Tuesday, November 4, 2014

How has the 2000 Pepsi-Gatorade Merger worked out?

From Business Week at the time of the merger:

Some of the more obvious synergies between Quaker Oats and Pepsi won't happen for a while. To overcome the Federal Trade Commission's fears of monopolization of the sports-drink market, Pepsico agreed not to bundle Pepsi and Gatorade in contracts with merchants for 10 years. It also agreed not to allow its bottlers to distribute Gatorade, which would have been an easy and cost-effective way to ship Gatorade to smaller stores.

Does anyone know of if these synergies ever materialized?


  1. The market for sports drinks in 2015 includes many players, however Gatorade does hold the majority of market share at more than 75%. According to Wikepedia, other players include Powerade and Vitaminwater. Both these brands are owned by Pepsi’s most powerful competitor- Coca Cola. Coca Cola purchased Glaceau (holder of VitaminWater and SmartWater) in 2007 for $4.1 billion bridging the gap between them and PepsiCo in the sports drink market, but not as closely as some might think. In 2014, the Gatorade Perform product sold a total $3.3 billion compared to the Powerade Ion4 product, which sold $833 million according to statisa.com. These were the two highest selling products in the sports drink market.
    With this success, I believe one could say that synergies have materialized between PepsiCo and Gatorade.
    In 2001, the sports drink market looked very different than it does today. The introduction and increased popularity of energy drinks like Red Bull and Monster Energy have played a hand in the overall sales performance of sports drinks. Pepsi and Coca Cola both entered the energy drink market, Pepsi with the Mountain Dew Kickstart product and Coca Cola with NOS and Full Throttle. These brands still struggle against the bigger names in the energy drink market. This leaves a huge opportunity for both Pepsi and Coca Cola.
    One should also note an interesting fact regarding Pepsi and another power move similar to the purchase of Gatorade, the new formed relationship with Anheuser-Busch InBev. Relative to economies of scale, in 2009 PepsiCo and Anheuser-Busch InBev established a new relationship. This particular relationship was modeled to help them both save money on items like office supplies, computers, and other materials by combining their procurement processes in the US according to fool.com. In addition, InBev’s Brazilian beer maker has bottled and distributed Pepsi soft drinks in parts of South and Central America for the past 15 years. One can only speculate what’s to come, however on the surface a full merger or acquisition between the two seems to be a positive move for both organizations.

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