NEW YORK (CNNfn) - In 1965 the University of Florida invented a sports drink for its football players to help them push through both halves of the game in the hot sun. The drink, named Gatorade after the team's nickname, remained obscure until it was credited will helping the Gators beat Georgia Tech in the 1967 Orange Bowl.|
"We didn't have Gatorade," the Georgia Tech coach told Sports Illustrated. "That made the difference."
Coca-Cola (KO: Research, Estimates) doesn't want to be Georgia Tech.
It is no secret Coke's interest in Quaker Oats (OAT: Research, Estimates) is fueled by a desire for the brand that is synonymous with sports drinks.
Gatorade has a 73 percent market share in the United States, according to Beverage Digest, with volume rising sharply for the last 10 years. It has also fought off the challenges of Pepsi's (PEP: Research, Estimates) AllSport and Coke's Powerade.
"Both Pepsi and Coke have tried to introduce sports drink products, but to no avail," said Caroline Levy, beverage analyst with UBS Warburg.
According to analysts, Gatorade's dominance is due in part to excellent advertising and publicity, both intended and unintended.
In 1986-87, during the New York Giants' playoff and Super Bowl run, television audiences saw players dump a cooler full of Gatorade on coach Bill Parcels after each win. And in 1991 the company signed Michael Jordan as a spokesman and scored a hit with their "Be Like Mike" campaign.
"Their marketing has captured the imagination of the public, especially the 18-to-35 male, with an American, in-your-face attitude," said David Nelson, food analyst with Credit Suisse First Boston.
"It's the ultimate in functional food, but more than that it's the ultimate in aspirational," Nelson said. "I mean, who wouldn't want to be like Mike?"
John Sicher, editor and publisher of Beverage Digest, said another key to Coke's interest is flat sales of carbonated beverages. Sports drinks are growing rapidly and are now the most important segment of non-carbonated beverages.
Nelson said Gatorade also refuses to take it easy, coming out with new flavors, new packaging and new ideas.
The company has come out with a lighter "Frost" line of flavors and a stronger "Fierce" line. It has also introduced Propel enhanced fitness water, a line of enhanced juice drinks called Torq, and an energy bar.
For Gatorade, Coke offers synergies which could help grow the brand even more.
Bill Pecoriello, beverage analyst with Sanford Bernstein, said in a research note Gatorade could see a 10 percent rise in volume from Coke's U.S. bottler network by making the sports drink available in vending machines.
Pecoriello also projected a 40 percent increase in international cash flow with Coke's synergies by 2005 and a 134 percent increase by 2010.
But ING Barings beverage analysts Emanuel Goldman warned against Coke changing Gatorade's domestic distribution at the beginning.
"The thing to do initially is keep things on the straight and narrow," Goldman said. "You don't want to do a Snapple."