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Is Niche Business Gatorade's Secret Weapon?

Just a decade ago, sports drink consumers pretty much had one Gatorade option — full calorie Gatorade.

Brand managers at the time reasoned that the formula for the masses didn't need to be changed. The Gatorade formula designed by four University of Florida doctors in 1965was still perfect athletes of all shapes and sizes.

But the business quickly changed. The low and no calorie business rose, the flavored water category, led by Vitaminwater, became a major player, so big it was swooped up by Coke for $4.1 billion. All of a sudden, Gatorade's "Trust us, our product is still for everyone" didn't work anymore.

So Gatorade started with G2, a low calorie version, which it had resisted for so long. Then, as internal feedback revealed that everyone from hardcore athletes to weekend warriors, didn't think of Gatorade as the performance enhancer they once did.

People were working out harder than ever before, the marathon and triathlon business were booming and plain old Gatorade wasn't doing the trick.

Gatorade G Series Fit
Source: Gatorade
Gatorade G Series Fit

So they took their niche hardcore business — their pro line — which throughout the last 15 years the brand had played with among professional athletes, re-engineered it and they brought it to the masses.

The new G Series was a three-step plan — 01 Prime for before a workout, 02 Perform during and 03 Recover after.

Traction was slow. Consumers weren't used to drinking three different drinks and, despite commercials that hinted how the new "system" worked, many were confused when they got to the supermarket. Others were even more confused if they showed up to Dick's or GNC as Gatorade had created a G Series Pro line that was for even more hardcore athletes.

But Gatorade execs didn't get discouraged.

Against plenty of criticism, including some from yours truly, they have stuck to their belief of conquering the sports drink market by speaking better directly to their consumers by offering them even more specific products.

Enter the G Series Fit line, which hit retail last month. Designed more for the fitness athlete — think former competitive athletes who need something more to get them through their workouts — who doesn't want to fill themselves with excess calories.

The Perform option (the during exercise drink) in the G Fit Series only has 10 calories per serving and it has a less intense flavor.

The other two parts of the Fit Series make up Gatorade's strongest bid yet to shift from being a sports drink brand to a sports nutrition company.

The G Series Fit 01 Prime line is a packet of small energy bites that come in three flavors. The company did this because market research was telling them that fit athletes feared the pre-exercise bloating. Bigger energy bars were too big.

While the brand extension seems natural, the Gatorade energy bar, which debuted a couple years ago, fell flat on its face and is such a mediocre product that stores can't even it get rid of it at a loss. The Banana Nut chocolate Fit chew I tried was not good, but I have heard encouraging things about the other two flavors — Cranberry Pistachio and Cinnamon Raisin Flax.

The post-workout drink in the Fit series is a fruit-based smoothie with protein. For years, Gatorade had stubbornly resisted protein, partly because it is so hard to mask the taste. This is their best effort yet, but don't expect it to taste like something you get at Jamba Juice.

Gatorade is in the midst of its greatest challenge ever. Powerade ION4 was the single best selling new item in the supermarket last year, according to according to market retail tracking firm IRI. Its market share dropped to 71 percent, according to industry trade Beverage Digest. That's a near monopoly in most sectors, but a disappointment for Gatorade, which for decades has been above the 80 percent mark.

It is because of this that Gatorade has to take risks that brands that share its market size have to take in order to not fall prey to aggressive smaller players. Internally, it's clear those that work with the Gatorade brand are well aware that there's massive erosion ahead if they miscalculate the marketplace.

So is their business of niches plan right?

FAILURE IS AROUND THE CORNER, UNLESS...

The product execution seems to be. But failure is around the corner if the brand doesn't excel at communication.

The group of drinks concept has never been done at mass retail before and people aren't used to it. The first plan of attack is to communicate with people before they get to the store. That communication to this point has been lacking. On air commercials are so quick they don't have time to truly explain what needs to be explained. Gatorade officials have to do a better job of getting consumers to their excellent Web site, which communicates all the differences. Finally, the communication has to seriously improve at the point of sale.

Gatorade G Series Fit
Source: Gatorade
Gatorade G Series Fit

I've seen people stand in front of the Gatorades at my local supermarket having no clue what all the names and numbers were. And this is a society that has learned the complex system of ordering at Starbucks .

So what's the plan? To greater speak to their target market, in-depth sponsorship activation is key. At last month's Boston Marathon, for example, runners got a Prime product before, Perform during the race and were handed a Recover upon crossing the finish line.

Next, it's about controlling the retail experience, which Andrea Fairchild, Gatorade's vice president of brand marketing, tells me she is "maniacally" focused on. What's the best way to do that? Segment the shelves into before, during and after occassions. So all the 01, 02 and 03 products are grouped together.

Finally, there's segmentation by marketplace, which should alleviate some of the confusion. The G Series will be in supermarkets, the G Series Fit will be found in Walgreen's , Target and gyms and G Series Pro will remain in sports specialty stores like Dick's and GNC.

As Gatorade's unofficial historian — I wrote the book "First In Thirst: How Gatorade Turned The Science Of Sweat Into A Cultural Phenomenon" in 2005 — I have not been happy with the brand's direction in the last couple years.

Perhaps it was the traditionalist in me that first set me off when Gatorade became "G." It continued with ads that got away from the science and allowed Powerade to exploit that area. And it didn't help when I could just tell that the new G Series products weren't being understood by the consumer.

But I'm starting to turn around. Generalists don't win in this world anymore. As Under Armour has proven, exploiting niches and convincing the customer they need them, is the fastest way to grow. Gatorade had become the official drink of construction workers more than it was for athletes. It became a punchline among those who worked out hardcore. It had lost all its aspiration qualities and was no longer the magic elixir to today's 10 year-olds as it was to me in the 80s.

If Gatorade can get this fragmented strategy communicated right, I think there's big potential to evolve and by that I mean grow. If consumers get into the habit of using a Gatorade product, that's massive revenue. Instead of grossing $1 from a single drink, someone who buys all three of the Fit line will pay $6.47 for the three phases and that could be turned over for every single workout.

I'm not ready to say that Gatorade is going to be a sure success, but I do think the brand is back on track.

Questions? Comments? SportsBiz@cnbc.com