Gatorade was being challenged by Powerade. And Powerade was coming into the market. They were backed by Coca-Cola. They had a cheaper energy drink. They were taking share away from Gatorade. And Gatorade started spinning out more flavors to combat power. And all that happened was that sales didn’t go anywhere, costs went up, and Powerade continued to gain share. Well, what Gatorade did is it went out and looked at those serious athletes to try and understand what they really wanted from the drink. And what they found is that serious athletes really cared about doing well at athletic events and that doing well often involved much more than hydration during the event. It involved preparing for the event, and then hydrating during, and then recovering after. And so Gatorade worked with other parts of PepsiCo, their corporate parent, like Quaker Oats, to develop sports bars and energy chews and protein shakes and things like that to help support the entire athletic event. It diversified the sources of income for Gatorade. And if one of those fails, it doesn’t really matter. The risk is much lower. When you look at just the drink, what you’d see back in 2009 when this strategy really kicked in is that there were fewer varieties of drink, but the drink sales went up, because they had this whole solution around the drink. And it brought people back to the drink.
–David Robertson, HBR Idea Cast #575