What will pump up sports drinks?

May 14, 2010

Add to that the falloff in the recession of the non-athletes who had previously been drinking sports beverages, and the category is slipping.

Sports drinks may be afflicted with the same malady as sports apparel. There are tiers of athletes that use each classification - elite professionals, serious recreational players, casual and social participants, and even non-athletes who simply like the association. 

The challenge for CPG and retail is to properly segment their products to appeal to the right user base, and to define and promote brands clearly and in targeted ways to maximize growth. The sports drink market hasn't fully done this yet - F3 thinks because the trade has instead tried to appeal to all with more sizzle than substance. Across the country, there are serious athletes who stay away from brands with certain ingredients, trainers who prefer water, and varsity coaches who mandate water rather than flavored beverages for their student-athletes whose bodies are still developing.

Add to that the falloff in the recession of the non-athletes who had previously been drinking sports beverages, and the category is slipping. Nielsen data for U.S. convenience stores show a dramatic 11.5% dollar sales decline to $1.6 billion in the 52 weeks ended March 20, 2010. The drop in unit volume was an even steeper 14.7% to 913.5 million units, according to the Scantrack data of prepackaged, UPC-coded products only.

These were the most abrupt percentage declines of all packaged beverages in the channel during the period. Dollar sales of packaged beverages in convenience stores overall dipped by 2.7% to $19.2 billion on a 4.1% unit decline, the Nielsen data revealed.

There is an obvious seasonality to the sales of sports drinks. As one might expect, peak months are June, July and August when outdoor activities are in full swing. However, even during these months, the 2009 peak sales periods were sluggish compared with the same four-week periods of the prior year. For example, dollar sales in the four weeks ended June 13, 2009, were 13.4% below the year-earlier period; the four weeks ended July 11, 2009, were 12.9% lower; the four weeks ended August 8, 2009, were 14.7% lower; and the four weeks ended September 5, 2009, were 9.8% below the same year-ago period, the Nielsen Scantrack convenience store data showed.

In our view, it's not that people were exercising or outdoors less in the height of last summer's recession. We think the same savings mentality that pummeled the bottled water category gripped these consumers as well, and many opted to pack water in their own containers instead.

Beverage Marketing Corp. figures reported by Ad Age showed a 17% annual rise in the nation's sports drink volume between 2004 and 2009, but that turned down sharply by 12.3% between 2008 and 2009. Beverage Digest pegged the size of the U.S. sports drink market at $7.5 billion in 2008, the Ad Age account noted.

It may take a combination of stronger brand identity, and products reformulated for the different tiers of serious athletes to casual hydration users, to put the sports drink category on the right course and make purchases simpler and more comfortable for each kind of drinker at the retail shelf.