As beverage giants look to sell Wall Street on a rebound after a rough 2023, investors may want to hear more about how the legacy incumbents are fighting off new sports drink challengers. Pepsico CEO Ramon Laguarta said on the company’s third-quarter earnings call that the sports drink startup Prime — created in part by YouTube star and professional wrestler Logan Paul — was making a dent in the sales of a key Pepsi brand, at least temporarily. “It is true that the emergence of Prime in the category took some share from Gatorade, less than other brands in the category, or less proportionally to the size of the brand. But I would say … we’re seeing that the size of Prime in the category getting smaller as we go into the fall,” Laguarta said during the Oct. 10 conference call. The rise of Prime comes at a time when key beverage stocks are struggling for traction. Shares of Pepsico, Coca-Cola and Keurig Dr Pepper are all down over the past 12 months while the broader market has rallied. PEP 1Y mountain Shares of Pepsico have fallen over the past 12 months, along with its two main peers. The incumbents are taking the competition seriously. Pepsi, for instance, is pushing newer versions of Gatorade with Gatorade Zero, G-Fit and Gatorlyte, as well as the Fast Twitch energy drink. If those newer options can prove to be long-term hits, they may not only help the incumbents fend off competition but also grow their market share. Barclays analyst Lauren Lieberman said in a Nov. 28 note to clients that the majority of the sales for those four products appear to be incremental to the sales of original Gatorade, citing data from Numerator. “Whether Prime’s success proves sticky or to be a flash in the pan, we think it is serving as an important template for how quickly brands can be built and that there is space for ‘indulgence’ in the sports drink category,” Lieberman said. State of play The increased competition in the sports drink industry is emblematic of the growth…
2024-01-06 06:32:00
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