderate Growth Achieved Despite Decline in Weight-Lifting

Marketers achieved steady, though unspectacular growth

of around 4% per year since 1990 by exploiting new product
areas in this category. As the growth in bodybuilding (and
the weight-gain products bodybuilders use) fell at the end
of the 1980s, low-calorie protein products, and then diet
protein products, took up the slack and reached out to new
consumers.
In a 1992 national survey, the American Sports Analysis
reported a 7.5% decline in weight-lifting. Thus, the
growth achieved by the category in recent years has been an
uphill battle against demographics and changing lifestyles.
A highly reactive market composed of many small companies
has met the challenge by adapting quickly to changing
demand.

Product Innovation and Price

Products that can convince consumers they are better

can charge more. Companies have been able to grow the dollar
value of the market by offering premium products with more
bioavailable proteins, fortified with the hot new molecule
of the day.

Category Rides Growth in Health Food Stores

Since 1989 the market for nutrition supplements has

grown nearly 50%, while the market for health foods
increased at double-digit rates annually throughout most of
this period. Health food retailers have become more
numerous. Largely through the influence of such growing
retail chains as GNC, and its subsidiary Nature Food Centre,
merchandising sophistication in health food retailing has
also increased. GNC has even advertised on television, on a
level hitherto associated with chain drug stores like Duane
Reade and Walgreens. These stores actively pursued the
bodybuilding market, giving the products ample display
space. Thus, the new breed of health food retailer has
carried protein powders along with it in the journey to
mainstream acceptance.

Factors in Future Market Growth (1/2)

Demographic Group Engaging in Bodybuilding on the Rise

According to David Jenkins, director of research and

development for Next Nutrition, the core users of protein
drinks are young men between the ages of 13 and 22. As
marketers of anti-acne products are well aware, the baby
"boomlet" that began in the United States in the late 1970s
is beginning to bear fruit with a new crop of teenagers,
whose numbers will increase at an average annual rate of 2%
between now and the end of the century.
While the proportion of young men taking up
bodybuilding may stagnate, the actual numbers of
participants will benefit from the growing population base.

Nutritionists Advising Non-bodybuilders to Use Protein Drinks

 At the same time, nutritionists and trainers are
advising those engaging in other endurance sports, as well
as nonathletes, to use amino acids and protein products
fortified with other supplements, simply as a more
controllable source of these nutrients than whole foods
without supplements. Though it is easy to meet the
government recommended daily allowance (RDA) for protein
without supplements, many nutritionists believe the RDAs are
much too low. The government recommends 8/10 of a gram of
protein per kilogram of body weight that is, less than 0.4
grams per pound; a nutritionist consulted by Packaged Facts
recommends between three quarters of a gram to one gram per
pound of body weight. Should this view prevail, it will
provide a steady source of non-bodybuilding consumers of
protein supplements.

Factors in Future Market Growth (2/2)

The Dietary Supplement and Health Act of 1994 Is

Favorable Omen

The Dietary Supplement and Health Act, which President

Clinton signed into law in October 1994, expands the
definition of dietary supplements to include sports
nutrition and herbal products, if labeled as dietary
supplements. In addition, dietary supplements cannot be
regulated as food additives by the FDA a tactic the agency
has often used in the past to make things hot for marketers
of supplements. Under the new law, the burden of proof
regarding the safety of supplements now rests with the FDA.
Further, marketers are permitted to disseminate third-party
literature from credible scientific sources to their
customers.
Marketers in the supplement and health food business,
who had been in a state of high suspense over the ultimate
shape of this legislation, have registered widespread
approval of the results. The new law benefits the protein
drink category directly through the advertising and
publicity claims it makes possible, and indirectly by
boosting the health and morale of the vitamin and mineral
supplement market, with which protein drinks are closely
allied.

Acceptance by Mass Market Retailers

A number of marketers are reporting success in reaching

mass market outlets, particularly with well-known brands of
high protein weight-loss products. The combination of
public acceptance of protein drinks and fortified protein
drinks and their availability in supermarkets would help
grow the market.

Private Label Unlikely to Grow More

 As will be discussed in greater detail in several parts
of this report, the protein drink category is highly
dependent on a single retailer, GNC, which enjoys a very
free rein when it comes to private labeling of successful
products. Private label, taken as one brand (and with the
predominance of GNC, it almost is one brand) can be
considered to be the leading brand of protein drinks in the
United states, at least in terms of unit sales.
Competing marketers have the consolation of knowing
that private label is so well developed already that it has
arrived and is no longer a threat.

Continued Concern with Health in United States

Favors Nutrition and Health Food Stores

As noted elsewhere in this report, Americans' concern

with health and nutrition continues to grow despite flagging
sports participation. It can be expected that health food
stores will continue to flourish and to help promote protein
drinks.

Projected Sales; Market Composition

Market to Reach $250 Million by 1999

Based on the factors outlined above, Packaged Facts

estimates the protein drink category will grow at moderate,
4% to 5% yearly rates over the next five years, reaching
$250 million by 1999.

Market Composition

Low-Carbohydrate Protein Powders Comprise

More than Half the Category

Although precise figures are unavailable, marketers

canvased for this report were in general agreement that low
carbohydrate powders comprise a much larger segment of the
market than either high-carbohydrate "weight-gain" powders
or liquid amino acids. Based on a collection of the
marketers' and distributors' educated guesses, Packaged
Facts estimates low-carbohydrate protein powders (including
meal replacement diet drinks) at 65% of the market, high-
carbohydrate protein powders at 25%, and liquid amino acids
at 10% of the market.

Most of the Consumers Are Still Young Males

Once almost exclusively a market for young males, the

protein powder market has reached out to new audiences, and
much of the growth in recent years has come from products
used by women and older people of both sexes. Nevertheless,
the core consumer is still young males aged 13 to 22.
Health Food Stores Have Half of Market

Based on interviews with marketers and distributors,

Packaged Facts estimates that around half of the protein
drinks sold in the United States are sold at health food
stores. Around 25% of sales are by mail order, 10% at gyms,
and the remainder are sold through a variety of outlets
including prisons and armed forces PXs.

The Market Is Not Seasonal

Perhaps because the sport that most affects sales of

protein drinks is an indoor sport, consumption and sales of
protein drinks do not evince much seasonal fluctuation.

A Bicoastal Market; Sales Heaviest in the West

Protein drinks sell best where the most gyms and health
food stores are located, on the East and West coasts.
California, in particular, is a center of activity both for
bodybuilding and nutrition, and a large number of protein
drink marketers are based there.

Marketers

The Marketers

Dozens of Companies

Dozens of companies market protein drinks in the United

States. Nearly all of them are relatively small and
privately held.

Three Marketers on First Tier

In the mid-1980s, California-based Weider Healthcare

held undisputed sway over the protein drink market. This
situation has changed in recent years, and today Weider vies
for first place with Twin Laboratories (often called
TWINLABS), a vitamin and mineral supplement company with
headquarters in Ronkonkoma, N.Y., and with General Nutrition
Companies, Inc. (GNC), based in Pittsburgh.

Weider

Weider Healthcare's roots are in the publication of

bodybuilding magazines. The company addresses the
bodybuilding market with a mix of products including several
muscle magazines, exercise equipment, and sports
supplements.
As detailed below in the Competitive Situation, Weider
has unique hold on the publicity surrounding bodybuilding,
an industry it has shaped into its present form. Within
sports nutrition, Weider markets over 100 powders, mostly
under the Victory brand name. Well-known protein drinks
include Victory Pure Protein, a line of pure protein powders
each made from a single protein source (egg, vegetable, or
beef); Victory Mega Protein, a whey protein product; Victory
Mega Muscle Builder, a weight gain product containing whey
protein and carbohydrates; and Victory Mass 1000, Mass 2000,
and Mass 4000, high-carbohydrate protein drinks with
calories-per-serving as indicated by the names.

Twin Laboratories

Twin Laboratories, a family-run company, markets a full

line of vitamins, minerals, and supplements. Though these
are the company's core products, like Weider it supports its
sports supplements with publications; through its Advanced
Research Press subsidiary it publishes Muscular Development
magazine.
Twin Laboratories also resembles Weider in marketing a
very extensive line of protein and weight-gain drinks, and
is constantly coming out with new ones. The company has
given the theme "fuel" to its products aimed at the
bodybuilding market. Its brands of protein drinks include
Gainer's Fuel and Super Gainer's Fuel (high carbohydrate
protein drinks), Ripped Fuel (low calorie protein drink),
Opti-Fuel 2 (a premium fortified protein drink similar to
Next Nutrition's Designer Protein), Amino Fuel (an amino-
acid drink), and Nitro Fuel (a high quality protein drink,
from whey, available in ready-to-drink form).

General Nutrition Companies (GNC)

GNC represents a phenomenon that is possible only in a

small world like the health food business: a retailer so
ubiquitous that its private label easily makes it one of the
leading marketers in the field. Brands include Pro Perform
ance, GNC Future Systems (a protein drink line targeted to
women), and Challenge. GNC is quick to private label hot
new products.

Several Marketers on the Second Tier

On the second tier, with brand shares around 10% or in

high single digits, are companies like L&S
Research/Cybergenics, Myosystems, and Next Nutrition.
Cybergenics, owned by L&S Research Corp., of Lakewood,
N.J., has a few sharply different lines designed to appeal
to different consumer targets, including its Infiniti series
of high-carbohydrate weight gain products, and its Zero Carb
Mega Protein (an almost-all-protein drink aimed at
bodybuilders).
Myosystems, based in Colorado, markets a highly
successful new product, MET-Rx, a fortified protein mix
packaged in individual servings. Myosystems promotes its
product with its own publication, Muscle Media 2000.
Next Nutrition, in Carlsbad, Calif., markets a popular
new product, Ultimate Whey Designer Protein, a hydrolyzed
protein product that can be mixed with a spoon. Next
Nutrition markets Designer Protein to women and nonathletes
as well as to male bodybuilders.

Minor Marketers of Protein Powders and Amino Acid Drinks

Some of the more interesting minor marketers in the

category include National Health Products, based in Florida,
which markets Hot Stuff Double X, a reformulation of a
product that took the bodybuilding subculture by storm a few
years ago; MLO Products, makers of Muscle-Zyme and Hard Body
Gainer 3600, both fortified protein drinks; and Optimum
Nutrition, which has a line of liquid amino acid supplements
("available in 32 ounce and 16 ounce sizes with a delicious
fruit punch flavor"). Other selected marketers and their
brands are shown on the following pages.

Marketer/Brand Ranks

Exact Brand Shares Are Not Available

Protein drinks are marketed in retail outlets that are

not tracked by sales auditing services, and almost all are
marketed by privately owned companies. Therefore, precise
brand shares are impossible to obtain.
Several marketers interviewed by Packaged Facts
suggested marketer rankings at or close to those given
below, with the top three marketers each enjoying somewhere
between 15% and 25% of category sales.

The Competitive Situation (1/3)

In 1980s, Weider Dominated Protein Drink Category by Dominating

Bodybuilding

Weider Healthcare's success in the protein drink

category is the outgrowth of the company's intense
involvement with, and influence on, the small world of
bodybuilding, which is the main source of the products'
consumers. Each of Weider's enterprises complement and help
to promote the others. Twin Laboratories' antitrust action
against the company, described below, can be regarded as a
tribute to the Weider marketing formula a formula to which
TWINLABS and other competitors have also paid the proverbial
compliment of imitation.
Weider's Magazines Help Promote Weider's Other Products

Bodybuilding publications were the first Weider

product, and the company continues to dominate the
bodybuilding media with its flagship publication Muscle &
Fitness, Flex (for competitive male bodybuilders), Shape, a
women's exercise magazine, and Men's Fitness, a men's
lifestyle magazine. The magazines are the perfect
advertising medium for Weider's other two main product
areas, exercise equipment and supplements.

Weider Helped Shape and Develop Bodybuilding

Weider's influence on bodybuilding as sport and

spectacle goes way beyond the publications, however. Ben
Weider is the president of the International Federation of
Body Builders (I.F.B.B.), an organization the brothers
founded in the late 1940s. Ben is also in charge of
international sales for Weider Health & Fitness. Over the
years, many competitors have complained that the I.F.B.B. is
in essence a market vehicle for Weider Healthcare. "They
say we fix tournaments and I put the winner on my magazine's
cover," says Ben Weider, pointing out that there are
hundreds of independent judges at the I.F.B.B. tournament.
In any event, the I.F.B.B. is no mere front for the company,
but the acknowledged setter of standards within
bodybuilding, and the sport's chief representative in the
effort to win recognition and legitimacy in mainstream
athletics.
The top bodybuilding competition in the world today,
the Mr. Olympia contest, was created by Joe Weider in 1971.
Several years later, a competitor (George Snyder, publisher
of Body & Fitness magazine) decided to exploit the growing
female involvement in bodybuilding with a Ms. Olympia
contest; by 1983, the I.F.B.B. had control of this contest.
Though the Weider brothers deny it, Snyder believed that he
had little choice in the matter. "I sold my books through
Joe Weider's magazine. If I got out of line, all that would
have been taken away."
Competing marketers bitterly resent Weider's dominance
of the field and competitive publications print acid
denunciations of most woundingly of all his recommendations
for the best way to build muscle mass. "His magazine keeps
alive completely incorrect training methods, such as the 100-
rep method," says strength training coach Charles Paquin in
the magazine Muscle Media 2000, which is published by a
competitor, Myosystems.
Nevertheless, Weider is generally credited with shaping
and building the industry as surely as its enthusiasts shape
and build their bodies. "He made bodybuilding the industry
it is today," says the same coach Panquin, perhaps not
intending the words as a compliment. According to former
Mr. America Leroy Colbert, before Weider, "contests were
vaudeville spectacles. People expected muscle men to break
chains wrapped around their chests."
Weider and Schwarzenneger

Joe Weider and his company were involved very early in

the most visible success story to have emerged from the
world of bodybuilding, Arnold Schwarzenegger. In 1972,
Weider paid for the 19-year-old Austrian champion's move to
California and gave Schwarzenegger a $100-a-week allowance
to write stories for Muscle Builder (later renamed Muscle &
Fitness). Articles by or about Schwarzenegger, in which,
for example, the hero revealed the important place amino
acid supplements had in his training regimen, provided the
perfect environment for ads for Weider's amino acid
supplements. Schwarzenegger's subsequent leap to film
superstardom not only increased interest in bodybuilding,
but undoubtedly has contributed to a change in standards
that has made the public accept other pumped-up stars like
Sylvester Stallone and Jean Claud Van Dam. This in turn has
likely made an increasing number of ordinary men feel frail
and puny by comparison, and thereby brought new recruits to
the world's gyms.

The Competitive Situation (2/3)

TWINLABS Loses Antitrust Action Against Weider

In 1989, one competitor, George Snyder, described

Weider's dominance of bodybuilding this way: "It's as if
N.F.L. Commissioner Pete Roselle had a younger brother who
owned Sports Illustrated and each January they held the
Roselle Super Bowl." It is not very surprising that
competitors would chafe at this level of control, and in the
year of that quote Twin Laboratories initiated an antitrust
action against Weider. Twin Laboratories accused Weider of
refusing to accept $800,000 of advertising for Twin
Laboratories' products in Muscle & Fitness and Flex.
According to Neil Blechman, then TWINLABS' vice president of
marketing, no competitor in the food-supplement market could
hope to grow without advertising in Weider's magazines,
which had created, Blechman contended, a "monopolistic
environment."
The antitrust case was eventually dismissed. Today,
TWINLABS advertisements can be found in Muscle & Fitness,
although hardly in the same profusion as they appear in
TWINLABS' own publication, Muscular Development.

Weider No Longer Single Dominant Force in the Market

Though still powerful in bodybuilding, Weider is no

longer the undisputed master of protein drinks in the United
States. There are three reasons for this: the growth of
GNC, which dominates the industry in another (and sometimes
as bitterly resented) way; the successful imitation of
Weider's media strategy by its major competitors, which
promote their products in muscle magazines of their own; and
the rise of hot new products from smaller companies, which
have put both Weider and Twin Laboratories in a reactive
mode.

The Rise of GNC

General Nutrition began in 1935 as a Pittsburgh health

food store called Lackzoom's; it specialized in yogurt. By
the end of World War II, the company had grown to 10 stores,
and in 1947, a mail-order business was started. The company
continued to expand through the years. In 1971, with 45
stores in operation, it began an aggressive expansion
program to place stores in shopping mall locations. From
the 1960s through the 1980s, General Nutrition expanded
geographically, and its stores broadened their selection.
In 1985, under chief executive Jerry Horn's direction, the
company sold off unprofitable operations, consolidated
manufacturing at the Greenville, S.C. plant, and introduced
new product lines. In 1987, the company introduced a
franchising program to enable entrepreneurs to become owner-
operators of GNC outlets. General Nutrition was acquired in
1989 by the Boston-based private investment firm, Thomas H.
Lee Co., in a leveraged buyout. Horn and the entire
management team were retained.
In 1993, General Nutrition introduced 98 new or
reformulated products to the marketplace. To educate
consumers and build store traffic, the company also
increased its advertising spending, from $17 million in 1992
to $23 million in 1993.
In 1994, GNC signed a merger agreement with Nature Food
Centres Inc., to acquire 204 stores, most of them located in
the Northeast and Midwest. According to publicity released
at the time of the agreement, approximately 65% of the
Natures Food Centres stores would be converted to GNC stores
over the course of the following two years; the remainder
would continue to operate under the name Nature Food Centre.
By mid-1994, GNC was predicting that an additional 125
new stores over and above those acquired in the merger would
be opened that year. Some of these would be franchises,
some would be stores directly owned by GNC. At that time,
GNC had a backlog of 152 franchises awarded but not opened.

GNC's Effect on Protein Drinks

Even before the merger with Nature Food Centres and the
opening of these new franchises, GNC represented so large a
proportion of the health food retail business that its
private labels automatically became major brands. GNC's
decisions concerning which brands to feature on their
shelves have very large consequences for the marketers
concerned.
Fortunately for the protein supplement business as a
whole, GNC decided in the 1980s to vigorously pursue the
bodybuilding business. GNC's ads and promotions featuring
the highly toned former Saturday Night Live cast member Joe
Piscopo, though they may not have done much for his career,
gave further legitimacy to bodybuilding.
The power of a big chain store like GNC also tends to
make the winners win big, putting them on an equal footing
with each other. Twin Laboratories, a marketer of premium
vitamins and mineral supplements whose protein supplements
were also represented in GNC stores, benefited when GNC made
the chain store an important feature of the health food
business.

The Competitive Situation (3/3)

Muscle Magazines and Supplements

Today, all the major muscle magazines are owned by

companies that market supplements, and the marketers
advertise their supplements within the magazines. At times
subtlely, at times blatantly, the magazines' editorial
content supports the products of the magazines' owners,
backing up advertising claims and making claims on behalf of
the nutrients that the ads themselves cannot make for fear
of FDA sanctions. Myosystems Muscle Magazine 2000 is
particularly open in its assaults on competitors' products
and gives editorial support to its own products.

Small Marketers' Innovative Products Put Majors in Reactive Mode

Insiders describe the protein drink market as "new

product driven." Late breaking news in nutritional science,
promoted by marketers, periodically boosts the reputation of
a hot new molecule (that is, some supplemental ingredient
that becomes a fad with the consumer). The innovation is
good for the market in general. It creates excitement,
draws in new consumers, and brings back disenchanted
consumers. For the major marketers, though, it means they
must always be remaking themselves for the consumer,
creating new brands and formulas. It is the reason why
Weider and TWINLABS both have so many products, few of which
are winners in any given year. The "new product driven"
nature of the category also affords opportunities for new
marketers to come up with a product that will sweep the gyms
and earn them a place on the shelf at GNC and other health
food outlets.

The Rise and Fall of Hot Stuff

A case in point is the heavily fortified protein drink,

Hot Stuff. Introduced in 1988 by National Health Products,
a small Florida-based family organization, Hot Stuff was a
high protein drink with a simple idea in one product, it
contained every hot molecule of that year, virtually every
ingredient bodybuilders wanted in 1988. The product was on
the market for a few years before it took off in late 1990
and early 1991.
 Hot Stuff's success may have been its undoing, however,
because it became prominent enough to attract the attention
of the FDA. The government took issue with the claims on
the Hot Stuff label and in its literature and advertising.
At the same time, Hot Stuff was also a bit too popular to
meet its demand. Stocks ran out at distributors and in
stores. According to a company spokesman, competitors took
advantage of this fact to spread a rumor that the FDA had
forced a recall of the product. This, says the spokesman,
was untrue. The government had merely insisted on changes in
the label.
In subsequent efforts to regain its popularity,
National Health Products changed Hot Stuff's manufacturer
and its formula. Loyal customers complained of the altered
taste and consistency, and sales continued to plummet.
In 1994, the company returned to the market with Hot
Stuff Double X, a newly formulated product containing all
the ingredients currently popular with bodybuilders, and
with the company hopes a taste that will duplicate that of
its predecessor.

Myosystems' MET-Rx

Though companies like Weider, Twin Laboratories, and

GNC are the market leaders, insiders agree that Myosystems'
MET-Rx was probably the single best selling product in 1994.
A competitive marketer interviewed by Packaged Facts
described MET-Rx as a "a phenomenal success, like nothing
I've ever seen in this market."
Whatever the merits of the product itself, MET-Rx owes
its success to sophisticated and very thorough marketing.
This begins with the innovative packaging, which presents
the consumer with preseparated servings in separate packets.
It could be argued that this is actually less practical than
the regular practice of packaging in bulk, since the product
will be used by consumers with different weights and
nutritional requirements, who may want different serving
sizes. All the same, the immediate effect was to set MET-Rx
apart from its competition. As the full name, MET-Rx
Engineered Foods, implies, the MET-Rx message is Science
with a capital S. The product's publicity and advertising
underscore this message with abundant references to the
research that has gone into the product's formulation, the
results of ongoing tests of the product, and biographical
notes on its inventor, A. Scott Connelly, M.D., who is
depicted in many of the ads and in press-release-based
articles that have appeared in mass market magazines about
MET-Rx.
As mentioned, Myosystems publishes Muscle Media 2000,
which strongly supports the product. MET-Rx is endorsed by
the likes of Cher, Sylvester Stallone, Sharon Stone, and
Clint Eastwood. The publicity kit the company sends to
retailers and others inquiring about the product includes an
enthusiastic letter addressed to Connelly by Mike Woicik,
the strength and conditioning coach of the Dallas Cowboys.
Articles very favorable to the product have appeared in such
magazines as Self and Longevity and in such newspapers as
Newsday, The Miami Herald, The New York Post, USA Today and
The Houston Post.
Much of MET-Rx's publicity came in advance of its
launch. The company gave the product to institutions like
the Dallas Cowboys and to individuals like Sylvester
Stallone before making it available to consumers (or
"general public peasants" in the words of New York Post
gossip columnist Cindy Adams). As is evident from these
publicity venues, MET-Rx has actively sought an audience
beyond the world of bodybuilding.

Marketing and Product Trends (1/2)

New Popular Ingredients Constantly Sweep the Market

Fashions in ingredients constantly sweep the sports

supplement market, which includes the protein drinks
category because protein drinks are differentiated from one
another by the fortifying chemicals they contain. Ongoing
research into sports nutrition and human metabolism, whether
a product of disinterested research or sponsored by
supplement marketers, is publicized in muscle magazines.
The newly popular anabolic (or "anti-catabolic") ingredient
is incorporated into a product by one enterprising marketer,
and others quickly follow suit.

"Ion-Exchange Whey" The Current High-Tech Protein

Next Nutrition's Ultimate Whey Designer Protein seems

to be the product chiefly responsible for the popularization
of ion-exchange whey. At issue is the degree to which one
protein source, more than others, will help build muscle.
Designer Protein's ads describe the manufacturing process in
considerable detail. The product's ads argue that its whey
protein, rendered from liquid whey by a special "Ultra Speed
Sonic Drying" technique, is more bioavailable than egg and
soy proteins, for which heat must be used to render them
bacteria free. Most of the marketers in the field now offer
some kind of hydrolyzed, ion-exchange, or predigested whey
protein product.

High-Calorie Products

Very high calorie and high carbohydrate products,

typified by Cybergenic's Infiniti line, appeared in the
early 1990s and gave the pure weight-gain segment of the
market a boost, according to industry insiders. Examples of
the continuing strength of this product trend are the many
products available from Twin Laboratories, Weider, and other
marketers. These include, often as part of the product's
name, the staggering amount of calories a single serving
contains. Current examples are Weider's Mega Mass 4000, Pro
Performance Weight Gainer 2200, Twin Laboratories' Gainer's
Fuel line (including Super Gainer's Fuel), and MLO Hard Body
Gainer 3600.

Marketing and Product Trends (2/2)

Pure Protein Products

Most people even most people who work out with

weights would become enormously fat on a steady diet of
these high calorie weight-gain products. So their
appearance has caused a bifurcation of the market: high
calorie and low calorie products at one end, and pure
protein products becoming increasingly popular at the other
end. Most marketers of protein drinks now offer both a high
carbohydrate weight gain product and a pure protein product.

The "Designer" and "Engineered" Protein Drink

As will be seen in the advertising section, scientific

formulation is one of the main arguments offered in support
of advertising claims for protein drinks. Increasingly,
marketers are incorporating the allure of science into their
image at an earlier stage than advertising; they work it
into the name, packaging, and publicity surrounding the
product. Thus, MET-Rx, whose full name on the package is
MET-Rx Engineered Foods. And Next Nutrition's Ultimate Whey
Designer Protein. Weider builds science into its
Performance Gold Techno Protein. And as its name suggests,
Twin Laboratories has banked on the image of science more
than any other marketer.

The Muscle-Gain Kit

In a currently popular marketing technique, companies

that market supplements in pill form as well as protein
drinks are including their products in a weight-gain or
muscle-gain kit, often accompanied by an instructional
booklet. MET-Rx, for example, sells an Introductory Kit,
including an Exercise and Nutrition Journal, a "recipe
guide," and a free video "8 Weeks to a New You." Dash Sports
Science offers the Building Box, which includes pill
supplements, the company's protein drink, Muscle Food 6000,
and assorted literature. Cybergenics offers Cybergenics for
Hard Gainers, a kit that includes a food scale for weighing
portions.

The New Diet Segment

One reason to exercise is to lose weight or at least

lose body fat. This is the rationale behind the new diet
food segment of the protein drink category. At the edges,
these products blend into another market entirely.
Theoretically at least, they are in competition with meal
replacement diet systems like Ultra Slim Fast; but they
differ from those systems in their extra-high protein
content, origin in sports nutrition, and promise to help
"tone" the body as well as help users lose weight. In
addition, diet protein drinks tend to be sold in health food
stores, though attempts are made to reach mainstream outlets
as well.
Products in the diet segment include Weider's
Performance Diet line and its Diet Supplement Weight Loss
Powder, Nature's Plus's Spiru-Tein, and TWINLABS' Diet Fuel.
Ads for Diet Fuel (both the protein drink and the
"thermogenic" pills) feature two bodybuilders, Roger Stewart
("Champion Bodybuilder") and Sherilyn Godreau (Ms. Pro
National Physical Fitness 1993).

Ready-To-Drink Liquids

In 1993, Twin Laboratories introduced one of the

category's very few ready-to-drink products, Nitro Fuel: a
high protein translucent liquid in a glass, screwtop, wide
mouth bottle, meant to be drunk immediately after or even
during a workout. The packaging complements TWINLABS' Hydro
Fuel, the company's Gatorade-like sports drink.
Weider has its own ready-to-drink offering, Joe
Weider's Protein Blast, available in aluminum cans. And
Weider's corporate alter-ego, Great American Foods, offers a
similar product.
A company called American Body Building produces
another ready-to-drink protein product, Post Workout
Critical Mass. Science Foods, Inc. of Las Vegas has a line
of sports drinks that includes Muscle Shake, a ready-to-
drink protein beverage; and Amino Mass, Amino Muscle Mass,
and Amino Mass Super, ready-to-drink amino acid beverages.
It will be interesting to see whether other marketers join
these pioneers in their experiment, which confronts the
companies with special storage and distribution problems
quite unlike those of regular protein powders.

Measured Advertising Expenditures

Most Protein Drink Advertising Is Unmeasured

Most advertising by protein drink marketers seems to be

unmeasured by Leading National Advertisers (LNA), which
makes no mention at all of many companies and products whose
ads are frequently found in bodybuilding magazines. In
addition, the advertising of companies like Twin
Laboratories, Weider, and Myosystems is sharply
underrepresented by LNA because these companies advertise in
their own captive media such as Muscular Development
(TWINLABS), Muscle & Fitness (Weider), and Muscle Media 2000
(Myosystems).
Measured Advertising Declines to Under Half a Million in 1994

According to LNA, marketers of protein drinks spent

$426,000 to advertise their products in 1994. It was the
least in three years, a steep drop of 84% from 1993
spending of $2.7 million, and of 72% from 1992 spending of
$1.5 million.

Magazines for Bodybuilding, TV for Diet Products

When protein drink marketers advertise diet products,

they turn to television, the medium with the broadest
mainstream appeal. Advertising for nondiet protein drinks
appears almost exclusively in magazines.

TWINLABS Leading Spender in 1994, Says LNA

According to LNA, only Twin Laboratories bought

significant amounts of measured advertising in 1994,
$285,000 or 67% of category spending. TWINLABS purchased
advertising for Gainer's Fuel, a powder mix protein drink,
and for Nitro Fuel, which is available both as a powder and
in ready-to-drink form. All of TWINLABS' 1994 advertising
was in magazines, according to LNA. LNA recorded no
spending in the protein drink category by Twin Laboratories
in 1992 and 1993.

Weider Spending Declines Sharply

In 1994, Weider spent $72,000, according to LNA, a

fraction of the $2.2 million it spent the previous year.
The decline shows a collapse of support for two products,
Weider Diet Supplement Powder and Victory Performance
Nutrition.
Since Weider in particular advertises extensively in a
large number of Weider-owned magazines, the plunge in
spending did not interrupt the steady barrage of Weider
print ads aimed at the readers of Muscle & Fitness, Flex,
Men's Fitness, and Shape.

Advertising Positioning

Benefits of Bodybuilding Seldom Mentioned

As a rule, ads for protein drinks do not preach to the

converted. Only a small proportion of them promote the
benefits of bodybuilding. With those few that do, the major
benefit is invariably sex appeal, and is dramatized very
broadly. For example, a Cybergenics ad depicts a fat, rich
man with a Lamberghini. Despite his expensive car and
clothes, he is getting nowhere with the opposite sex.
Several yards away, on a facing page, a half-dressed
bodybuilder with a much less expensive vehicle is surrounded
by bikini-clad playmates. "Nothing Is as Sexual as a Great
Body," the headline reminds us.
Every muscle magazine contains a few ads like this.

Ads Address the Competitive Instinct

More often though, ads appeal to the competitive

instinct of the bodybuilder, the instinct to look as good or
better than the Goliath depicted in the ad. Another
Cybergenics ad, directed at the initiated Cybergenics For
Hardgainers even dares to evoke the hostile outsider's view
of bodybuilding, while admitting the obsessiveness of the
sport. "I Wanted to Look Like a Freak!" this headline
shouts. And the speaker in the ad goes on to tell how he
got his wish, thanks to the product.

Effectiveness Through Scientific Formulation

By far the most common proof of effectiveness in

advertisements for protein drink products is scientific
formulation. Nearly all ads make a case for the muscle-
building, "anabolic," or "anti-catabolic" properties of the
product, based on the ingredients it contains and the way in
which it was manufactured.
The appeal to biochemistry may merely make reference to
the research behind the product: "Now, after 15 years of
scientific research and consistent proven results, comes a
unique, medically tested program..." says an ad for the
drink and supplements of Dash Sports Science. Or the appeal
may be breezily informative: "At best, the body can only
absorb about 20-30 grams of protein at one time. Techno
Protein delivers 24 grams of protein per serving to fund
body requirements with little or no excess."
Finally, quite often the appeal to science can be very
technical, assuming the audience's knowledge of BCCAs
(branch chain amino acids) and MCTs (medium chain
triglycerides), with footnotes at the end referencing
scientific journals, as in a 1994 ad for Ultimate Whey
Designer Protein. Weider, which funded a study on the value
of protein supplements as part of its settlement of an FTC
complaint against the company, now incorporates results of
this study and another Weider-funded study into ads for its
Victory Pure Protein line.

Before and After Pictures

Ads for protein drinks frequently contain before and

after pictures. Although usually the progress attested to by
the pictures is real enough bodybuilding does build
muscle advertisers seem unable to resist the temptation to
exaggerate the differences between before and after. The
before picture is generally taken in bright light that fades
out muscle definition. The model wears longer shorts,
stands at ease with bad posture and sometimes even has chest
hair. In his or her after picture, the same model stands in
flattering light in a classic "Hans and Franz" muscle-
defining posture, wears posing oil and high-cut shorts. A
disclaimer in the lower right hand corner of the ad reminds
the consumer that gains depicted here are not typical and
are not due to the product alone.

Endorsements and Testimonials

Endorsements of the products by bodybuilders or other

athletes, as well as testimonials by ordinary users of the
product, are another common feature of ads for protein
drinks. A MET-Rx ad, which uses about every technique these
ads use, contains nine happy customers, including football
players, bodybuilders, an explorer, and an "entrepreneur."
Victory's Pure Protein line is endorsed in one ad by a Mr.
Olympia, an Arnold Schwarzenegger Classic winner, and an
Amateur World Heavyweight Champion. Another Weider ad
contains quotes praising the product by champions Paul
Dillet, Dorian Yates, and Lou Ferrigno. A TWINLABS ad
asserts, "Champion bodybuilders Jim Quinn and Billy Smith
take new Super Gainers Fuel after high intensity
workouts...." MLO, which markets much of its product
outside the United States, includes in its ad endorsements
from John Ginner, Mr. Greece, Mr. Europe, and Mr. World;
from Konstantine Stanskovitch, World Class Weightlifter; and
from other international athletes.

Ads Are Very Heavy on Copy

Though they appear in special media and address a

special audience, ads by the major marketers are usually
well written and are often accompanied by vivid pictures
worthy of Sports Illustrated. An old-fashioned aspect of
the creative approach to the advertising, though, is that
they are meant to be read, running to hundreds of words of
close type. This seems to be a result of the high-tech
claims of the products. Ad copy describes the chemistry and
theory of the product in detail, like the ad copy of a
sports car discussing the many features and advanced
engineering it incorporates.
Examples can be found in Appendix III.

Consumer Promotions

Consumer Promotions Are Complex and Sophisticated

Consumer promotions for protein drinks, like most

advertising, are quite sophisticated for some products, and
characterized by a large element of old fashioned medicine
show hucksterism for others. Without question, there is a
lot of it.
Bodybuilding Contest Sponsorship

Weider's special relationship with the I.F.B.B., the

setter of standards and arranger of contests in
bodybuilding, has been noted already in the Competitive
Situation section. All major marketers of protein drinks
and sports supplements sponsor bodybuilding contests such as
the Mr. Olympia, Ms. Olympia, and Arnold Schwarzenegger
Classic. The names of the sponsoring companies are
prominently displayed on site.

Celebrity Endorsement and Publicity

Athletes of all kinds boxers, baseball and football

players, but above all contest-winning bodybuilders endorse
the products. The endorsements appear not only in ads but
also in the trade and bodybuilding press, and occasionally
in the mainstream press as when Sylvester Stallone
attributes his well-defined physique to MET-Rx.

Press Coverage

As noted earlier, most muscle magazines are published

by companies that are in the supplement and protein drink
business, and their editorial content often blatantly
supports the advertising. Often it is possible to include
in the articles health and scientific claims that must be
excluded from the advertising. The hand of the marketers can
also be detected in friendly articles in the mainstream
press.

Consumer Coupons Are Rare

Probably because the health food business has not as

yet evolved the efficient coupon redemption systems
associated with drug and supermarket retailers, marketer
coupons are rare, though not unknown. (A recent ad for
Weider's Performance Techno Protein, a protein drink,
contained a coupon for a trial size of Performance Creatine,
a sports supplement.)
Discounts at retail, on the other hand, are not only
common, but virtually unceasing.

Special Introductory Offers, Kits, and Free Gifts

Other ways of offering consumers a deal are also

common. For example, MET-Rx offers its product in a special
introductory kit including recipe book, exercise and
nutrition journal, free video, and one year subscription to
the newsletter put out by the product's inventor. In a mail
order ad in Muscle & Fitness, Weider offers a free video,
"Up Close and Personal With the Champions," with every $25
purchase (a very modest purchase as most of the products
cost that much), and an unspecified free surprise gift with
a $50 purchase. Many products come with literature
including instruction booklets with suggestions for
resistance workouts. MLO's Muscle-Zyme comes with a set of
body fat calipers. Next Nutrition ads invite customers to
write for a free copy of a 30-page protein special report
and a recipe booklet for use with the product.

Distribution

Distribution

Products Are Distributed Through Health-Food Distributors

Around 80% of protein drinks are retailed in health

food stores. Prominent distributors to this channel are
Tree of Life (St. Augustine, Fla.), Nature's Best (Brea,
Calif.), and Health Foods, Inc. (Des Plaines, Ill.).
The health food industry is maturing, and several large
regional health food store chains now have centralized
warehouses. Packaged Facts expects to see more
manufacturers delivering direct to these facilities. The
trend will continue as mainstream consumers shop health food
stores and price pressures encourage still further
consolidation.

Distributor Margins Are High and Discounts to Distributors Are Common

Health food distributors typically take a high margin,

about 25% (in comparison with mass-market distributors'
typical 10% for vitamins). In addition, deep discounting of
product by marketers is more expected in the health food
business. Deals that offer product to distributors at 15%
off or more occur several times a year.

Many Small Semiprofessional Distributors

"One of the beauties of this industry," according to

one marketer of protein drinks, is the long shelf life of
the products, three years at room temperature. The ease of
storing protein drinks and their ready availability through
mail order makes it easy for small-time entrepreneurs to
begin distribution operations. Gym owners frequently set up
as distributors, and it is not uncommon for individual
bodybuilders to distribute the products out of their
garages.

At the Retail Level

Health Food Stores, Gyms, and Mail Order

Based on interviews with marketers and distributors,

Packaged Facts estimates that around 75% of protein drinks
are sold in health food stores, around 10% in gyms, with the
remaining 15% divided among mail order, supermarkets, and
warehouse clubs.

Margins in Health Food Stores and Gyms

Gross margins in health food stores and gyms run high

in comparison with mass market retail; for protein drinks
gross margins range between 35% and 50%. This is somewhat
lower than health food store margins for vitamin and mineral
supplements, which average around 50%. Because protein
drinks are fairly bulky, they are not as profitable per
square foot of shelf space as pills.

Promotional Tools in Health Food Stores

According to a survey of health food retailers

conducted by Health Foods Business, over two-thirds of
stores (69%) use in-store demonstrations to promote
products. Forty-two percent use newsletters, 39% give
lectures, and 34% host tasting fairs. Other types of
promotions and sponsorship activities used by health food
retailers include environmental activism (29%), health fairs
(27%), and races or fitness events (26%).
A similar question in the Whole Foods survey found that
59% of health food retailers use educational handouts and
bag-stuffers, 56% participate in regular discounting, 54%
use in-store sampling, and 43% offer senior-citizen
discounts.

Sales and Discounts Are Perpetual

Fifteen percent off sales, 25% off, buy-one-get-one-

free, and buy-one-get-one-half-price are a constant feature
of merchandising in health food stores that sell
supplements. Some of the products are on sale at all times.
Protein drinks are included in these promotions.

GNC Gives 225-250 Linear Feet to Protein Drinks

GNC stores have pursued the bodybuilding supplement

trade aggressively over the years. They give generous
amounts of space usually an entire wall of the store, with
225-250 linear feet of shelf to the products. The products
are also placed in a suitable environment that may, besides
the protein drinks, include anabolic pills and liquid
supplements, free weights (GNC sells a line of exercise
equipment), and revolving book racks filled with books and
pamphlets on sports nutrition (Weider publishes a large
number of these).
The leading marketers Weider, TWINLABS, Cybergenics,
and GNC's own Pro-Performance brands are given the most
space. Special separate displays are sometimes given to the
hot products of the year in 1994, MET-Rx or to marketers who
come up with eye-catching shelf-talkers. Drinks like Next
Nutrition's Designer that seek to sell to nonathletes are
sometimes placed outside the bodybuilding section. Point of
purchase displays are common.
Nature Food Centre stores canvased for this report were
laid out in essentially the same way as GNC stores.

Table: Retail Sales and Growth of Protein Drinks (1990-1994)

(In Millions)

Year Dollar Sales % Change

1994 $200 4.2%

1993 192 3.8
1992 185 4.5
1991 177 4.0
1990 170 -

Source: Packaged Facts.

Table: Projected Retail Sales and Growth of Protein Drinks

(1994-1999)

(In Millions)

Year Dollar Sales % Change

1999 $250 4.6%

1998 239 4.8
1997 228 4.6
1996 218 4.3
1995 209 4.5
1994 200 -

Source: Packaged Facts.

Table: Selected Marketers of Protein Drinks (1/2)

Marketer/Brand Description

American Body Building

Post Workout Critical Mass
Ready-to-drink protein drink.

AST Research
VyoPro Whey Protein
Value brand modeled on
Designer Protein from Next
Nutrition.
Canusa Products/American
Signature
Muscle Mag Weight Gainer
Muscle Mag Protein Drink
Mix
Champion Nutrition
Heavyweight Gainer 900
Powder Drink
Cybergenics, Inc.
Cybergenics Super Infinity
3000
Cybergenics Zero Carb Mega
Protein
Dash Sports Science
Muscle Food 6000
Experimental and Applied
Sciences (E.A.S.)
PhosPhagain
Fessler Mill
Fessler's Super Weight Gain
General Nutrition Center/Pro
Weight-gain and
protein drinks, part of
complete line of supplements
marketed internationally, but
especially in U.S. and
Canada, under name of muscle
magazine and bodybuilding
store franchiser.
Weight-gain protein drink.
Metabolol Supplements
Fortified protein drinks
(name also used on vitamin
and mineral supplements).
A premium-priced
line of 3,000-calorie-per-
serving high-protein mix,
which comes in nine "gourmet
ice cream flavors." 157
grams protein, 414 grams
carbohydrates, 38 grams MCTs.
Boasts "most protein per 100-
gram sample." For dedicated
bodybuilders.
Premium high protein drink.
High carbohydrate, weight-gain
protein drink.
Low
calorie protein drink
fortified with 29 vitamins
and minerals.
European weight-gain protein
drink, sold in the U.S. via
mail order.
Performance
Pro Performance 2200 Gold
Pro Performance Weight Gainer
1850
Genesis Nutrition
Super Weight Gain 1800
Great American Nutrition
Metaform Technically Advanced
Nutrition
JTR Labs
Pro Body Muscle Formula
Metabolic Nutrition, Inc.
OptiADVANTAGE
MLO Products Co.
Hard Body Muscle-Zyme
Hard Body Gainer 3600
Weight-gain product with
2,200 calories and less than
1 gram of fat per serving,
fortified with guarana, royal
jelly, creatine monohydrate,
and OKG.
A similar product
with 1,850 calories per
serving.
Weight-gain, high
carbohydrate protein drink.
A value-
priced imitation of MET-Rx
protein supplement (described
below). Comes in individual
packets. 37 grams protein
from milk isolates and
caseinates, whey concentrate
and egg white; 24 grams
carbohydrates, 2 grams fat,
fortified with vitamins and
minerals. Original and
chocolate flavors. Suggested
retail $49.99 for 20, 2.5 oz.
servings.
Protein drink.
An
"engineered" protein drink,
resembling Designer Protein
in its formulation and MET-Rx
in its packaging. Whey
protein with creatine
phosphate in packets.
Low carbohydrate protein
drink, "ion-exchange,"
"hydrolyzed."
High carbohydrate weight-gain
protein drink, 3,600 calories
 per serving.

Myosystems Inc.
MET-Rx Nutritional Supplement
A weight-gain shake that
comes in individual packets.
37 grams Protein from milk
isolates and caseinates, whey
concentrate and egg white; 24
grams carbohydrates, 2 grams
fat, fortified with vitamins
and minerals. Suggested
Retail $62.99 for 20, 2.5 oz.
servings.

Source: Packaged Facts

TABLE: Selected Marketers of Protein Drinks (2/2)

Marketer/Brand Description

National Health Products

Hot Stuff Double X A
protein shake, made from whey
protein and fortified with
many vitamins, minerals, and
herbs.
Nature's Best
Natures Best Outgrow Weight
Gain Drink High-
carbohydrate, weight-gain
protein drink.
Nature's Best Protein Shake
Low-carbohydrate protein
drink.

Next Nutrition
Ultimate Whey Designer
Protein A protein
drink mix, made of "low
temperature processed," whey
protein, hydrolyzed, produc
ing shorter chains of amino
acid chains to promote
"positive nitrogen balance."

Nutrition Health and

Fitness, Inc.
(a Canadian company)
Nitro Carb Weight-
gain protein drink.

NVE Pharmaceutical
"Predator" Weight-Gain
Fortified high carbohydrate
 weight-gain product the brand
name version of private label
product.
"Predator" Protein
Fortified protein drink brand
name version of private label
product.

Optimum Nutrition
Anabolic Amino 2222 Liquid
Liquid amino acid with
carbohydrates, 2,222 mg. of
amino acids in 3-tablespoon
serving.
Mighty One 3000 High
carbohydrate weight-gain
protein drink.

Saturn Supplements
Advanced Whey Protein
Value priced version of
premium protein drink.
Weight Gain 1000
Value priced protein drink
Pro-Plan With Egg
Value priced protein drink
with proteins from caseinate,
egg, and milk sources.
Opti-Plan
Value-priced
carbohydrate and protein
drink fortified with vitamins
and minerals.

Science Foods, Inc.

Amino Mass-Free
Sugar-free, ready-to-drink
amino acid beverage.
Amino Mass-Super
Ready-to-drink amino acid
beverage.
Amino Muscle Mass
Ready-to-drink amino acid
beverage.
Dynamo Ready-to-drink
protein beverage, in
chocolate flavor.
Muscle Shake Ready-to
drink protein beverage, sugar
free.

Sports One Inc.

Gold Series Solid Mass
High calorie protein drink,
fortified with vitamins and
minerals.
Strength System USA
Whey Better Protein
Value brand modeled on
Designer Protein.

Twin Laboratories, Inc.

Ripped Fuel A vitamin-
fortified, "thermogenic"
protein drink, with MaHuang
extract, guarana extract, 40
grams milk and egg proteins,
extra L-glutamine, alpha-
ketoglutarates, L-carnitine,
chromium picolinate, and
other vitamins and minerals.
Gainer's Fuel A line of
fat free protein formulas,
with various amounts of
calories per serving. Milk
and egg proteins, fortified
with chromium, picolinate, L-
carnitine, alpha-
ketoglutarates, and other
nutrients. Chocolate and
vanilla flavors.
Opti-Fuel Fortified
protein drink similar to Next
Nutrition's Ultimate Whey
Designer Protein.
Amino Fuel Amino
Acid drink.
Nitro Fuel Whey-
source protein drink
available as powder and in
ready-to-drink form.

Universal
New Ultra Genesis
Fortified protein drink, the
brand name of a private label
manufacturer.

Weider International
Victory Pure Protein
A line of pure protein mixes,
each made of protein from a
single source; available are
egg, vegetable, beef: "Mixes
with anything, lactose free."
Victory Mega Protein
A protein supplement mix made
with whey proteins: "Triple
filtered pure whey protein
hydrosylate."
Victory Ultimate Protein
Another whey product (how
different from the other go

Victory Mega Muscle Builder
Victory Mass 1000
Victory Mega Mass 2000
Victory Ultra Mega Mass 4000
Victory Fat Burner System
Mass 2000 Kit
Joe Weider's Protein Blast
to GNC and check)
Victory Mega Ripped Whey
protein, no carbohydrates,
fat, or lactose.
Whey protein and gluco-
polysaccharides. Promoted as
a "workout recovery formula."
A line of weight-gain mixes,
each with increasing numbers
of calories and fortified
with supplements such as OKG,
creatine, L-carnitine,
chromium, and vanadyl.
An "easy 14-day program" kit
containing vitamin and
mineral supplement tablets in
"multi-nutrient paks" as well
as meal replacement shake
powder.
A kit
containing a 3.12 lb.
container of the weight-gain
product Mass 2000, amino-acid
tablets, and Nitrostrips
(urine tests used to
determine whether user's body
is in an anabolic state).
Ready-to-drink, high calorie
protein shake in cans.

Source: Packaged Facts.

Table: Top Five Marketers of Protein Drink Category

Rank Marketer

1 Weider
2 TWINLABS
3 General Nutrition Companies
4 L & S Research/Cybergenics
5 Myosystems

Source: Packaged Facts.

Table: Selected New Products: Protein Drinks

Marketer/Brand Description
 1994
AST Research
VyoPro Whey Protein Value-
priced protein drink modeled on
Next Nutrition's Ultimate Whey
Designer Protein.

Great American Nutrition

METAFORM Value-priced
protein modeled on Myosystem's
MET-Rx.

Healthy`N Fit International

Inc.
Ion Exchange Whey Amino
Acids All ion-exchange whey amino acid
drink.

L & S Research Corp./

Cybergenics
Near Zero Carb
Mega-Protein High-protein drink made from egg
albumen.

Myosystems, Inc.
MET-Rx Engineered Foods
Premium-priced protein drink
packed in individual servings.

National Health Products

Hot Stuff Double X Protein
drink fortified with most of the
chemicals popular among
bodybuilders today.

Strength Systems USA

Whey Better Protein Value-
priced drink modeled on Next
Nutrition's Ultimate Whey
Designer Protein.

Twin Laboratories
Super Gainers Fuel Muscle
Cell Volumizing Formula
High carbohydrate weight-gain
drink fortified with creatine
monohydrate, medium chain
triglycerides, chromium
picolinate, and branch chain
amino acids.
Fat Free Gainers Fuel 1000
Fat Free Gainer's Fuel 2500
Low-fat, high carbohydrate
weight-gain protein drinks.

1993
Twin Laboratories
 Nitro Fuel Ready-to-
drink amino acid drink.

Next Nutrition
Ultimate Whey Designer
Protein Premium protein drink from ion-
exchange whey, dried with high-
speed air process.

Source: Packaged Facts.

Measured Advertising Expenditures: Protein Drinks (1992-1994)

(In Thousands)

Marketer/Brand 1992 1993 1994

Twin Laboratories _ _ $285
TWINLABS Nitro Fuel Energy Drink _ _ 182
TWINLABS Super Gainers Fuel _ _ 103
Energy Drink

Weider International $882 $2,218 $72

Victory Performance Nutrition 436 535 _
Protein Blast Energy Drink 51 11 _
Weider Amino Acid Drink 21 21 45
Weider Diet Supplement Drink 374 1,651 27
Powder

Myosystems, Inc. _ $216 $40

Met-RX Nutritional Supplement _ 216 40

Champion Nutrition $216 $214 $23

Heavyweight Gainer 900 Powder 119 150 _
Drink
Metabolol Supplements 97 64 23

Nature's Best $82 $42 $5

Natures Best Outgrow XL Weight 43 21 5
Gain Drink
Nature's Best Protein Shake 39 21 _

Nature's Way $164 $20 $1

Pure Power Bodybuilding 164 20 1
Supplements

Heico Acquisitions, Inc./Nutri $121 $2 _

Science, Inc.
Gaining Edge Weight Gain 121 2 _
Supplement

Total $1,465 $2,712 $426

Source: Leading National Advertisers; Packaged Facts. This

material used with permission.
 Figure: Protein Drink Dollar Sales (1990-1999)

Graphical Information Can Be Obtained At No Charge From Publisher

Figure: Share of Protein Drink Retail Dollar Sales

by Product Category (1994)

Graphical Information Can Be Obtained At No Charge From Publisher

LA-39104 ENERGY BARS

Products: Definition

The Products

Products Included: Fortified High-Carbohydrate Candy Bars

Specifically Marketed for Sports and Fitness Consumers

For the purposes of this report, energy bars are high-

carbohydrate, high-calorie, low-fat candy-bar-like meal
replacements designed to improve the performance of people
engaged in strenuous, calorie-burning activities, especially
sports. Most energy bars are also high in protein and
fortified with vitamins and minerals.

Breakfast Bars, Granola Bars, and Other Health Bars Not

Included

Breakfast bars and granola bars, even when low in fat,

are not included in the market. Some of these products may
have done their share to encourage acceptance of candy-bar-
like products as nutritious meal replacements or
supplements. However, they are very different in
formulation, are marketed (with a few exceptions) by a
different group of companies, and are aimed at a different
audience.
Also available to the consumer are many all-fruit bars
and natural-ingredient health bars intended as healthy
alternatives to candy bars. The difference between these
products and energy bars is less obvious, and indeed they
often aim at the same customer. Unlike energy bars,
however, these products do not identify themselves with
athletics.
Obviously, regular candy bars, like Snickers or Milky
Way, are also outside the parameters of this market.

A Sports-Oriented, Nutritious Convenience Food

Energy bars are sometimes described as sports drinks

without the fluid. The description has a partial accuracy,
since many bars supply electrolytes, as isotonic drinks do,
and all are high in carbohydrates, like carbo-loading
drinks. But manufacturers of the bars supply and consumers
apparently demand much more in an energy bar, including
quantities of protein, vitamins, minerals, and fiber that
make the bars a complete meal replacement. They are a
highly portable convenience food for health-conscious
people, a nutritious meal that will not take up much room in
a backpack or pants pocket, will not bruise like a banana,
and will not leak like a sandwich.

Products: Use

Improve Performance of Athletes Doing More

Than an Hour of Strenuous Activity

As with sports drinks, energy bars probably improve

performance of those engaging in strenuous activity for
extended periods an hour or more.
The hour in question need not be a continuous one.
Intermittent activity jogging or biking in the morning, then
playing tennis at lunch can make the same demands on the
body, and an energy bar consumed between the two bursts of
activity probably helps with the second spurt.

Sports Drinks vs. Energy Bars: Bars Best for Cycling,

Hiking

On the down side, energy bars do not replace fluid,

even when they replace electrolytes (not all do).
Furthermore, according to Barry Mink, M.D., an internist at
the Aspen Clinic in Colorado, who has worked with the United
States Olympic Committee, research shows that if an
individual is working out at 70% or more of his or her
maximum, it becomes difficult to digest solid food.
However, bicycling and hiking seem to be exceptions. A
1993 study by Michael Sherman, Ph.D., professor of exercise
physiology at Ohio State University, showed that drinks and
bars were metabolized equally well by endurance cyclists.

Fluids Should Be Taken Concurrently

Since any exercise strenuous enough to require an

energy bar will certainly cause dehydration, experts
strongly advise that fluids be consumed in addition to the
bar. "You must consume adequate water with sports bars,"
says Sherman, "especially if you're exercising when it's
hot."

"Timed-Release" Carbohydrates

One thing energy bars can do more easily than drinks is

deliver a sort of "time-release" effect by combining
ingredients that are absorbed quickly such as simple
sugars with dried fruits and grains that the body will
absorb more slowly. A preworkout banana does much the same
thing (and also supplies potassium), but as a marketer
points out, "you can't slip the banana in your back pocket."

Should Bars Be Consumed Before, After, or During

Exercise?

According to Edmund R. Burke, Ph.D., associate

professor of biology at the University of Colorado, a sports
bar consumed 60 minutes before exercise can, like a carbo-
loading beverage, ensure adequate levels of muscle and liver
glycogen, thereby lowering the chances of muscle fatigue
during exercise.
Consuming a bar during extended exercise also has its
advantages, says Burke. Sixty to 80 grams of carbohydrates,
or 240 to 320 calories, is generally thought to be
sufficient carbohydrate replacement per hour of strenuous
exercise, and this corresponds to one to 1« of an average
sports bar per hour of exercise.
Finally, Burke points out, eating about 200 calories of
carbohydrates within a half hour after exercise will help
speed recovery from fatigue by replenishing stores of muscle
and liver glycogen.

Products: Ingredients (1/2)

Ingredients: Sugar and Grain as Carbohydrate Sources

As mentioned earlier, energy bars often combine sugars

and grains to achieve a time-release effect. The grains are
sometimes also used to give the products body and supply
much-needed variations in texture. Honey, fructose, and
corn syrup are often used as some of the simple sugars.
Complex carbohydrates are supplied by maltodextrin, glucose
polymers, unprocessed rice, or rice crisps. Wheat flour is
sometimes used, though less often since wheat is harder to
digest than other grains.

Why Protein?

Protein is included in fairly large quantities in

nearly all energy bars, even though its presence probably
does little to enhance performance in the short term. One
marketer has an unusual rationale for the inclusion of
protein. "Our bar is based on new research, which shows
that the carbohydrate/protein ratio in food determines to a
large extent whether one burns stored fat," according to a
company spokesman.
In the presence of the right proportion of protein and
dietary fat, carbohydrate entry into the system is retarded,
thereby keeping insulin levels down and fostering higher
levels of the hormone glucagon. This steadies blood sugar
for extended periods by encouraging the body to access body
fat for energy.
Steady blood sugar has clear benefits for athletes,
including better energy, greater endurance, and better
concentration and focus.
This theory justifying the inclusion of protein in
energy bars is the exception, not the rule, and the bars
produced by this company have an unusual ingredient profile,
with 40% fat, most of it from olive oil. Most energy bars
include protein simply because the bars are meal
replacements and their consumers want to eat food that helps
build muscle, as well as supply calories for work.
As will be seen later, many of the bars seem to be
popular with nonathletes, simply as a healthy snack
alternative.

Meat Avoided as Protein Source

Protein in energy bars comes from a range of sources.

Calcium caseinate (soy) and whey (milk) are the most common.
Animal protein, though not unknown, is rare, since many
users are vegetarians and even for meat eaters the idea of a
beef, pork, or "animal gland" candy bar tends not to make
the mouth water. However, many marketers do not print the
source of the protein on the wrapper.

Vitamins and Essential Minerals and Electrolytes

Most energy bars are fortified with essential vitamins

and minerals, usually with 100% recommended daily allowances
(RDA) of vitamins and 35% RDA of various minerals.
Percentages of United States RDA on a typical bar (Tiger
Sport) are protein 25%, vitamin A 10%, vitamin C 100%,
thiamin 100%, riboflavin 100%, niacin 100%, iron 25%,
vitamin D3 10%, vitamin E 100%, vitamin B6 100%, vitamin B12
100%, folic acid 100%, phosphorus 40%, magnesium 35%, zinc
25%, copper 25%, biotin 35%, pantothenic acid 25%, chromium
25 micrograms*, AKA 10 milligrams*, fumaric Acid 20
milligrams*, Malic Acid 20 milligrams*.
Asterisks indicate that an RDA has not been established.
The bar also includes 90 milligrams of sodium and 320
milligrams of potassium in the form of potassium chloride,
potassium citrate, and potassium iodide.

Prdocucts: Ingredients (2/2)

Importance of Phosphorus

Many energy bars contain phosphorus, and some deliver

their sodium in the form of sodium phosphate. According to
Dr. Burke, quoted earlier, "Phosphate aids in the ATP
cycle," that is, the basic metabolic action in which
adenosine triphosphate plays a crucial role, "and research
has shown that sodium phosphate can increase oxygen
consumption capacity by 10% to 12%. Phosphate also acts as a
buffer to decrease the acidity of the blood and inhibit the
buildup of lactic acid, which inhibits muscular function."

Fats and MCTs

All bars contain some fat, most from vegetarian sources

and mostly unsaturated. Some bars use (and advertise the
use of) medium chain triglycerides (MCTs), a popular source
of fat in sports supplements including the protein drinks
described earlier in this report. According to Steve
Blechman, vice president of product development for Twin
Laboratories, which markets many vitamin and mineral
products and sports supplements, MCTs are "a readily
utilized source of energy during exercise, making a low
percentage of fat even healthier." Fat from MCTs, in other
words, will be used, not stored.

Fiber Sources

Most bars include some fiber, both to firm up the bar

and to make it a healthier meal replacement. The most
common sources are pectin, guar gum, and oat bran. Wheat
bran and cellulose are avoided, since they are harder to
digest, especially during exercise.

Herbs

Some bars also contain herbs such as ginseng and

guarana, which "enhance mental performance, stimulate the
central nervous system and generally act as vitalizers for
the body," according to the marketer of an energy bar that
contains these ingredients.

Calorie, Carbohydrate, and Fat Content in Numbers

Calories in energy bars average around 220, in a range

between 150 and 250 for most bars. One atypical bar, aimed
at bodybuilders, contains 515 calories. The best-selling
bar contains 225 calories. Fat ranges between 1 gram and 14
grams, with 2 to 4 grams the usual quantity. As for protein
content, the bars tend to fall into segments, high and low,
with one group of bars ranging between 2 and 4 grams of
protein, and a higher protein segment ranging between 10 and
14 grams. The best-selling bar contains 10 grams of
protein.

Products: Flavoring; Packaging; Regulation

Problems of Flavor and Texture

A conventional candy bar of the sort that makes Homer

Simpson's mouth water high in fat, designed for no other
purpose than to please a sweet tooth has obvious taste
advantages over an energy bar designed to serve several
other purposes.
Most energy bars beg to be washed down with plenty of
fluids as, indeed, sports nutritionists recommend they
should be for functional reasons. The bar's texture tends
to be sticky and gritty. When unwrapped, bits of some bars
cling to the wrapper.
Strong flavors such as chocolate and coffee are often
chosen to disguise the competing flavors of the grains and
vitamins. Alternatively, some bars enlist the aid of their
grain sources, and deliver oatmeal-vanilla or oatmeal-
chocolate. Though the initial flavor is usually good, the
high protein, heavily fortified bars tend to leave a chalky
or B-vitamin aftertaste. One taste-testing article in
Sports Trend, rating several of the bars against each
another, complained of the "rush of vitamins" aftertaste in
some of the bars. Other negative comments in this taste
test were "pasty," "too fig-tasting," and "rubbery."
In the products' defense, marketers sometimes point out
that like isotonic drinks, energy bars taste better at the
time of strenuous exercise.
Though there is considerable variation within each
type, the low-protein, low-vitamin bars tend to be more
palatable; this is the trade-off marketers grapple with when
formulating the bars.

Common Flavors

Commonly used flavors in sports bars are vanilla,

chocolate, strawberry, banana, honey nougat, apple cranberry
crunch, carob, burgundy cherry, and molasses-coconut.

Shelf Life

Energy bars, though they usually taste better when they

are fresh, have a shelf life of between six months and one
year at room temperature. Since most must go through
distributors before they reach the shelf, their life is
shorter at retail. Most of the bars can still be eaten when
their shelf life has expired, but they harden enough to
offer a serious challenge to the athlete's jaw muscles.

Size by Weight

Weights are given on the package by grams and ounces,

ranging from 1.4 ounces to 4.5 ounces (the latter for a high
calorie bar targeted at bodybuilders). Most bars weigh
around 2.3 ounces, with the leading brand at 2.25 ounces

Packaging and Labeling

Energy bars typically measure 5 inches by 1« to 2

inches by a little over an inch thick the relatively flat
dimensions of a pure chocolate bar. Some are thicker and
correspondingly shorter in the other measurements. The
lower-weight bars are smaller in all dimensions.
Energy bars are wrapped in air-tight foil or plastic.
As is true of most candy bars, the wrapper is heat sealed
along the back length (the 5 inch way) and again afterward
at both of the two short (1« inch or so) ends. The side
heat-seals leave « inch flat ends to the bar. The back long-
way heat seal folds down as a flap, covering up part of the
nutrition information or the ingredients list. It lifts to
reveal this information.
The front of the wrapper is printed with the name and
flavor of the product, advertising claims and descriptions
("New" "the Ultimate Performance Bar" "Functional Food Bar")
and, at the bottom, the weight in ounces and grams. The
back wrapper contains mandatory lists of ingredients and
nutritional information, the bar code, the name of the
distributor or manufacturer, and often an 800 number to call
for "questions or comments."
The wrapped bars are packed in boxes that are often
themselves heat sealed in plastic wrapping. Most boxes can
be used as display cases for the bars.

Energy Bars Are Regulated as Dietary Supplements

Under the provisions of the Dietary Supplement and

Health Act of 1994, energy bars, like other sports nutrition
products, will be regulated as dietary supplements. The act
is discussed in the Overview section of this report.

Market Size and Growth; Factors for Future Growth (1/2)

Market Size and Growth

Market Reaches $60 Million in 1994

Since most energy bars are marketed by privately held

companies, and many are sold in bike shops and health food
stores that are not tracked by sales auditing services,
exact sales figures are unavailable. However, trade
estimates commonly put the market at $60 million in 1994,
and note that it has been expanding at an approximate 20%
annual rate over the last three years.

Factors for Future Growth

Fitness Boom Sags, but Outdoor Activities on the Rise

According to surveys by the National Center for Health

Statistics and the National Association of Sporting Goods,
involvement in fitness has declined in the past few years.
But that is only part of the story. Those who are still
active in fitness are engaged in different kinds of
activities, with more involvement in outdoor and endurance
sports such as biking, hiking, and cross-country skiing.
These are strenuous endurance activities that take the
consumer far from restaurants and convenience stores where a
quick meal might be obtained. The energy bar, besides its
promise of improved performance, is the ideal convenience
food for those circumstances.

New Product for Old Need

However, since outdoor sports have not been increasing

at anything like 20% annually, they cannot be the main
reason for the growth of the category. Rather, its sheer
novelty is probably a more important factor behind the rapid
growth. The functional energy bar high in protein,
vitamins, and carbohydrates, low in fat, not only a healthy
candy bar, but a candy bar for sports is a new idea that has
gradually found an audience.

Multiplication of Marketers Puts Product on the Map

During most of the 1980s, only two marketers were on

the scene with energy bars, and only one targeted the
product specifically to athletes. While that company grew
rapidly, by itself it could not give the category enough
visibility to really take off. In the last five years, the
entry of many new companies and products has helped the
category reach critical mass.

Factors for Future Growth (2/2)

Category Rides Growth of Health Food Business

Health food stores are an important outlet for energy

bars, which have benefited from the growth of this retail
trade. Over the last 10 years, the retail health food
business has become increasingly professional and uniform.
The rise of chain stores, especially GNC, has given health
food greater visibility and respectability.

A Vanguard Functional Food

Like all sports nutrition products, energy bars are a

front-line functional food. They appeal to a young consumer
eager to become competitive, who has a big appetite for
snacks and a willingness to experiment. As the functional
food idea takes hold with the public, the energy bar has
been a natural first step.

Entry of Major Marketer Will Benefit Category

In 1994, Quaker Oats announced plans to enter the

energy bar category with Gatorbar, an energy bar extension
of its phenomenally successful sports drink, Gatorade.
Quaker Oats is a billion dollar company, many times larger
than any other marketer involved in this fledgling category.
The Quaker development is welcomed by most marketers of
energy bars, who reason that the high visibility Gatorbar
will bring to the field will benefit the category as a
whole.

Expanded Retail Access

One effect of Quaker Oats' entry into the market might

be to help energy bars break into retail outlets until now
closed to them, principally supermarkets. Even before
Quaker Oats' entry into the category, marketers of some bars
were reporting rapid expansion of energy bars into
convenience stores and drug outlets. This trend clearly has
a long way to go before these outlets are saturated.

Marketers Reaching Beyond the Athlete

As bars move beyond sporting goods stores and health

food stores to mass market outlets, they are finding a new
audience among nonathletes in search of a healthy
alternative to candy bars. According to a 1993 Shoppers For
Health Report from Food Marketing Institute/Prevention, 61%
of shoppers say they almost always read nutrition labels
when buying food for the first time a 9% increase on the
previous year. In the same survey, more than half of the
shoppers reported they had changed a food purchase decision
in the past month based on information read on a nutritional
label.
For the health-conscious consumer, the contrast between
the nutritional labels of the average energy bar and the
average candy bar is a very stark one the energy bars win
hands down. And beyond the numbers, the association of
energy bars with sports assures the health-conscious that
the products are wholesome and nutritious. Wheaties were
the "breakfast of champions." Energy bars are the meal
replacement of champions.

Other Major Marketers May Follow Quaker Oats' Lead

If Quaker Oats' new product is a success, other big-

time marketers with the power to reach new retail outlets
and the money to advertise widely may follow their lead.

Projected Sales; Market Composition

Market to Reach $128 Million by 1999

Based on the foregoing factors, Packaged Facts

estimates the market for energy bars in the United States
will reach about $128 million by 1999. Stepped-up
competition and promotion and entry into new retail outlets
will carry the product along at its current 20% growth rate
for the next two years. Then, growth will flag somewhat as
novelty wears off and the promotions associated with product
launches end.

Market Composition

Active 18 to 44 Year Olds Especially Cyclists

While no survey is available that tells us exactly who

eats energy bars, the leading marketer of energy bars
describes its typical consumer as "18 to 44 year old college
educated men and women." Most marketers think of their
consumers in similar terms.
Cycling is a natural fit for use of the bars. Cyclists
are the most heavily targeted group in advertising and
promotions for the bars.

Bike Shops Lead Health Food Stores

Energy bars first began selling in bike shops, and this

type of outlet probably still enjoys a comfortable plurality
of sales. Harry Webb, vice president of sales at MLO
Products, which markets several bars, estimates that 40% of
all energy bars are sold in bike shops. While it is true
that all health food stores sell energy bars, customers at
bike shops tend to buy by the box rather than by the bar.
Energy bars are available at a wide variety of other
outlets, including convenience stores, college athletic
departments, chain drug stores, sporting goods stores,
supermarkets, and gasoline stations. Penetration of most of
these markets is incomplete, however. For example, only a
small minority of supermarkets sell energy bars, and only a
few brands are available at convenience stores.

Warm Weather Benefits the Products

Some marketers report considerable seasonality of

sales, others hardly any. Those that do not experience much
sales fluctuation during the year, however, are doing nearly
all of their business in states that are warm year-round.
Based on marketer reports, Packaged Facts estimates that
energy bars sell 10% to 20% more in the spring and summer
than they do in the winter and fall.

Energy Bars Sell Best in the Sunbelt

Because warm weather is a factor in the sales of energy

bars, and because the culture of physical fitness and
outdoor sports is greater in the South, energy bars sell
best in the sunbelt states, especially California, Arizona,
Texas, and Florida. The largest distributors are located in
these regions as well. Since outdoor activities are also
important in the state of Colorado, energy bars also do well
there.

Marketers

The Marketers

Dozens of Companies of Many Types

Dozens of companies sell energy bars nationally: some

are sporting goods marketers that have a sports nutrition
division (Weider, York Barbell, Proline); some are sports
nutrition companies (Universal, Champion, MLO, Optimum
Nutrition); some are natural foods companies that have
recast their all-natural "nutrition bar" as an energy bar
(Glen Foods, FinHalsa, Avocet); some are health food or
sporting good chains; others, like Twin Laboratories, are
vitamin supplement companies that have a sports nutrition
division. A few, like Powerfood, were created to market
energy bars. Finally, there is the international food and
beverage company, Quaker Oats.

Small, Medium, One Giant and Other Giants Interested

All but one of the companies are privately held, and

most are small, with sales well under $50 million a year for
all product lines. A few enjoy sales in the hundreds of
millions. One company, Quaker Oats, is an international
food and beverage giant with net sales in excess of $6
billion in 1994.
Mars, Inc., the candy bar company that produces the
tasty but wicked high fat Snickers and Mars bars so often
contrasted with the virtuous energy bars, is currently test-
marketing its own VO2 bar at sporting events. And,
according to a spring issue of Insider magazine, Nabisco is
also rumored to be developing an energy bar.

One of the Smallest Markets the Leading Brand

Powerfood, a Berkeley, Calif.-based company started in

the mid-1980s specifically to market energy bars, is the
category leader by a comfortable margin. The company's sole
product, PowerBar, is currently available in Malt-Nut, Wild
Berry, Chocolate, Apple-Cinnamon, Banana, and Mocha flavors.

Weider Nutrition Group Is Alone on Second Tier

Weider Nutrition Group of Salt Lake City, is the sole

second-tier marketer, with its Tiger's Milk and Tiger Sport
bars. Weider also markets Protein Blast Energy Bar, aimed
at bodybuilders, and Exceed, an energy bar that Weider
acquired recently from Abbot Laboratories along with its
Exceed sports drink.

Quaker Oats

Quaker Oats, the food industry giant that markets the

sports drink Gatorade, began test marketing its Gatorbar in
the spring of 1994. A 220-calorie bar made from natural
fruits (figs, especially) and grains, Gatorbar is much lower
in protein and vitamins than Powerfood's product. It is
also much less expensive.

Important Contenders: Hoffman Products, Proline, TWINLABS

Hoffman Products, a sports nutrition subsidiary of York

Barbell Company in York, Pa., markets Hoffman's Energy Bar,
a small, relatively high-fat bar available in a wide variety
of sizes as well as flavors. Like Tiger's Milk, Hoffman's
energy bar considerably predates PowerBar. Hoffman Products
also markets protein drinks, vitamin supplements, and
suncare products. As its name states, the parent company,
York Barbell, markets an extensive line of free weights, as
well as other fitness-related hardware, books, videos, and
apparel.
Started by professional tennis player David Austin,
Proline International (Camarillo, Calif.) markets a range of
sports-related personal care products, including sunscreens
and shampoos. Proline's ATP Tour Bars are a somewhat
unusual formulation in energy bars: They are relatively low
in protein (2 grams) for their 160 calories, with modest
amounts of vitamins and minerals. The company seems to have
good penetration in a wide range of retail outlets.
Twin Laboratories, the Ronkonkama, N.Y.-based vitamin
and mineral supplement company that also markets a wide
range of sports nutrition products, markets the energy bars
Gainer's Fuel and Diet Fuel, which are widely available at
health food stores. Though TWINLABS does not push its
energy bars, the company's bodybuilding magazine, Muscular
Development, and its importance in the health food industry
give it advantages in marketing them.

Other Noteworthy Marketers

Sports Pep (Castle Rock, Colo.), markets Thunder Bar, a

high protein PowerBar-like product sold at cycling stores,
health food stores, fitness centers; it is widely advertised
in sporting magazines. Sports Pep is a division of the Pep
Company, which manufactures a wide range of products for the
health food industry.
A number of minor marketers are sports nutrition
companies that market other products, especially protein
drinks, to the bodybuilding trade. Universal Nutrition, a
sports nutrition manufacturer that does most of its business
through private label, lists four distinctly defined lines
of energy bars in its catalogue, including Forza (for
endurance athletes), Yohimbe (with herbs), NutriSlim (for
dieting), and Pro Bar (for bodybuilders).
MLO's Hardbody Chocolate Sports Bar is named after that
company's Hardbody weight-gain protein drink. National
Health Products' Hot Stuff Fitness Bar is a solid version of
its Hot Stuff protein drink. Champion Nutrition, which
markets a very high calorie Super Heavyweight Bar, also
markets a line of protein drinks.

Marketer/Brand Shares

Powerfood's PowerBar Between 40% and 60% in 1994

Powerfood's own publicity gives its PowerBar brand's

share of the energy bar market as between 40% and 60%.
Several other marketers canvased about PowerBar's market
share suggested that 60% was probably nearer the truth.

Weider Only Other Marketer in Double Digits

The energy bar category is too poorly tracked to

calculate brand shares of most marketers. There is general
agreement in the industry that Weider, with its Tiger's
Milk, Tiger Sport, and Exceed energy bars, is the second
biggest seller, and the only other marketer in double
digits.

Other Market Shares Fluctuate Wildly

The general concensus is that no other marketer has a

share greater than 10%. The rapid entry of new products
into the category in the last few years has made brand
shares fluctuate wildly.

The Competitive Situation (1/2)

One Champion, Many Contenders

The relatively small market for energy bars bears some

similarities to the early market for sports drinks at any
rate to that market before Quaker Oats' purchase of
Gatorade. Within the little world of energy bars,
Powerfood's PowerBar is nearly as dominant and as closely
identified with the category as Gatorade is with sports
drinks. If it is not the household name that Gatorade is,
this is only because energy bars are still unfamiliar to the
average household.
The most significant difference between the competitive
situation in sports drinks and energy bars now, aside from
the vast difference in scale, is that the market leader is
not a giant company with the resources of Quaker Oats, but a
small, one-product entrepreneur; the only billion-dollar
company in the category is, in fact, Quaker in the role of
challenger.
However, other powerful challengers, Mars and possibly
RJR Nabisco, appear to be on the way.

Brian Maxwell and the PowerBar Story

As Powerfood's well-oiled publicity machine makes clear

to interested journalists, PowerBar and the company that
markets it are the brainchild of Brian Maxwell, a British-
born, world-class marathon runner who made the Canadian
Olympic Team in 1980. Maxwell's experience as a long-
distance runner a calorie-draining endurance sport in which
blood-sugar level can make the difference between victory
and defeat convinced him of the need for a high-energy, low
fat meal replacement that could be taken during an event.
Having decided that no existing product satisfied his
requirements, in the mid-1980s he set about inventing his
own with the help of fellow runners William Vaughan, a
biochemist, and Jennifer Biddulph, a nutritionist to whom
Maxwell is now married. The result, after three years of
experimentation, was a mixture of fructose, oat bran,
maltodextrins, and milk proteins heavily fortified with
vitamins, minerals, and amino acids, and flavored with
chocolate or berry. The first mass-produced PowerBars were
created in 1986 and were sold by mail order.

What Was Different about PowerBar

Some credit Brian Maxwell with the invention of the

category; most do not go quite that far, merely crediting
him with putting it on the map. A few of the energy bars
that are still in competition with PowerBar were already
available in the mid-1980s. The most notable of them was
Tiger's Milk, which (when added to the PowerBar-influenced
line extension, Tiger Sport) is still PowerBar's nearest
competitor. "America's First Nutrition Bar," the package
claims. Hoffman's Energy Bar, based on a sports supplement
sold for 40 years by the company founded by body-building
entrepreneur Bob Hoffman, was available in the 1960s.
Spirulina Sunrise also predates PowerBar by a few years.
However, while these products come close enough to
serving the purposes of PowerBar to remain its competitors,
they differ significantly in formulation from Maxwell's
product. Tiger's Milk and Hoffman's Energy Bar are both
relatively high in fat. In common with the Spirulina
Sunrise, they contain no electrolytes and do not pack the
high doses of vitamins and minerals found in PowerBar and
the many later products encouraged by PowerBar's success.

Sports Sponsorship Is Crucial to Powerfood's Success

While future expansion of PowerBar will depend on its

ability to reach beyond athletes, initial success rested on
its narrow focus offering a new, well-defined product to a
well-defined group. The group was endurance athletes, and
Powerfood knew where to find them at the events themselves.
From the beginning, Powerfood publicity has centered around
athletic sponsorship. Setting another pattern for the
category, Powerfood found cycling events particularly
rewarding for this purpose. The company gave out free
PowerBars to the United States cycling team at the Tour de
France in exchange for sponsorship, a move that led to a
short profile of the company by CBS Sports in 1987.

Sports Sponsorship As Free-Sampling

In an interview with Packaged Facts, Powerfood's

communications director Scott Sowry, said the company
sponsored 4,000 athletic events in 1994. The company
prospers by "meeting the needs of the athlete" which often
turns out to mean giving the athletes free PowerBars.
"That's where we meet the needs of the athlete, we're out
there at 6 a.m. at 10K events, triathlons, cycling events.
The best ad for a PowerBar is a PowerBar."
As a result, a great many athletes are exposed to
PowerBars. If they like them, these athletes will buy the
product by the box, not just the bar.

PowerBar Retailing: Working Outward From Bike Shops

In finding retail outlets for PowerBar, the company

again benefited from tight focus on athletics, and on
particular types of athletes. "At first we started out with
bicycle stores," says Sowry. "That was back in 1987. From
there, in 1989, we started hitting the health food industry
and general sporting goods stores. In 1990, we went into
gyms and health clubs. In 1991, we had our first
significant international sales. In 1992, we were
introduced in supermarkets, convenience stores, and golf and
tennis specialty stores. In 1994, we started getting into
the Price Club stores."
Sowry admits that Powerfood, like the rest of the
energy bar category, has merely "scratched the surface" in
supermarkets.

PowerBar Has International Reach

Now available in 26 countries, PowerBar has what a

competing marketer calls "a good head start in international
sales. When I was in Russia the year before last [1993],
PowerBar was all over the place."

The Competitive Situation (2/2)

Weider's Many Identities

 Weider Nutritional Group, whose importance to the
sports supplement and bodybuilding businesses are discussed
in the Protein Drink section of this report, has a practice
of fielding many brands in the same category. Weider
currently presents at least three products in the energy bar
market Tiger's Milk brand, which it purchased in 1986; Tiger
Sport, a more PowerBar-like line extension; and the Exceed
bar, which it purchased from Abbott Laboratories in 1994.

Weider's Shrinking Tiger's Milk Bar

Tiger's Milk has had to compete with PowerBar on the

basis of price. The suggested retail price of a PowerBar,
though it is frequently discounted, is $1.69. Tiger's Milk,
like many brands that compete in the category, is willing to
go far to keep its price under $1.00, seen by many marketers
as an important consumer threshold. For Weider the answer
has been to reduce the size of the bar the basic Tiger's
Milk bar is 1.25 ounces and 170 calories, a full ounce and
55 calories less than a PowerBar but then it costs half as
much and, like PowerBar, is frequently discounted.

Competition Heats Up with the New Decade

Around 1989 or 1990, competitive energy bar brands

began to race along the marketing and retailing trail blazed
by PowerBar through cycling shops, sporting goods stores,
and health food stores. Around 90% of the brands listed in
the selected products table earlier were introduced in the
1990s, several in 1994 alone. The product is a natural fit
for sports nutrition companies that already enjoy
distribution in health food stores. As noted earlier,
several bars are line extensions of existing protein drinks.
The product is also attractive to sporting goods companies
that have distribution in bike shops and sporting goods
stores.

Enter Quaker Oats

In 1986, Brian Maxwell approached Quaker Oats (among

others) with the offer of licensing the product that he had
not yet called "PowerBar." According to Jennifer Maxwell,
"They responded, `We have our own R&D department.'" Eight
years later, in early 1994, Quaker Oats began test marketing
its own entry, Gatorbar.
Some within the industry say it is too late for Quaker
Oats, that by now PowerBar is as identified with this
category as Kleenex or Band-aids or Gatorade are with
theirs, and cannot be dislodged from first place the only
position in the small energy bar category that it would be
worthwhile for Quaker Oats to occupy.
These calculations omit two factors. First, most
further expansion of the market will be to nonathletes in
search of a healthy snack, with sponsorship by athletes as a
guarantor of wholesomeness the energy bar as "snack of
champions." Second, Quaker has special advantages that will
help it muscle into highly desirable and difficult-to-enter
retailing outlets especially the precious space by the
checkout at the great packaged goods marketers' valhalla of
the supermarket. Not only does Quaker Oats have the
financial resources to meet the high slotting fees charged
for this premium supermarket space, it also has enormous
influence and power to obtain favorable treatment. So,
entering these outlets is actually a less expensive
proposition for Quaker Oats, which can well afford the
expense, than it is for Powerfood.

Powerfood and Competitors Say They Welcome Gatorbar

Publicly at least, Powerfood takes the position that

Quaker Oats will help grow the energy bar category by
bringing it greater visibility, attention, and access.
Surely, if there is room for one energy bar at the
supermarket checkout, there is room for two or three and
PowerBar is the likeliest candidate. Other marketers hope
to flow through the channels Gatorbar and PowerBar create.

Gatorbar Unlikely to Dislodge PowerBar in PowerBar Strongholds

But Supermarkets and Convenience Stores Are Another Story

Quaker Oats' low-protein, low-vitamin Gatorbar pitched

to the general health-conscious consumer will probably not
dislodge PowerBar in the bike shops and sporting goods
stores where endurance athletes buy bars by the box.
PowerBar is a more serious energy bar for a serious
consumer.
In the larger world of supermarkets and convenience
stores, though, Quaker has special strengths. How well it
will take advantage of them depends on many imponderables.
Will the consumers take to Gatorbar's fig-like flavor, for
example? Those who like this taste may prefer to get theirs
from RJR Nabisco or one of its many fig-bar competitors.
How hard will Quaker push the product? To Quaker Oats the
stakes are not high. Gatorbar is just another line
extension, like Gatorgum several years ago or Sunbolt,
Gatorade's high-caffeine breakfast drink introduced in 1994.

Mars and Possibly RJR Nabisco on the Way

Mars, Inc. has the same kind of access and marketing

clout that Quaker Oats enjoys. It also has more experience
with candy bars, and the loyalty of consumers who have been
eating Snickers and Mars bars for years but may be
interested in a healthier alternative. Now the company is
test marketing its own VO2 energy bar at sporting events,
apparently following Gatorbar's successful strategy of free-
sampling the bar to athletes.
 RJR Nabisco, another power player, may be preparing to
launch an energy bar, too. The entry of these two large
companies, if they choose to enter mass markets, will
certainly complicate things for Quaker, and perhaps less so
for Powerfood, which is already entrenched in its special
outlets.

Will Powerfood Be Purchased?

In late 1994, Jennifer Maxwell told Business Week that

she and Brian Maxwell have been approached several times by
larger companies interested in buying Powerfood. This is
certainly not hard to believe. So far, though, the Maxwells
have resisted their suitors. According to Business Week,
"For now...the Gatorbar rollout seems only to have inflamed
their natural competitiveness."
Still, partnership with or purchase by a major food
company remains a possibility, and would be more likely if
Powerfood has trouble entering mass markets on its own.

Marketing and Product Trends

Lower-Protein, Better-Tasting Bars

Most energy bars' chief drawbacks chalky texture, bad

aftertaste are the result of their high protein content, and
the better tasting bars tend to be less ambitious about both
the proteins and the vitamins they try to pack.
It could be argued that these less highly fortified
bars are actually more desirable, not merely as a snack,
but as performance-enhancing foods. Protein is hard to
digest and is not absorbed well during strenuous activity.
The chief nutritional demand the body makes during strenuous
sporting events, as consumers of Gatorade can attest, is for
carbohydrates, and in some cases electrolytes. Even most of
the vitamins and minerals in the bars, which have a
sometimes unpleasant effect on their flavor, could be
consumed with equal benefit to the athlete at some other
time.
These considerations are reflected in the formulas of
some new brands, most notably ATP Tour, with only 2 grams of
protein, and Gatorbar, with only 3 grams a third less than
the PowerBar it has staked out as its chief competitor.

No-Protein Bar Introduced in 1993

A product introduced both as a bar and drink in 1993

goes even further, offering mostly the carbohydrate
maltodextrin, but no protein, fiber, or fat the theory being
that all of the latter ingredients merely add to fatigue
during sporting events by overtaxing the athlete's digestive
system. Gu as the product is vividly but not appetizingly
named was invented by William Vaughan, the biochemist who
helped Brian Maxwell develop the PowerBar. It is fortified
with minerals and herbs, but only those believed to be
performance enhancing, and with branched-chain amino acids,
which, some research indicates, may help delay fatigue.
Gu, a pudding-like product, does not subject the
athlete to the added strain of chewing. Gu seems unlikely
to break out into the convenience store trade and become
America's favorite snack. But its existence supports the
argument that an energy bar does not have to be a complete
meal replacement, with all the nutritional value of a
protein drink, and multivitamin.

Smaller Bars Becoming More Common

Some of the newer energy bars are considerably smaller

than the 2.25 ounce standard of PowerBar. Tiger's Milk has
been shrinking over the years, as noted earlier, and Tiger
Sport is now available in a 1.2 ounce as well as a 2.3 ounce
size. ATP Tour is only 1.5 ounces and Gatorbar, like Tiger
Sport, will be available in both a regular and a small size.
The recently introduced Nutrablast is only 1.6 ounces.
The desire to move beyond the athlete to general health-
conscious consumer is probably the chief motivation for this
trend. Smaller bars can more easily remain below the price
threshold of an impulse purchase; this is more important for
the nonathlete, who does not have as good an excuse to spend
money as someone who is about to compete in a bicycle race.
The lower calorie content of the smaller bar makes it more
suitable for health-conscious (and probably weight-
conscious) individuals who know they will not be involved in
a triathlon or anything like it for the next hour. (While a
conventional candy bar weighs more and is more fattening,
its consumers are not as health conscious.)

A Children's Segment?

At least one marketer, FinHalsa Co., has shown its

faith in the potential for a children's segment of the
energy bar market. This year, it introduced Inky Dinky
FinHalsa, "Kid-sized versions of the company's popular
sports nutrition bars, which supplies 50% of all RDAs for
vitamins and minerals for children 1-4 and 25% of RDAs for
children over four."
Clearly, kids are not competing in triathlons either.
Pre-adolescents are generally active, but they do not push
themselves to the limits of endurance. However, they do
like candy, and it is not hard to see the attraction for
nutrition-minded parents of substituting a vitamin-crammed
energy bar for the junk food their progeny might otherwise
ingest.

Measured Advertising Expenditures

Advertising Has Increased Rapidly with Category's Growth

 The rapid expansion of the energy bar category can be
traced through the steep increases in its advertising
expenditures, which climbed by 44% from 1992 to 1993 and 94%
from 1993 to 1994. In 1994, measured advertising
expenditures for energy bars approached $5.9 million,
according to Leading National Advertisers (LNA).

Powerfood Responsible for 81% of Measured Advertising Expenditures

As the table below shows, no other marketer remotely

compares with Powerfood in measured advertising. Eighty-one
percent of the category spending in 1994, and most of the
spending increases in the last three years, have traced to
Powerfood. In 1994, Powerfood placed $4.7 million in print
and television advertising for PowerBar, a 164% increase
over 1992 and an 80% increase over 1993.

Weider Steps Up Advertising in 1994

Weider, which fields several energy bars, stepped up

its mass media advertising outlay by 222% in 1994, and put
nearly half a million dollars behind Tiger's Milk, which it
had not supported with advertising in 1992 or 1993.

Quaker Oats Is Third-Place Spender

Quaker Oats became the third place spender in 1994,

with its contribution to the category, Gatorbar, still only
in regional distribution. Quaker Oats purchased $295,000 in
mass media, a modest 5% of category advertising.

Weider and Twin Labs Advertise in Their Magazines

LNA figures for Weider and TWINLABS may be misleading,

since these marketers have access to free or at least
extremely cheap advertising in their own magazines.
TWINLABS publishes Muscular Development, a bodybuilding
magazine, and the company's energy bar, Ultra Fuel, targets
this audience. Weider publishes Muscle & Fitness, Flex,
Shape, and Men's Fitness. For these companies, as a
competitive marketer comments, an energy bar ad is just
another page.

PowerBar and Its Larger Competitors Advertise

in Sports and Fitness Magazines

In 1994, Powerfood put 84% of its measured advertising

in print advertising in magazines like Runners World, Sports
Trend, Bicycling, Cycling, Women's Sports and Fitness, and
Muscle & Fitness. Ads for Sports Pep's Thunder Bar also
appeared in Sports Trend. Longevity, a magazine for health-
conscious baby boomers, also occasionally features energy
bar ads.

"Sports Rags" and Health Food Publications for Smaller

Marketers

Marketers unwilling to spend over $1,000 a page to

advertise a relatively low-ticket item target athletes
through cheaper, newspaper-format periodicals, like Windy
City Sports. Ads for energy bars also appear in health food
magazines like Delicious and Vegetarian Times.

Advertising Positioning

Improved Performance Is Main Ad Positioning

Ads for energy bars make a simple case in pretty simple

terms. The bars are "vitamin-packed, energy enhancing,
moist and delicious," as a recent PowerBar ad put it, and
will give you "energy to burn," as ads for Sports Pep's new
Thunder Bar note. PowerBar, the package says, is "Athletic
Energy Food" as well as "Food for Optimum Performance."
Thunder Bar is "Energy Food For Athletes." In another ad,
it is "Fast Food" (picture shows runners as a blur of
forward motion).

Ingredients and Endorsements Are the Main Proof

The case is made partially with ingredients: PowerBars

are also "vitamin-packed." Thunder Bars are "high energy"
rather than "high calorie," as well as low fat, with
ginseng.
Sports image and sports endorsement are the most
important means of supporting the claim of improved
performance. It would be only a slight exaggeration to say
that all ads for energy bars look the same; all depict the
product superimposed on a picture of an athlete engaged in
his sport, and usually some copy accompanying the picture
names the athlete and specifies his or her endorsement of
the product. "Jay Evans, PSIA Demonstration Team, relies on
PowerBar to carve through some fresh powder." Thunder Bar
shows us a cyclist "Dave Copeland, 1992 Olympic Team
Member," engaged in his sport. ATP Tour Bar is "the choice
of the pros;" its ad depicts tennis player Vince Spadea
engaged in his sport.

Some Bars Compete on Taste

With PowerBar having made its reputation based on very

high vitamin and protein content, some competing bars
emphasize taste, an area where most bars with high protein
content are vulnerable. "And it doesn't have to taste bad to
be good for you," ATP Tour ads remind us.
Creatively, the Ads Are Considered Primitive

"Whenever I pick up my Runners World and see a PowerBar

ad, I laugh at it," says an advertising executive quoted in
that publication. "The ads are so retro. They look like
something we'd have done 20 years ago. Part of me thinks
they're awful, and part of me thinks they're brilliant. The
simplicity is their distinction."

Consumer Promotion

Consumer Promotion Is at Least as Important as Advertising

Promotion, especially promotion at athletic events that

exposes consumers directly to the product, is at least as
important a part of the marketing of energy bars as
advertising, and perhaps more important. Powerfood spends
equal amounts on ads and promotion and considers promotion
the basis of its success.

Sampling Is the Key Promotion

"Promoting the bar at the grass-roots level was a key,"

says Brian Maxwell, the PowerBar's inventor and president of
Powerfood. "Our basic marketing philosophy was the same
then as now. We have a good product that works. All we
have to do is get athletes to try it. Marketing for us
isn't doing a power lunch or having a meeting. Marketing is
being out there at 7 a.m. in the rain at a road race and
giving out bars. I'd rather give out 10,000 bars at the
Peachtree Road Race than spend a zillion dollars for an ad
on network TV."
This PowerBar marketing formula is widely imitated.
Mars, Inc. is test-marketing its energy bar, VO2 Max, by
sampling it at sporting events.

Sporting Events Sponsored

In addition to distributing free samples of the bars to

competitors at events, marketers of energy bars help make
the events possible by sponsoring them. Logos are
prominently displayed on site. As previously mentioned,
PowerBar sponsored 4,000 events in 1994.

Endorsements by Athletes and Teams

Endorsements by competition-winning athletes, and by

teams and associations, are important in convincing
consumers of the product's efficacy, and are used by every
marketer that can obtain them. The ATP Tour bar is named
for the Association of Tennis Professionals, which licenses
its name to the bar. PowerBar achieved its first publicity
coup coverage by CBS Sports in 1987 by winning the
endorsement of the United States cycling team in the Tour de
France. One of Quaker Oats/Gatorade's first moves on
muscling into the energy bar market in 1994 was to wrest
from PowerBar the sponsorship of the Ironman Triathlons.
Sports Pep's Thunder Bar is the current official sports bar
of the United States cycling team.

Coupons Sometimes Used

Energy bars are occasionally promoted through discount

coupons in print ads for the bars or print ads for
retailers.

Sports-Related Contests

Sports-related contests are sometimes used to promote

energy bars, as in a recent print ad for the ATP Tour that
offered consumers the chance to win a trip for two to the
1995 Lipton Tennis Championships. The contest was co-
sponsored by ATP Tour Bar and GNC.

Literature and 800 numbers

Ads and packages of the bars often display 800 numbers

that can be called not only for purposes of ordering, but
also for answers to questions and comments about the bar.
Literature educating consumers about nutrition, and directly
or indirectly making the case for the product, is available
as well. A recent PowerBar ad states: "For a free, 12-page
Guide to Nutrition and Energy, call 800-444-5154."
PowerBar also publishes a newsletter and offers point-
of-sale brochures covering various sports activities from
cycling to rock climbing.

Trade Advertising and Promotion

Trade Ads Common in Sporting Goods and Natural Food Trade Magazines

With the growing popularity of energy bars in the last

few years, and more frequent editorial coverage of them in
trade magazines, ads directed at retailers have begun to
appear in sporting goods and health food trade magazines.

Trade Ads Emphasize Sales, Profits, and Repeat

Trade ads make the consumer argument for the bars their
effectiveness and "great taste" then move on to emphasize
the logical benefits to the retailer. "When your customers
are riding their last ten miles, they want a sports bar that
gives them energy to burn," says a Thunder Bar ad in Sports
Trend. "...The bottom line you boost repeat purchases,
sales and profits."
In the same vein, a PowerBar trade ad tied in with the
introduction of two new flavors of the product stated,
"PowerBar's last new flavor launch generated a 25% increase
in sales."

Special POP Displays Available and Sometimes Shown in Trade Ads

The same PowerBar ad depicts PowerBar's not-too-fancy

four-decker display rack. Powerfood provides a number of
different racks and point-of-purchase displays.

"Advertorial" Technique Used

As can be seen from the PowerBar trade ad shown in

Appendix IV, Powerfood addressed readers of a recent
Convenience Store News ad with an "advertorial" approach,
offering its ad in the guise of an article in the style of
the publication in which it is found.

Distribution

Distribution

Most Bars Sold Through Regional Distributors

Most energy bars can be purchased directly by mail from

the marketers, and a very few marketers arrange to sell
direct to particular retail chains. But more than 90% of
energy bar sales are through regional distributors who serve
the health food and sporting goods industry. This fact
affects the freshness and shelf life of the bars, since it
typically takes them three months to get from the
manufacturer to the retailer.

Some Brands Available Only Through Mail Order or by Phone

Some brands of energy bars do not use regional

distributors at all, but are (as PowerBar was in its first
year) only available direct from the marketer/manufacturer
by telephone or mail order. Deer Valley McHenergy Bar, for
example, is sold only by phone from Deer Valley Resort.

Brands Stronger in Different Regions

While most marketers of energy bars however small

time make their brands available everywhere through mail
order, not all have truly national distribution. Many of
the smaller companies are based on the west coast and sell
most of their product there.
 Retail

At the Retail Level

40% of Sales in Bike Shops

The hardcore energy bar users are bicyclists, who buy

the product by the box, not by the individual bar. For this
reason alone, insiders believe that 40% of the bars are
still sold at cycling stores. Beyond this, it is very
difficult to determine where the sales are, since different
brands are strong in different outlets.
Other types of sporting goods outlets and health food
stores probably each enjoy between 10% and 20% of sales.
Remaining sales are divided between mail order, chain drug
stores, convenience stores, gas stations, correctional
facilities, fitness centers, and supermarkets. Energy bars
have only scratched the surface of most of these outlets,
however.
Some brands seem to be specializing (at least in this
stage of their evolution) in sports outlets. Trail Hiker,
for example, is sold only at ski resorts and by phone.

Bars Most Often Displayed Like Candy Bars

Energy bars, like any candy bar, are considered ripe

for an impulse purchase, and are typically displayed in
front of the counter in the box they came in. They are the
sporting goods or health food store version of the candy
bar usually other health-food bars (nutritious and/or
natural, but not high protein or necessarily low fat) are
displayed in the row just above or below. Major brands like
PowerBar are sometimes displayed on a separate multilayered
shelf like the one shown on the PowerBar trade ad in
Appendix IV.

Bars Sometimes Displayed in Different Store Locations

According to Natural Foods Merchandiser, health food

stores like GNC "commonly display energy bars in two, three
or four locations in a store." Examples given in this
article are "next to other sports nutrition products," "next
to liquid carbohydrate drinks or electrolyte drinks, in a
section with dried hikers' foods, or near books on hiking or
sports nutrition."

Point-of-Purchase Advertising Widely Available

Marketers offer merchandisers' product information

brochures, window and store stickers, and posters often
without charge.
Margins High in Bike Shops, Sporting Good Stores, and Health
Food Stores

Health food stores, as well as sporting goods stores

and bike shops, tend to have high prices and high
margins 35% to 50% and margins on energy bars in these
retail outlets fall within that range.

Table: Retail Sales and Growth of Energy Bars (1990-1994

(In Millions)

Year Dollar Sales % Change

1994 $60 20%

1993 50 20
1992 42 20
1991 35 50
1990 23 -

Source: Packaged Facts.

Table: Projected Retail Sales of Energy Bars (1994-1999)

(In Millions)

Year Dollar Sales % Change

1999 $128 12%

1998 114 15
1997 99 15
1996 86 20
1995 72 20
1994 60 -

Source: Packaged Facts.

Table: Leading Marketers of Energy Bars

Company/Brand Description

Avocet
Clif Endurance Bar High
carbohydrate, low-fat bar,
all natural ingredients, with
real fruit and whole grains,
no fructose, wheat, or dairy
products. Crunchy chocolate
chip. $1.69

Bariatrix International
 NutraBlast Functional Food
Bar High protein and
carbohydrate energy bar, with
fructose corn syrup, whey
protein concentrate, soy
protein isolate, and calcium
caseinate. Vitamin
fortified. 1.6 oz. plastic
wrapped bar in vanilla nut,
chocolate fudge, apple
cranberry crunch, chocolate,
and honey nougat flavors.

Champion Nutrition
Super Heavyweight Bar
A very high calorie 465
calories bar aimed at
bodybuilders. 29,000 mg.
amino acids. 4 oz.

FinHalsa Co.
Sports Nutrition Bar
170 calorie bar, 2 grams of
fat, 50% of RDAs of vitamins
and minerals. Raspberry
crunch and other flavors.
Suggested retail of $1.00 to
$1.25.
Inky Dinky FinHalsa
Nutrition Bars for Kids
"Kid-sized" versions of the
company's sports nutrition
bars. Supplies 50% of all
RDAs for vitamins and
minerals for children 1-4
years, 25% of RDAs for
children over 4. Six indi
vidually wrapped bars to a
bag, suggested retail $3.99
to $4.25.

Glenn Foods
Spirulina Sunrise One
of a series of all natural
bars with no sodium or
potassium. Oatmeal/chocolate
flavor.

Hoffman Products/York
Barbell Co.
Hoffman's Energy Bar
232-calorie bar with high fat
content for a sports bar (14
grams). No potassium.
Chocolate and molasses-
coconut flavors.
Intermountain Trading Company
Bear Valley MealPack
410 calorie, 29% fat, 17%
protein bar.

MLO
Hardbody Chocolate Sports Bar
18,000 mg. amino acids, 3,500
mg. BCCAs (branch chain amino
acids), 2.75 oz. bar. An
unusually crunchy bar. Line
extension of protein drink
targeted to bodybuilders.
Pro-Sports A similar
bar aimed at general
endurance athlete.

National Health Products

Hot Stuff Fitness Bar
270 calorie bar, 15 grams of
protein. Line extension of
protein drink popular with
bodybuilders.

Nature's Best
Per Fect Amino Acid Bar
High protein and carbohydrate
"nutritionally balanced" bar,
fortified with vitamins and
minerals. In chocolate.

Nature's Plus
Spiru-Tein High Protein
Energy Bar Carbo
coated "all natural" high
protein bar. 1.4 oz.,
fortified with vitamins and
minerals.

Optimum Nutrition
Pro-Amino Amino-acid
sports bar, "a protein-packed
sports bar featuring 18,000
mg. of amino acids and 40
grams of complex
carbohydrates, fortified with
vitamins and minerals. In
burgundy cherry.
All Sport Endurance
"Complex carbohydrate energy
bar." 2.25 oz., 220
calories, fortified with
vitamins and minerals.

Powerfood Inc.
PowerBar High calorie
and protein, low fat sports

Proline International
ATP Tour Bar
PurePower Sports Nutrition
PurePower Energy Bar
Quaker Oats/Gatorade
Gatorbar
Sports Pep
Thunder Bar
Titon Sports
ICO Superprotein Bar
Twin Laboratories, Inc.
Gainer's Fuel
Universal Nutritional Systems
Forza
bar, fortified with vitamins
and minerals. $1.69.
160-
calorie, 5 grams of fat,
fortified with vitamins and
minerals. Strawberry with
oatmeal and almond chunks.
$1.
2.29 oz. energy bar with 100%
RDA A, C, E, B6, and other
vitamins and minerals, 35%
RDA of magnesium, zinc, and
copper. Packaging and name
resembles PowerBar.
220 calorie, 2
grams of fat, tastes similar
to PowerBar, but has one-
third less protein. $1.
High
protein, high carbohydrate
bar with 220 calories, 20 mg.
sodium, 75 mg. potassium.
Taffy-like bar, high in
protein and calories, very
low in fat. $1.69.
Extra
large energy and protein bar,
4.51 oz., 515 calorie bar
with 21 grams of protein and
14 grams of fat. Highest
calorie bar on the market,
line extension of a protein
drink targeted to
bodybuilders.
Extra low fat
(1 gram) sports bar targeted
to cyclists and other
endurance athletes, with GTF
chromium "to help increase
metabolic rate" and
electrolytes.
 Yohimbe Bar Energy
bar with performance-
enhancing herbs (1,000 mg.
Yohimbe, 250 mg. damiana, 50
mg. ginseng, etc.).
NutriSlim Diet bar, low
fat with fruits and nuts.
Pro Bar High protein
bar aimed at bodybuilders.

Weider
Ener-quench High-
carbohydrate, preworkout
energy booster, part of new
sports nutrition line Weider
designed for mass market
retail.
Pro Bar High-protein
after-workout snack, part of
Weider's sports nutrition
line aimed at mass market
retail.
Tiger's Milk Peanut-
butter based, vitamin-
fortified bar.
Tiger Sport High
carbohydrate and protein, 350
mg. potassium. Extension of
Tiger's Milk sports nutrition
line. $1.29.
Exceed Sports Bar High
energy, low-fat food bar.
2.9 oz., 280 calories per
bar, vitamin fortified, high
in sodium and potassium.

Source: Packaged Facts.

Table: Selected New Products

Marketer/Brand Description
1995
Mars, Inc.
VO2 Max Energy bar being
test-marketed at sporting
events, not yet launched at
retail.

Monosystems, Inc.
MET-Rx Energy Bar
High
calorie bar for those who want
to add muscle mass. 310
calories, 30 grams protein, and
2 grams fat.
 1994

Bariatrix International
NutraBlast Functional
Food Bar 1.6 oz. high protein and
carbohydrate energy bar.

FinHalsa Co.
Inky Dinky FinHalsa
Nutrition Bars for Kids
"Kid-sized versions of the
company's popular sports
nutrition bars." Supplies 50%
of all RDAs for vitamins and
minerals for children 1-4, 25%
of RDAs for children over 4.

Optimum Nutrition
Pro-Amino Amino-acid sports bar.

Quaker Oats/Gatorade
Gatorbar Major marketer's
answer to PowerBar, with one-
third less protein and fig-juice
used to enhance flavor. $1.

1993

Universal Nutritional
Systems
Forza Extra low fat (1
gram) sports bar targeted to
cyclists and other endurance
athletes, with GTF chromium "to
help increase metabolic rate"
and electrolytes.

1992

ATP Tour
ATP Tour Bar 160-calorie,
1.5 oz. bar, 5 grams of fat,
fortified with vitamins and
minerals.

Nature's Plus
Spiru-Tein High Protein
Energy Bar Carbo coated "all
natural" high protein bar. 1.4
oz., fortified with vitamins and
minerals.

Source: Packaged Facts

Table: Measured Advertising Expenditures:

Sports Bars (1992-1994)
 (In Thousands)

Marketer/Brand 1992 1993 1994

Powerfood, Inc. $1,795 $2,633 $4,733

Powerfood Energy Bar 1,795 2,633 4,733

Weider International $51 $196 $631

Exceed High Energy Sports Bar - 185 172
Protein Blast Energy Bar 51 11 -
Tiger's Milk Bars - - 459

Quaker Oats Co. - $67 $295

Gatorbar Energy Bar - 67 295

TWINLABS $157 $41 $42

TWINLABS Ultra Fuel High Energy 157 41 42
Sports Bar

Total $2,033 $2,937 $5,701

Source: Leading National Advertisers; Packaged Facts.

This material used with permission.

Figure: Energy Bars Retail Dollar Sales (1990-1999)

Graphical Information Can Be Obtained At No Charge From Publisher

LA-391AA COMPANY PROFILES

Coca-Cola Co.

Net Operating Revenues of $16.2 Billion in 1994

Coca-Cola Co., based in Atlanta, makes the world's best-

selling soft drink, which is available in more than 195
countries. It also makes the world's best-selling diet soft
drink (Diet Coke) and number-one lemon-lime soft drink
(Sprite).
Coca-Cola is also the largest marketer of juice and
juice-drink products in the United States and in the world.
Total net operating revenues for 1994 were $16.2 billion, up
15.7% from 1993. Net operating revenues in the United
States were about $4.5 billion.

Almost Three-Quarters of Coca-Cola's Operating

Revenues Are Earned Outside the United States

Coca-Cola is a truly global company, earning almost

three-quarters of its revenues outside the United States.
Coca-Cola had a significant presence in most of the West and
the developing world prior to 1984. With the collapse of
communism, this preeminent symbol of American capitalism has
penetrated most of the former iron curtain countries as
well. In 1994, Coca-Cola became available, after long
absences, in Vietnam and South Africa. Today, there are
fewer than 20 countries in the world (countries like Libya,
North Korea, Outer Mongolia) where the company's products
are not available.

A Soft-Drink Specialist

At around the same time as its principal competitor,

PepsiCo, began diversifying into fast-food restaurant chains
and snack foods, the Coca-Cola company initiated programs
that sharpened its focus on the soft drink business. In
1994, according to the company's annual report, a mere 3% of
Coca-Cola's operating income derived from businesses other
than soft drinks, down from 23% 10 years earlier.
Coca-Cola's network of bottlers (companies some owned,
some independent that buy Coca-Cola's syrups and turn them
into soft drinks) is the envy of its competition, and its
efficient and aggressive distribution system is one of its
principal strengths.

Major Brands

Besides Coke and Diet Coke in their various

incarnations, leading brands of the Coca-Cola company
include Sprite, the world's leading carbonated lemon-lime
beverage; Fanta, the world's best-selling non-cola-flavored
soft drink, which is not available in the United States; Hi-
C, the popular children's beverage that Coca-Cola acquired
in 1960; and Minute Maid juices. In addition, Coca-Cola
owns over 100 smaller brands around the world.

Moves into New Age, Ready-to-Drink Teas, and Sports Drinks

In the past, Coca-Cola has attempted to acquire major

competitors such as 7-Up and Dr. Pepper. Co. Blocked on
antitrust grounds by the FTC from doing so in 1986, Coca-
Cola has since concentrated on developing new brands in-
house.
According to Sergio Zyman, senior vice president/chief
marketing officer of Coca-Cola, the company currently has
about a 13% market share of all nonalcoholic beverages and
would like to increase that share. Since it is already the
leader in soft drinks, Coca-Cola is seeking to expand into
other growing nonalcoholic beverage markets, such as New Age
and sports drinks.
In 1991, it reformulated and repackaged Fresca as "a
distinctive sparkling refresher with a light citrus taste";
in 1992, in a joint venture with Nestl‚ SA, it introduced a
line of ready-to-drink Nestea products, some flavored with
unusual fruits. In 1992, through its Minute Maid division,
the company introduced Fruitopia, an alternative fruit
drink. PowerAde, merchandised nationally for the first time
in 1994, is Coca-Cola's bid for a larger share of the sports
drinks market in the United States. Coca-Cola's Aquarius is
the leading sports drink in several European markets.

Aggressive Merchandising and Innovative Marketing

Coca-Cola relies heavily on aggressive merchandising

and innovative marketing programs and promotional concepts
to drive sales of its products. For example, the company
uses "Fast Lane Merchandisers" at checkout lanes to
stimulate purchases of cold single-serve packages. These
coolers hold 20 ounce bottles, along with tracks of candy,
gum, and magazines. The company also effectively uses
vending machines, which account for more than 12.5% of its
United States volume sales.

The Advantage of Unique Image

Although careful when it comes to legal protection of

its logo and trademarks, the company has often seemed
oblivious of the place its flagship product occupies in the
collective consciousness of the 20th century. Over the
years, Coca-Cola has introduced changes in design (shape of
bottle and logo), name (Coca-Cola to Coke) and, notoriously,
formula. In time, irate consumers have forced the company
to back off, to varying degrees, from all three of these
unwelcome innovations. In 1994, the company even gave the
bottle back its waistline, and the annual report remarks, in
the pious tone of a recent convert, that "the Coca-Cola
trademark itself is a remarkably resilient and multidimen
sional piece of cultural iconography."

General Nutrition Companies, Inc.

Sales

General Nutrition Companies, Inc., based in Pittsburgh,

owns and operates General Nutrition Centers (GNC), the
largest specialty health retailer of vitamin and nutritional
products in the world. General Nutrition became a publicly
traded company in January 1993. A vertically integrated
firm, it also operates the nation's largest vitamin,
mineral, and supplement (VMS) product manufacturing
facility, General Nutrition Products, in Greenville, S.C.
Net revenue for the year ended February 4, 1995, was $673
million, versus $546 million for the year ended February 5,
1994: a 23% increase. Over three-quarters of net revenue
(78%) comes from the retail operations, while 13% comes from
franchising, and 9% comes from manufacturing.
General Nutrition Companies sells products in six self-
care categories: nutritional supplements, including
vitamins, minerals, and herbs; sports nutrition; weight
loss; healthy foods; all-natural cosmetics; and fitness
equipment and apparel. The company markets these products
through its more than 2,000 company-owned and franchised
"health management" centers in all 50 states, as well as in
Puerto Rico, Guam, Central America, and Mexico. GNC is also
a major manufacturer of VMS products for third parties,
including competitive brands and bulk commodity products.
General Nutrition produces its own consumer magazine,
Be Healthy!, which is sent to store customers. Advertising
space is sold to other marketers who sell products to GNC
stores. The company also promotes its retail outlets
through TV advertisements, allowing other marketers to tag
the commercials with a mention of their products.

Trouble with the FTC

In April 1994, the Federal Trade Commission (FTC)

levied a $2.4 million fine against General Nutrition for
deceptive advertising. The FTC charged that General
Nutrition could not back the claims made in its stores for
diet products such as KLB6, Glucomannan, Sugar Blocker,
Fatbuster Diet Tea, and Sleeper's Diet, as well as those
made for such VMS products as spirulina and ginsana.
The FTC claims General Nutrition failed to substantiate
weight loss, muscle building, disease treatment, and
endurance claims on more than 40 products the retailer sold.
GNC also made prohibited claims about amino acid products.
The company has taken a number of measures to ensure future
compliance with FTC guidelines, including prohibiting store
managers from purchasing through local distributors.

Aggressive Growth Planned

General Nutrition continues to expand aggressively.

The company officially acquired the 204-store chain Nature
Food Centres (NFC) for around $62 million on September 20,
1994. About 100 of the stores were converted to GNC format,
and the remainder left as Nature Food Centres. Between the
Nature Food Centres acquisitions and new company-owned
stores and franchises, GNC opened over 550 new locations in
1994, a 32% increase, and is on track to open 350 new stores
in 1995.
In addition, the company is expected to continue to
introduce new products as a major part of its competitive
strategy; according to General Nutrition's president and
chief executive, 50.0% of the company's sales come from
products introduced in the last three years. GNC is
considered a strong contender, given the company's position
as the only national chain of its type, its strong market
share, and the largest advertising budget in the industry
(5.0% of sales versus the 1.3% industry average).

PepsiCo, Inc.

Net Sales Top $28 Billion in 1994

 PepsiCo, Inc., based in Purchase, N.Y., is a world
leader in soft drink bottling, fast-food (or "quick-
service") restaurants, and snack foods. Net sales for
PepsiCo, which employs 470,000 people, have grown at a
compounded annual rate of 15% over the past five years and
exceeded $28 billion in 1994, up 14% over 1993. About 34%
of its sales in 1994 came from beverages, 37% from
restaurants, and around 29% from the company's snack foods.

Eye on International Markets

PepsiCo's principal competitor in the soft drink

business, Coca-Cola, does 80% of its business
internationally. By contrast, PepsiCo still derives some
70% of its sales and four-fifths of its operating profits
from the United States. According to PepsiCo's annual
report, the company looks to international markets for most
of its future expansion.
Of the company's three business segments, PepsiCo
beverages have penetrated international markets best so far;
they are available in approximately 16 countries and
territories through company-owned, joint venture, and
franchised bottlers. The company's snack foods are
available in nearly 90 countries and territories; in 26
countries it operates company, joint venture, or licensed
plants to make these products. PepsiCo's
restaurants company owned, joint venture, franchised and
licensed are present in 88 countries and territories. There
were, at the end of 1994, 19,451 units operating in the
United States and 7,348 outside the United States.

Eight Principal Divisions and Their Brands

PepsiCo's three major business segments and

international sales are managed through eight major
divisions. Pepsi-Cola North America handles the company's
beverage industry in the United States. Brands marketed in
the United States through this division include: the
legendary cola soft drink, Pepsi, and its many line
extensions; Mountain Dew; Slice; Lipton Original ready-to-
drink tea, which PepsiCo markets through a joint venture
with Unilever; Ocean Spray Cranberry Juice Cocktail, through
a joint venture with Ocean Spray; and All Sport Thirst
Quencher, PepsiCo's new entry into the sports drink arena,
which was introduced in 1991 and marketed nationally for the
first time in 1994.
PepsiCo's domestic snack food business is marketed
through the Frito-Lay Division. Snack chips are responsible
for the largest part of this division's revenues, and the
company holds a 50%+ share of the snack chip market in the
United States. Familiar brands include Ruffles and Lay's
potato chips, Doritos and Fritos corn chips, Chee-tos cheese
snacks, Tostitos tortilla chips, Rold Gold pretzels, and
Sunchips multigrain snacks.
 The company's major restaurant chains in the United
States are managed by three divisions bearing the names of
these well-known businesses: Pizza Hut Inc., Taco Bell
Corp., and Kentucky Fried Chicken Corporation. A related
division, PepsiCo Food Systems, is a restaurant supply
company. There is a PepsiCo system restaurant for every
14,000 people in the United States. PepsiCo's restaurants
outside the United States and Canada including KFC, Pizza
Hut and Taco Bell are managed by PepsiCo Restaurants
International.
PepsiCo Foods and Beverages International manages the
remainder of the company's business abroad. Brands that
PepsiCo markets internationally but not at home include 7-Up
(a brand which PepsiCo owns outside the United States),
Miranda orange soda, and Pepsi Max.

Diversification and Movement Into Growth Businesses

PepsiCo has changed the nature of its businesses and

product lines enormously over the last decade and a half,
diversifying to hedge its bets, and moving steadily into
high-growth markets. Beyond the corporation's need to move
forward or die, and for a place to put its soft-drink
profits, two forces motivated these changes: the maturing
of the market for the company's original core product line
in the United States, and antimonopoly regulations that
restrict PepsiCo's acquisitions within the soft drink
market.
PepsiCo's existence as a major fast-food restaurant
operator dates from 1977, when the company acquired Pizza
Hut. Taco Bell came the following year, and Kentucky Fried
Chicken (now called KFC to deemphasize the word "fried") in
1986.
In recent years, as growth of cola drinks has been
threatened by new beverage alternatives, PepsiCo has also
sought to change product lines within the beverage industry.
Prevented by the U.S. government from purchasing 7-Up (the
"uncola," surely the perfect beverage to balance a cola)
PepsiCo now owns the brand outside the United States, beyond
the reach of the FTC. PepsiCo moved into the ready-to-drink
tea category in 1992 through a joint venture with Unilever,
to juice drinks in 1991 in a joint venture with Ocean Spray,
and launched its own sports drink, All Sport, in 1991 when
that category was growing at double-digit rates.

Powerfood, Inc.

Sales Placed at $30 Million

Powerfood, based in Berkeley, Calif., was founded in

1986 by Brian and Jennifer Maxwell to market PowerBars, a
snack bar designed to be eaten by athletes before, during,
and after competitive events. In 1994, the privately held
company employed around 100 people, and was expected to sell
$30 million in product, according to Business Week.
An Inc. Fastest-Growing Company

Brian Maxwell, a former marathoner who ranked third in

the world in that sport in 1977, founded the company with a
mere $75,000 in capital, which he raised partly by posing in
an ad for Xerox Corp.'s Marathon line of copiers. Between
1987 and 1991, Powerfood grew 6,915%, leading Inc. magazine
to rank it number 22 on its list of the 500 fastest-growing
companies in America.
Despite competition from dozens of brands, nearly all
of which have come into being in the wake of PowerBars'
success, the company enjoys a brand share of nearly 60% in
the category that it created.

International and Vertically Integrated

Powerfood began marketing its product abroad in 1991.

Today the bars are sold in at least 27 countries, and have a
good head start on their competition in the burgeoning
international market for energy bars.
Finding that the low-fat content of the PowerBar
formula tended to jam conventional candy-bar-making
equipment, Maxwell helped design new machinery. In 1989, he
opened his own factory to produce the bars, so that today
the still very modest-sized Powerfood is a vertically
integrated corporation.
According to Jennifer Maxwell, several large
corporations have sought to purchase Powerfood, but the
couple has so far not been tempted to sell. "This is my
life," says Brian Maxwell. "This is what I want to do for
the next 20 years."

Quaker Oats Company

Net Sales of $6 Billion in Fiscal 1994

The Quaker Oats Company, based in Chicago, is a

grocery, beverage, and pet food marketer with net sales of
$6 billion in the year ended June 30, 1994, a 4% increase on
the previous year. The company derived 72% of sales and 80%
of operating income from its United States and Canadian
Grocery Products. In fiscal 1994 (before the purchase of
Snapple), these areas accounted for 66% of the company's $2
billion in identifiable assets.

Corporate Structure

The Quaker Oats businesses are organized by geographic

region. The two operating segments are United States and
Canadian Grocery Products, and International Grocery
Products (Europe, Latin America, and Pacific). By
geographic segment, the percentage of total 1994 company
sales broke down as follows: United States and Canada 72%,
Europe, 20%, and Latin America/Pacific, 8%. This represents
a decrease in the proportion of international sales since
1992, when Quaker's United States operations had 65% of
sales volume. The company points out that international
economies were weak in fiscal 1994, and growth was slow in
foreign markets for grocery products and pet foods.

Leading Brands Are Bywords for Their Categories

Eighty-one percent of the company's 1994 worldwide

sales were earned from brands that hold a number one or
number two share position in their category. A surprising
number of Quaker brands are synonymous with their categories
in the public mind. The company's flagship brand, the
cereal Quaker Oats, though far from its biggest seller,
enjoys a 65% share of the hot cereal market, a share six
times as large as its closest competitor, private label.
Other well-known Quaker Oats breakfast cereals are Life and
Cap'n Crunch.
Quaker Oats markets the Aunt Jemima brand, which holds
an 18% market share in the syrup category and a 22% share in
the pancake mix category. Quaker Oats rice cakes hold a 79%
share of their rapidly growing category.
The company's biggest brand, Gatorade thirst quencher,
which enjoyed worldwide retail sales of $1.1 billion, has
occupied the number one position in its category for around
25 years, having a share between 85% and 90% for most of
that time. In the last few years, increased competition
from major beverage companies have pushed that share down to
around 77% worldwide, as of fiscal 1994.

Snapple Purchase Makes Quaker Third Largest Nonalcoholic

Beverage Marketer in North America

In November 1994, Quaker Oats purchased Snapple, a

small company based in East Meadow, N.Y., which has
revolutionized the market for fruit-juice drinks in the last
few years. With Snapple's annual sales of nearly $700
million joined with Gatorade's worldwide sales of $1.1
billion, Quaker becomes the third largest nonalcoholic
beverage marketer in North America, after Coca-Cola and
PepsiCo.
While some analysts maintain that the $1.7 billion
Quaker paid for Snapple 17 times Snapple's 1994 operating
earnings, when acquisitions in the beverage industry usually
run 10 or 11 times was excessive, the match offers several
advantages to Quaker Oats:

- Like Gatorade, Snapple is a fast-growing brand in a

fast-growing category, ripe for the extra push that a major
marketer can give it. Undoubtedly, Quaker hopes to repeat
the marketing success of Gatorade with Snapple.
 - Snapple enjoys good distribution in convenience stores,
delis, and other small outlets where Gatorade is weak, and
has been less successful penetrating the supermarkets that
are Quaker's forte. Thus, the two brands strengthen and
complement each other.

- Quaker has been rumored to be a takeover target,

especially by Coca-Cola and PepsiCo. This purchase makes a
takeover more difficult; at the same time, it poses a
challenge to Quaker's beverage competitors: Quaker, long
the company to beat in sports drinks, is suddenly the
company to beat in New Age drinks as well.

- Finally, Snapple has the sort of name recognition

Quaker seems to look for in a brand.

Quaker Divests Itself of Chocolate and Pet Food Businesses

In what company spokespersons describe as "an evolving

realignment of Quaker's portfolio that focuses on the strong
profitable growth prospects of its grain-based products and
good-for-you beverages," Quaker Oats has announced plans to
sell off its pet food businesses in the United States and
Europe (together worth about $1.3 billion in retail sales)
and its $100 million Mexican chocolate business.

Twin Laboratories, Inc.

"Multimillion Dollar Corporation"

Twin Laboratories, Inc. (also called TWINLABS), based

in Ronkonkoma, N.Y., is a family-run company that carries a
full line of vitamins, minerals, and supplements. Sales for
the privately held company are not disclosed, although the
company bills itself as a "multimillion-dollar corporation
with worldwide distribution." TWINLABS has several
affiliate companies, including Nature's Herbs, makers of
herbal supplements; Alvita Products, a supplier of herb
teas; and Advanced Research Press, publishers of Muscular
Development magazine.

Over 300 Products

TWINLABS manufactures and markets over 300 products,

including the top-selling vitamin and mineral line in health
food stores; the world's most complete line of antioxidants;
sports supplements; marine oils; and digestive aids. Its
Nature's Herbs subsidiary, located in Orem, Utah, is one of
the largest herbal supplement companies in the United
States.

A Leader in Sports Supplements

 TWINLABS is a leader in sports supplements, including
protein drinks and vitamin and mineral tablets, under the
brand-theme of "Fuel." Among the best known are Gainers
Fuel, Diet Fuel, and Nitro Fuel the latter product is one of
the first ready-to-drink protein drinks. TWINLABS also
markets the Gainer's Fuel and Diet Fuel energy bars.

Marketing Philosophy

Twin Laboratories was incorporated in 1969. Started by

the Blechman family, it is still run by the original
founders and their five sons. The company supports its
products with advertising, mostly in magazines specifically
targeted to the health food shopper. TWINLABS also supplies
retailers with permanent floor display fixtures that ensure
presence in the store. The company's general management
philosophy is to ensure the safety and quality of its
products with strict, scientific, unequaled quality control.
To this end, TWINLABS seeks to introduce new products that
have been carefully researched and are innovative in the
supplement industry. The company is constantly introducing
new products, offering a "fuel" product for every
conceivable niche within the protein drink category.

Weider Health and Fitness

Sales of Several Hundred Million

Weider Health and Fitness, based in Salt Lake City,

claims to be the world's largest health and fitness company.
The company publishes four health and fitness
magazines Muscle and Fitness, Shape, Men's Fitness, and
FLEX. It manufactures and markets home gym equipment, and
also markets Weider Sports Nutrition products, Schiff
vitamin products, and Tiger's Milk sports bars. Total sales
for the privately held Weider are estimated to be several
hundred million dollars annually.

Growth Through Acquisition

Since the mid-1980s Weider's business has grown through

acquisition: the purchase of Tiger's Milk, an energy bar company,
in 1986; and Weslo, a home-fitness-equipment company, in 1988.
The 1989 acquisition of Schiff, a well-established vitamin
company in business over 50 years, helped make Weider a
leader in the vitamin and mineral supplement market. In
1993, Weider acquired Exceed Sports Nutritionals from Ross
Laboratories. Schiff and Exceed are marketed by Weider
through its Weider Nutrition Group division, along with the
Tiger's Milk bar and the company's many sports supplements.

Over 100 Sports Supplements

 Weider is represented in the sports nutrition market by
protein drinks and sports-oriented vitamin supplements, in a
constantly changing and expanding product line. In protein
drinks and sports supplements, the company fields three main
product lines that duplicate each other in many aspects:
Victory, Performance, and Dynamic.

The Most Sophisticated Publicity Machine in Its Field

Weider is generally acknowledged to have the most

sophisticated publicity machine in the bodybuilding and
protein supplement industry: It expertly ties together its
publications, sponsorship of contests, and patronage of
individual bodybuilding stars in promotions that help keep
the company's core audience very conscious of the Weider
product lines. In addition, Weider supports its brands with
generous amounts of advertising, primarily in its own
publications and other health-oriented magazines. Further,
liberal amounts of point-of-sale materials are made
available to stores.