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Powerade Hits Brand Record Market Share

In the sports business world, there are few brands that show complete and seemingly perpetual domination.

There's Nike , and its Jordan brand, in basketball shoes. And there's PepsiCo , and its Gatorade brand, in the sports drink space.

New Gatorade G2
New Gatorade G2

Despite Michael Jordan's retirement from the game seven and a half years ago, sales of Air Jordans have stayed sharp. The same can be said for Gatorade, which ironically tapped Jordan as its first pro athlete endorser in 1991 and rolled the now famous "Be Like Mike" ads.

But there are clearly cracks in the armor. This just in: Gatorade is vulnerable. For so long the brand has weathered the punches thrown at it, but the stats now show that the brand is bleeding.

Over the past four years, Gatorade has had an image crisis of sorts. The public could see the manifestations of a huge behind-the-scenes employee departure through shifting strategies, namely scaling back the prominent lightning bolt logo and replacing it with "G." Commercials to go along with it moved away from the athlete core — why they should drink the product — and instead sought to be cool with black and white imagery and Maya Angelou poetry. Then this year, the brand did a 180 as it made a huge mainstream push to speak to competitive athletes more than ever before, selling the benefits of three products (a before, during and after workout drink) through its G Series.

As Gatorade went through the most abrupt changes in its 45-year history, its only formidable opponent, Coca-Cola's Powerade, forged ahead.

When Gatorade went with the cool "That's G" strategy, Powerade — which first hit shelves in 1992 — started playing Gatorade's old game: Science. And they stepped on the pedal with an age old trick, the zero calorie space, an area that Gatorade has refused to play in.

"Our competitor is appealing to a different consumer with this offering."" -Gatorade, Jennifer Schmit

"We're really excited about the success we've had," said Carolyne Guss, senior brand manager for Powerade. "We've grown 25 percent this year and we're at 27 percent in overall market share, our highest ever."

And unlike in the past where market gains by Powerade were achieved through big discounting, Beverage Digest's John Sicher says that Powerade prices relative to Gatorade prices aren't low enough to discount the progress the Coke brand has made.

The brand that used to try to gain market share by unveiling wacky flavors that Gatorade hadn't tried, brought to us ION4 in 2009, telling the public that this drink had calcium, magnesium and B vitamins that Gatorade didn't have. In an interesting move, Powerade brought Dr. Bob Murray, long time director of the Gatorade Sports Science Institute, onto its advisory board.

Whether the new ingredients work or are just marketing fluff, it doesn't matter. The only thing the public saw was Gatorade suing Powerade for what it said was deceptive advertising. Powerade backed off its aggressive stance, but did successfully defend the lawsuit.

Then there's the Powerade's ZERO proposition, which hit the marketplace in 2008 with ads comparing it to Gatorade's portfolio. And sure enough, after years of telling the public that science told them that athletes shouldn't have anything but the full calorie drink, Gatorade buckled to unveil G2 with half the calories of your everyday Gatorade.

But it still wasn't zero. Powerade had a unique weapon against goliath. While kids might seek to be aspirational and drink what athletes drink, beverage marketers know that moms buy the products. And in the age of obesity, zero means a lot, not only to moms but to those battling the bulge at gyms.

Through the third quarter of 2010, Powerade Zero sales have grown 69 percent this year, according to Nielsen AMC.

"Our consumers are overwhelmingly positive about ZERO," Guss said. "The average gym goer doesn't need to take in calories and it absolutely does it job to replenish."

While Gatorade did cut calories and produced G2, brand officials have remained steadfast that they won't go any further.

"Our competitor is appealing to a different consumer with this offering," said Gatorade spokesperson Jennifer Schmit. "Since our target is competitive athletes, we are offering a range of options to meet their needs before, during and after athletic activity. We believe, and current science would support, that athletes need calories in the form of carbohydrates to help fuel working muscles during training and competition."

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Make no mistake, Gatorade still has a huge lead.

It's core Gatorade product over the last year has grossed $827 million, according to Symphony/IRI.

Compare that to Powerade, whose ION4 and ZERO combined for $685 million in sales.

But there's certainly more pressure on the Gatorade brand than ever before. The brand's message is that success will come by talking to the athlete instead of the casual drinker.

"As inventor of and dominant leader in the sports drink category, this year Gatorade evolved the category to meet more athlete needs with the introduction of G Series and G Series Pro," Schmit said. "We're very encouraged by the positive reaction athletes have had to the new G Series, and our launch communications have been successful in delivering strong awareness and attention for our new innovation. We will continue to innovate based on science to meet the needs of a broader range of athletes, across more occasions, which will profitably fuel our business and deliver future growth."

But is that the right strategy? Does the general population see themselves as competitive athletes? Only time will tell.

What's interesting is that Powerade hasn't relied on huge endorsers to get to get to its highest market share ever. Ryan Howard, Derrick Rose, Chris Paul and Chris Johnson don't exactly compare to the arsenal that Gatorade has, nor the names that its brand brother Vitaminwater has amassed in recent years. In fact, two and a half years ago, Coke made the decision to shift LeBron James from the Powerade stable, where he had been since his rookie season in 2003, to Vitaminwater.

It's not like Powerade isn't a priority at Coke. Vitaminwater just yielded NCAA championship rights to Powerade and the brand does sponsor two NBA teams (the Knicks and Jazz), 12 Major League Baseball teams, Little League and Pop Warner. But it's fair to say that the Powerade's gains doesn't come from anything blatantly obvious from the marketing side.

It's not about a new athlete or a new bottle. It's about the offering. That's probably what's most scary to the folks at PepsiCo's Gatorade, who are being legitimately challenged for the first time ever.

Questions? Comments? SportsBiz@cnbc.com