Hydration Category is the Real Deal
Isotonic beverages, sports drinks, hydration products…whatever you call them, blurring lines and new positionings are creating one heck of a fascinating CPG category. For those looking beyond water for their hydration needs, the market is heavy with functional beverages and powdered supplements. While just about every CPG category has been filled with brands “skating on ice” trying to meet the everchanging consumer demands, none closely compared to the hydration category that was once defined pretty much only by the sports drink Gatorade. It’s that “cat and mouse” business game which is blurring the lines between category, brand, function, and format. But you’ll see throughout the journey which we will take in this content together that the functional CPG category isn’t so much about invention as it is about incremental innovation.
Invention: Gatorade
I won’t bore you with a categorical history lesson, but how can anyone do a content piece on the non-water hydration category and not talk about the category creator Gatorade. Though the product was invented in 1965 to help University of Florida athletes, it didn’t begin disseminating across college athletic programs until 1967. Gatorade didn’t meaningfully expand until 1983 when Quaker Oats Company acquired the beverage brand and injected its vast sales and marketing resources into it. One such investment was to expand the sports marketing that Gatorade started in 1968 with the NFL. The key sports league targeted was the NBA that was expanding quicky in the United States. That 1984 NBA sponsorship led them to expanding their sports marketing strategy to sponsor their first athlete in 1991. I think we all remember the famous “Be Like Mike” marketing campaign, but I share all this historical detail because it sets the tone of the rest of the content…it is the foundation.
As I mentioned before, this CPG category…like all the other categories, isn’t so much about invention today as it is about innovation. Invention is creating a totally new thing. Gatorade was something totally new.
“Better for You” Iteration: BodyARMOR
If you want to create something that has a lasting impact on the CPG world today, it needs to be combo of “new” yet “familiar.” Do something too closely related to the market leader and people won’t take notice but do something too novel and they’re confused. In the CPG industry, most successful products do not arrive out of nowhere; they’re remixes of existing ones.
That brings us to BODYARMOR. Another sports drink, which is familiar, but it’s “better mousetrap” aspect was mostly around the product containing natural ingredients, no artificial flavors, and no artificial dyes. That “better for you” product differentiation led to an increasingly diverse set of consumer cohorts that expanded the category into everyday hydration. Another “new” element was that BODYARMOR invited athletes onto its cap table when it was a private company. But by and large, BODYARMOR used the Gatorade playbook of sports marketing, which has led them to spending out the wazoo since the company was founded in 2011.
“Supplement” Iteration: Liquid I.V.
Let’s first take a slight detour to explain the iterative innovation impact of BioSteel.
they’re using the BODYARMOR product and sports marketing playbook now, but with the original Gatorade athlete focus
they started as a powdered supplement company, where Gatorade and BODYARMOR were beverage brands first and foremost.
BioSteel wasn’t the first powdered hydration supplement. I honestly don’t know who that was, but it doesn’t really matter because being first to market (or having first mover advantage) doesn’t make you a category creator. The powdered hydration product category creator, at least in my mind, would be Liquid IV.
The Liquid IV founders had some of the same Gatorade product frustrations that sparked the creation of BODYARMOR and BioSteel…they also used the BODYARMOR athlete investor gameplan but it’s important to note that the brand expanded it a little to include influencers/celebrities. Instead of going all sports marketing strategy though, since the link between hydration and high-intensity sports competition had been well-established in the market, Liquid IV was inspired by BODYARMOR attracting everyday active individuals. Where BODYARMOR took one small step, Liquid IV took one giant leap forward in democratizing the hydration category.
Liquid IV rode the mainstreaming effect that has hit all sports nutrition adjacent CPG categories. Almost every hydration category consumer isn’t a professional athlete or competing in some sporting activity. That makes the current high-intensity sports marketing not super-relatable to their lives. Instead, almost all hydration category consumers consider themselves to be living an active lifestyle. It might not be the same legacy definition of active lifestyle that some of us hold in our heads but a busy individual with a schedule packed with everyday activities and them adding in something like walking a trail is the expanding definition that Liquid IV saw as an opportunity.
While that democratization will play out again soon, I want to bring up another element in this categorical journey and that is Liquid IV’s decision to focus on powders which are much more profitable and easier to sell/ship online. The brand grew during the height of the Facebook marketing arbitrage era and used that ecommerce momentum to expand into a sales channel strategy that moved Liquid IV towards the market ubiquity you see today.
“Creator” Iteration: PRIME Hydration
So, where did the “Liquid IV Effect” take us next? It’s best personified by talking about PRIME, the brand co-founded by mega YouTubers Logan Paul and KSI (in with partnership from Congo Brands…the portfolio that owns Alani Nu). Gatorade was all about athlete endorsement deals. BODYARMOR, BioSteel, and Liquid IV gave athlete/celebrity endorsers a small fraction of equity in the company. Whereas PRIME leaned into the creator economy by making them large equity holders and hands-on business faces of the brand.
The celebrity/creator packaged goods trend is one that sees the most popular celebrities/creators of today…becoming the biggest CPG brands of tomorrow. It took less than a year in market for PRIME to become the fifth largest sports drink brand in America. How did they do this with fractions of the marketing spend that it took BODYARMOR to reach that level years ago? When you hit on the “right celebrity + right product” element, you can pull forward brand awareness to a level that takes competitors years or many millions of dollars. The major benefit of the celebrity packaged goods trend is that Logan Paul and KSI are masters of at winning consumer attention through today’s kingmakers…aka digital platform algorithms.
PRIME also ran with the opportunity Liquid IV created by them targeting consumers in a different way that wasn’t being done in the marketplace. PRIME is making the category fun and introducing a new younger demographic to the traditional sports drink market. That categorical incrementality is appealing to large retail partners that are finding space in sets that are still owned by Gatorade.
Where Does the Hydration Category Go Next?
Outside of a continuation of early trends mentioned already, beverage CPG folks should be looking towards the sports/active nutrition niche of the supplement industry.
This continues to be the influential epicenter of CPG…
Nutraceutical-ish
As consumption occasions continue to change, formats are becoming increasingly flexible, and as consumers are paying greater attention to their health and wellbeing, the functional component of hydration products becomes increasingly important. I see these deeper product advancements mostly happening through nutraceutical ingredients. A few examples would be:
Senactiv (NuLiv Science) = great for hydration products because it’s an ingredient that can aid in ATP production (which is energy your body uses), but also recovery and endurance.
Aquamin (Marigot Ltd.) = multi-mineral complex derived from red marine algae.
Flavor FUN
Not that sports drink flavors are that boring, but I expect to see more of two trends converge with the hydration category…
Licensed Flavor Partnerships = GHOST currently leverages its Sour Patch Kids in its hydration sticks, G Fuel has done a few entertainment IP tie-ups, but Ryse has hinted at a RTD beverage utilizing its various licensing partners.
Spicy/Cocktail Inspired = with more adults looking for hydration reactively, which is a fancy way for me saying looking for a hangover cure, we will likely see more offering that look like the recent Smoky Mezcal Paloma and Cucumber Mojito launches.
Hydration for “Everyone”
As a CPG category grows larger, it creates opportunities to segment the market. I see more hydration brands launching (or marketing) product variants to ethnic groups.
Salud = recognizes that each ethnic group has a specific way of consuming and is targeting the Hispanic community.
Personally Techie
Hydration brands will have a greater willingness to think outside of the drink format. This appeals to those consumers hunger for personalization that’s only possible with a technology ecosystem strategy.
Gx sweat patch + Smart Gx Bottle + Gatorade’s app = Gatorade is a “Tech Company” that sells beverages