PowerAde ReportKelsie Hall, Ryan Summers, Christen McAllister

University Of Louisville | December 7, 2016

Introduction

The Coca Cola Company first introduced PowerAde to the sports drink market in

1988. The decision to bring on board this product was to increase sales and direct

competition to Pepsi Company’s popular product, Gatorade, which was originally

designed for the University of Florida’s football team in 1965. During the same year that

PowerAde was administered to the public, they were announced as the official sports

drink of the Olympic games, alongside Aquarius, which were another sports drink brand

at the time.

Despite the new launch, PowerAde was at a disadvantage from the start being that

they surfaced almost more than two decades after Gatorade came about as well as

Gatorade’s distinct tile of the official drink for the NFL. However, despite PowerAde’s

failure to quickly change the mind of Gatorade’s consumers, they were able to gain

something: a rival. The war between both sports drinks deemed as one of the most

popular competitors in the sports drink realm, and both products continue to go head-to-

head to this day.

Sports drinks account for around 4.6% of the U.S. Legislative Reference Bureau

market volumes and have produced an increase in consumer’s seeking an alternative to

soda with its high-calorie and sugary intake. So, entering the sports drink market was an

important decision for Coca Cola resulting in plethora growth and awareness for both

PowerAde and Gatorade as one can see from the statistic above. However, not much has

changed since the birth of PowerAde, as they continue to fall behind their competitor in

market share, annual growth, brand awareness as well as many other factors that affect

their triumph over Gatorade.

Hypothesis Statement

Question:

Why is PowerAde consistently second to Gatorade in both brand awareness and sales?

Hypothesis:

PowerAde’s celebrity endorsements are lower than Gatorades

PowerAde’s brand awareness is lower than Gatorade

PowerAde’s TV advertising is lower than Gatorades.

Executive Summary

PowerAde falls a consistent second to Gatorade in the United States sports drink market

due to many dynamics of their marketing plan. Their lower brand awareness as well as

endorsement production proves that their biggest competitor, Gatorade, continues to have

leverage over them when it comes to head-to-head competition.

Through survey analysis and secondary data research, it can be concluded that PowerAde

can expand their brand image by seeking out a professional athlete to endorse. Increasing its

marketing spending by 5 million dollars to endorse Conor McGregor is something PowerAde

should take advantage of as well as pursue as he is a star athlete with no similar endorsements;

this can be very beneficial for both parties. Gatorade’s image does not necessarily fit with

McGregor as he is not the typical type of athlete they would endorse, and by taking him under

their wing, PowerAde will be able to fulfill many problem areas that have accumulated in the

past. The UFC’s brand is rapidly rising and so is McGregor, which is another key reason as to

why partnering with him would result in more success. PowerAde has previously focused on

marketing their products aligned with athletes of more amateur status, and it is time to make an

investment in Conor McGregor, also known by his fighter name The Notorious MMA.

PowerAde, Coca-Cola’s popular sports drink brand, is one of many drinks categorized

under the sports drink market. PowerAde Ion 4x is the brands best-selling sports drink and offers

12 different flavors. PowerAde also distributes their most recent Zero Calorie PowerAde Zero

drink in 4 flavors. Though PowerAde is seen as a clear-cut top selling product, the product

continues to fall second to Gatorade in the drink market as well as other categories. Gatorade,

Pepsi Co.’s top selling sports drink controls roughly 74% of the sports drink market. PowerAde

greatly falls behind with a 22% market share. While it is far above the next best competitor,

Gatorade continues to overpower PowerAde and has for centuries. The main two aspects of

focus within this report are that PowerAde’s sales are second to Gatorade due to the fact that

both their brand awareness and endorsements are at a great decrease when compared to

Gatorade’s brand awareness and endorsements. In order to generate more sales and exposure,

PowerAde must seek to increase its marketing spending in an efficient way through endorsing a

professional athlete as stated above. However, they cannot pick any normal athlete, but it needs

to be Conor McGregor, the face of MMA and the UFC. Doing so would increase PowerAde’s

brand awareness, in return, generating additional sales for the brand.

The UFC is the top level of Mixed Martial Arts (MMA) fighting in the world. The

William Morris Endeavor recently purchased the UFC for 4 billion dollars realizing its potential

for growth was immense; this would be the largest deal for any sports franchise ever. The 25-

year-old sport has now been featured in 22 different countries and has hosted over 363 events.

Different from other competing sports like the National Basketball Association, Major League

Baseball, and the National Football League, the UFC is what it is today because of the individual

athletes competing, which leads to Conor McGregor. McGregor is the best UFC fighter in the

world, and more importantly to PowerAde, he has few brand endorsements.

Conor McGregor currently has 7 main endorsements bringing a total income of 6 million

from these endorsements last year. If PowerAde were to pay McGregor the 5 million dollar

endorsement the following things would be placed into his contract:

I. McGregor would be featured in a PowerAde commercial campaign specific to him.

II. PowerAde’s Logo would be on all of his training gear, warm-up gear, and on his

fighting shorts.

III. In pre and post fight meetings, along with weigh-ins, McGregor must take a sip of

PowerAde.

Those following three marketing opportunities that exist through PowerAde’s endorsement

of McGregor, will be used as a vehicle to increase the brands awareness. With the millions of

fans and pay per-view purchases McGregor generates, it is clear that PowerAde has an

opportunity to close the gap on Gatorade.

MethodIn order to gain a better understanding of Powerade performance in the market, we

designed and conducted an online survey using Survey Monkey. Our survey was sent to a

random sample of 3,000 people attending the University of Louisville on October 28, 2016.

The survey was designed to focus on gaining insight into the ways Powerade compares to

other sports drinks, primarily Gatorade, in regards to awareness, availability, consumption,

effectiveness, perception and satisfaction among a variety of consumers in the market. The

survey also gathered information on demographics and personality traits of respondents to

identify a target market and understand the culture of their consumers.

Unaided awareness of brands within the sports drink industry was measured before

respondents were asked about the four main competitors in the sports drink industry: All Sport,

First Place, Gatorade and Powerade. This question defined a sports drink as “a thirst-quenching

beverage used in sports and related activities, to rehydrate, boost energy and replenish

electrolytes lost to sweating” and asked respondents to recall “sports drinks brands” the

respondent was aware of, if any, by typing them into a dialogue box with no other prompting. In

a subsequent question respondents were given the four main competitors in the sports drinks

industry and were asked to select those they were aware of, if any.

All questions, except the unaided awareness question, used nominal and ordinal data

measurement scales. Nominal scales were used for demographic items such as highest level of

education, gender, marital status, and race/ethnicity. Ordinal scales were used to measure how

much respondent’s agreed/disagreed with various statements. Figures 1 and 2 below provide

examples of product and personality attribute questions and how ordinal scales were used to

measure responses.

Respondents were also eligible to receive a monetary incentive for completing the

survey. To ensure the integrity of the survey, a question stating “yesterday, I had a fatal heart

attack after watching television” was included to identify respondents who paid little or no

attention to the survey.

Figure 1

Figure 2

ResultsThe survey initially returned a sample size consisting of 769 respondents. After filtering

out respondents who did not answer, “strongly disagree,” to the heart attack question as well as

those who completed the survey in less than 3 minutes, the sample size used for data analysis

was reduced to 673. The “I’m not sure” or “I’m not familiar with this brand” responses for

ordinal scale questions were also replaced with blanks to increase statistical analysis accuracy.

The data was then analyzed using IBM SPSS statistical analysis software. Figure 5 shows the

demographic information for the average respondent for our sample.

Values

Count of RespID 673Average of CompCollegeCode 55%Average of IncomeThousCode 56.24Average of AgeCode 35Average of FemaleCode 44%Average of ChildrenCode 33%Average of MarriedCode 60%Average of WhiteCode 77%Figure 5

PowerAde’s brand awareness is lower than Gatorade’s

We hypothesized that PowerAde’s brand awareness would be lower than Gatorade’s

brand awareness. Figure 6 represents the average awareness among our sample to be higher for

Gatorade than Powerade.

Figure 6

Figure 7 shows the results from a paired sample t-test comparing the awareness of

Gatorade and Powerade. Our null hypothesis was that there is no differences in mean Powerade

Gatorade Powerade All Sport First Place0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

99.55% 95.84%

12.04%0.45%

Sports Drink Brand Awareness

awareness and mean Gatorade awareness. Our alternative hypothesis was that there is a

difference in mean Powerade awareness and mean Gatorade awareness. Because the P-value in

Figure 8 is less than 0.05, we rejected the null hypothesis and accepted the alternative

hypothesis. While Powerade awareness is approximately 4% less than that of Gatorade, Figure 9

shows that Powerade’s 45.03% triers is significantly less Gatorade’s 66.96%. This percentage

shows that awareness is not the only problem Powerade faces in its competition with Gatorade.

Paired Samples Statistics

Mean N Std. Deviation Std. Error Mean

Pair 1 AwPoweradeCode .958 672 .2000 .0077

AwGatoradeCode .996 672 .0667 .0026

Figure 7

Figure 8

Figure 9

Powerade’s athlete

endorsements are lower than Gatorade’s

We hypothesized that Powerade’s athlete endorsements are lower than Gatorade’s

athletic endorsements. Figure 10, a perceptual map, is used to demonstrate the relationship

between Gatorade and Powerade triers as well as the average response to the ordinal scale

question, “is endorsed by professional athletes whom I admire” for Gatorade and Powerade

separately.

Figure 10

Figures 11 & 12 demonstrate the results from an independent sample t-test comparing

Powerade endorsements and triers. Our null hypothesis was that there is no difference in mean

Powerade trying by endorsement. Our alternative hypothesis was that there is a difference in

mean Powerade trying by endorsement. Because the P-value in Figure 12 is less than 0.05, we

rejected the null hypothesis and accepted the Alternative Hypothesis.

Gatorade Powerade All Sport First Place0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

66.96%

45.03%

3.31% 0.80%

Triers by Sports Drink Brand (%)

Figure 11

Figure 12

Similarly, Figures 13 & 14 demonstrates the results from an independent sample t-test

comparing Gatorade endorsements and triers. Our null hypothesis was that there is no difference

in mean Gatorade trying by endorsement. Our alternative hypothesis was that there is a

difference in mean Gatorade trying by endorsement. Because the P-value in Figure 12 is less

than 0.05, we rejected the null hypothesis and accepted the alternative hypothesis.

Figure 13

Figure 14

Powerade’s TV advertising is lower than Gatorade’s

We hypothesized that Powerade’s television advertisements are lower than Gatorade’s

television advertisements. A perceptual map, Figure 15, is used to demonstrate the relationship

between Gatorade and Powerade triers and the average response to the ordinal scale question “is

a drink that I often see advertised on television” for Gatorade and Powerade separately.

Figure 15

Figure 16 shows the results from an independent sample t-test comparing Powerade

television advertisements and triers. Our null hypothesis was that there is no difference in mean

Powerade trying by television advertising. Our alternative hypothesis was that there is a

difference in mean Powerade trying by television advertising. Because the P-value in Figure 17

is less than 0.05, we rejected the null hypothesis and accepted the alternative hypothesis.

2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.30246

Triers Vs. Adver-tisement

Perceptual MapPowerAde Gatorade

Triers

Adv

erti

sem

ent

Figure 16

Figure 17

Figure 18 shows the results from an independent sample t-test comparing Powerade

television advertisements and triers. Our null hypothesis was that there is no difference in mean

Powerade trying by television advertising. Our alternative hypothesis was that there is a

difference in mean Powerade trying by television advertising. Because the P-value in Figure 19

is less than 0.05, we rejected the null hypothesis and accepted the alternative hypothesis.

Figure 18

Figure 19

From analyzing this data, it can be concluded that endorsements and television advertising for

both brands affect triers.

Target Market Data

Using our demographic sample data, we were able to identify an appropriate target

market for PowerAde in comparison to the target market for Gatorade.

Figures 20 & 21 show the age range of our sample that tried each product. While Gatorade’s age

range is heavily concentrated from age 27-32, nearly 85% of Powerade’s age range is more

evenly spread out across ages 22-42.

Figure 20 & Figure 21

Perceptual Map

2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3012345

Triers Vs. AdvertisementPerceptual Map

PowerAde Gatorade

TriersAdv

erti

sem

ent

2.8 2.9 3 3.1 3.2 3.3 3.4 3.5 3.692.0%94.0%96.0%98.0%

100.0%

Endorsement Vs. AwarenessPreceptual Map

PoweradeGatorade

Endorsement mean rating

Ave

rage

A

war

enes

ss

2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.301234

Triers Vs EndorsementPerceptual Map

PowerAdegatorade

TriersEndo

rsem

ent

Endorsement RecommendationWe recommend PowerAde acquire an endorsement with UFC fighter Conor McGregor

that will include personal advertising (wearing the Powerade logo) and television advertising.

Explanation and Analysis

First and foremost, this opportunity wouldn’t have presented itself if there hadn’t been some

upside to the UFC’s demographics. Through demographic analysis, we concluded from the

survey that is target market is the 35-year-old male who has a lower income than that of a

Gatorade consumer. Because of the fact that the gender for PowerAde is more equal, close to 56-

44 male to female. Along with the average income by that of PowerAde ($56,000) is on target

with the UFC’s low skewing average income. It becomes quite evident that PowerAde and the

UFC have a similar consumer based on gender and income. The wider gender split and higher

income of Gatorade consumers would make this a worse business investment for a company like

Gatorade. On a side note, while this doesn’t necessarily have to due with statistical analysis,

Gatorade, when choosing a professional athlete to endorse, often chooses similar types of

athletes. Gatorade chooses athletes that play sports in the season form like the NHL, MLB,

NBA. PowerAde on the other hand not only endorses amateur athletes, but they endorse them all

year round. Due to the fact that the UFC doesn’t have seasons and it is never ending is another

reason why the idea of endorsing Conor McGregor would be more appealing PowerAde than

Gatorade.

From our data analysis, we have concluded that PowerAde needs to increase its brand

awareness in order to increase sales. A Conor McGregor endorsement will enable PowerAde to

reach a diverse and rapidly growing sports market. PowerAde’s market demographic is similar to

that of the UFC, in which Connor McGregor is a high profile competitor. These demographics

include slightly more males than females, who are over age 30, do not have children in their

household, and report an average annual household income under $50K. The UFC employs

Mixed Martial Arts (MMA) fighters who have the freedom to enter into endorsement contracts

by the companies of their choice. While Connor McGregor is currently an endorsed athlete, he

does not have a deal with a sports drink. MMA, and more notably the UFC, is a sports market

that the sports drink industry has started to interact with. PowerAde has a unique opportunity

with this endorsement deal to establish themselves among a group of athletes who are often

missed by the advertising of PowerAde’s competitors, including Gatorade.

After analyzing the survey results and confirming that Powerade is an industry second to

Gatorade in terms of both endorsements and advertising, this deal is critical to Powerade

increasing their brand awareness and subsequently sales. From secondary data research,

including an analysis of the UFC market as a whole, we believe that the endorsement of

McGregor with his millions of fans who watch his fights via Pay Per View and live online

streaming, along with the viewership of his pre and post-fight interview segments, can create a

positive impact for Powerade in terms of brand awareness.

Cost of McGregor Endorsement

Due to the fact that Connor McGregor has current endorsements, we would want to pay him

the most by at least 2 times what other sponsors pay him. Last year, McGregor made over 6

million from 7 main endorsements. Therefore they pay him roughly under a million each,

PowerAde will offer him 2 million to ensure that they are getting the most out of the

endorsement.

From secondary data, we found that a 30 second television advertisement cost approximately

$60,000. We budgeted 3 million for television advertisements for the Conor McGregor

endorsement which will yield approximately 50 30 second commercial spots for the year.

Combing the individual endorsement and the television advertising costs gives PowerAde a total

cost of $5M for the new marketing activity.

Sales Increase

Cost from marketing activity= 5 millionCurrent marketing spending= 23,000,000

New marketing spending 28,000,00028,000,000-23,000,000=5,000,0005,000,000/23,000,000=21.7%AED=(%change in sales)/(%change in ADV)AED: 0.1(X)/(.217)=.1X=2.17% increase in salesCurrent sales= 1,185,000,000Projected sales= (current*2.17%)+currentProjected sales= 25,714,500+ current = 1,210,714,500

Return on Investment

Revenue=1,185,000,000Ending revenue=1,210,714,500Inc. revenue= 25,714,500Gross margin=20.44%Inc. Gross margin=(25,714,500*20.44%) =5,256,044Inc. marketing costs= 5,000,000ROI= (5,256,044-5,000,000)/5,000,000ROI=5.12%

Sensitivity Analysis

Assumption: AED Low Value: AED = 0.05Cost from marketing activity= 5 millionCurrent marketing spending= 23,000,000New marketing spending 28,000,00028,000,000-23,000,000=5,000,0005,000,000/23,000,000=21.7%AED=(%change in sales)/(%change in ADV)AED: 0.05(X)/(.217)=.05X=1.09% increase in salesCurrent sales= 1,185,000,000Projected sales= (current*1.09%)+currentProjected sales= 12,916,500+ current = 1,197,916,500

Revenue=1,185,000,000Ending revenue=1,197,916,500Inc. revenue= 12,916,500Gross margin=20.44%Inc. Gross margin=(12,916,500*20.44%) =2,640,133Inc. marketing costs= 5,000,000ROI= (2,640,133-5,000,000)/5,000,000ROI= -47.2%

Most Likely Value: AED = 0.1 (see above)

High Value: AED = 0.2Cost from marketing activity= 5 millionCurrent marketing spending= 23,000,000New marketing spending 28,000,00028,000,000-23,000,000=5,000,0005,000,000/23,000,000=21.7%AED=(%change in sales)/(%change in ADV)

AED: 0.2(X)/(.217)=.2X=4.34% increase in salesCurrent sales= 1,185,000,000Projected sales= (current*4.34%)+currentProjected sales= 51,429,000+ current = 1,197,916,500

Revenue=1,185,000,000Ending revenue=1,236,429,000Inc. revenue= 51,429,000

Gross margin=20.44%Inc. Gross margin=(51,429,00020.44%) =10,512,088Inc. marketing costs= 5,000,000ROI= (10,512,088-5,000,000)/5,000,000ROI= 110.2%

Assumption: Incremental Gross Margin

Low Value: Inc GM = 15%Cost from marketing activity= 5 million

Current marketing spending= 23,000,000New marketing spending 28,000,00028,000,000-23,000,000=5,000,0005,000,000/23,000,000=21.7%AED=(%change in sales)/(%change in ADV)AED: 0.1(X)/(.217)=.1X=2.17% increase in salesCurrent sales= 1,185,000,000Projected sales= (current*2.17%)+currentProjected sales= 25,714,500+ current = 1,210,714,500

Revenue=1,185,000,000Ending revenue=1,210,714,500Inc. revenue= 25,714,500Gross margin=15%Inc. Gross margin=(25,714,500*15%) =3,857,175Inc. marketing costs= 5,000,000ROI= (3,857,175-5,000,000)/5,000,000ROI= -22.9%

Most Likely Value: Inc GM = 20.44% (See Above)

High Value: Inc GM = 26%Cost from marketing activity= 5 millionCurrent marketing spending= 23,000,000New marketing spending 28,000,00028,000,000-23,000,000=5,000,0005,000,000/23,000,000=21.7%AED=(%change in sales)/(%change in ADV)AED: 0.1

(X)/(.217)=.1X=2.17% increase in salesCurrent sales= 1,185,000,000Projected sales= (current*2.17%)+currentProjected sales= 25,714,500+ current = 1,210,714,500

Revenue=1,185,000,000Ending revenue=1,210,714,500Inc. revenue= 25,714,500Gross margin=26%Inc. Gross margin=(25,714,500*26%) =6,685,770Inc. marketing costs= 5,000,000ROI= (6,685,770-5,000,000)/5,000,000

ROI=33.7%

Break Even Analysis

Break Even Time (assuming 2.17% increase in sales as a result of investment and sales are consistent each month)

Incremental Marketing Cost / (Total Cost / 12 months)5,000,000 / (28,000,000 / 12) = 2.14

Our recommended marketing activity will take PowerAde a little over two months to break even.

Theoretical Framework

As marketing students, we have been immersed in tactics that businesses utilize in order

to ensure success within their company. Numerous frameworks have been implanted such as

ATAR, AIDA, as well as the 4 P’s to create a dedicated marketing process for not only the

business, but for the consumers as well.

Though PowerAde deems to be one of the most popular sports drinks in the world, there

is always room for growth, change, and innovation in order to compete with competitors such as

Gatorade, which continues to be the number one sports drink on the market. As a group, we

came up with the recommendation to endorse a specific athlete who is not already signed by a

company contract. Celebrities, athletes, and public figures run the show when it comes to

advertising and marketing, and we felt that PowerAde needed to solely focus on one person who

has maintained the spotlight for many years when it comes to athletics.

Connor McGregor, is an Irish professional martial artist and UFC fighter who has gained

mass attention due to his reigning championships over the years. The athletes network is

estimated at $14 million, and he became the first UFC fighter on Forbes’ Highest Paid Athlete

List. McGregor’s popularity has skyrocketed and he has made a name for himself in the sports

realm; this is the reasoning behind our recommendation for Powerade to endorse him. Due to the

framework with the 4 P’s, endorsing such a high-figure athlete would help define Powerade’s

marketing mix and increase their brand awareness.

The 4 P’s include price, product, promotion, and place. By endorsing Connor McGregor,

we are helping consumer’s grasp exactly what the product is and why the product is unique.

PowerAde is unique because it can relate to not just the typical athletes one would easily think of

(basketball, football, soccer, volleyball), but UFC fighters who are both male and female and

who have grown to dominant that channel of athleticism. Price is important, as there will always

be competitive nature when it comes to monetary value. By endorsing McGregor, PowerAde will

be advertised through all of his events, competitions, as well as other occasions, which will

increase the awareness of the product. When more consumers are aware of the product, the more

they will purchase, which in turn affects the price aspect of the marketing mix. Endorsing goes

hand-in-hand with promotion, which is the main reason behind our recommendation. Gatorade is

the face of sports drinks for many teams and events, and we felt that PowerAde needed a push

when it came to advertising. Endorsing a famous, well-known athlete will help grow

PowerAde’s awareness of the product. Once the awareness is increased…PowerAde will need to

determine the place, which is another reason as to why we chose to recommend endorsements.

Throughout Connor McGregor’s journey, PowerAde will be able to choose when, where, and

how he will promote the product as well as what time would be best. Placement is crucial to any

product, and it is important to create a high engagement with consumers worldwide.

Appendix

Email recruitment letter

Copy of client proposal

Copy of questionnaire

Detailed SPSS output