Sports Drinks Makers Are Waging an $8 Billion Thirst War

A market started by Gatorade has become a scientific proving ground for high-tech, all-natural hydration.

It wasn’t too long ago that cities started paying closer attention to studies connecting soda with America’s obesity epidemic.

New York was one of the first to attempt regulation of no-good-for-you drinks. It lost in court. A proposal in Philadelphia fell short, too. It took the progressive bastion of Berkeley, Calif., to get a soda tax to stick, spurring locals to drink 21 percent less of the stuff. Bay Area neighbors San Francisco and Oakland soon followed, as did Boulder, Colo., and Chicago. When Philadelphia tried again last year, its law passed.

The growing understanding that sugar is bad for you has helped consumers change habits. Sales of full-calorie soda have plummeted, and industry behemoths PepsiCo Inc. and Coca-Cola Co. are rushing to fill their lineups with flavored waters and smaller soda sizes—both sugar-free and traditional. Names such as Coke Zero, Pepsi Zero, Coke Light, and even Coke Life now line the coolers of convenience stores. According to data from Beverage Marketing Corp., 48 percent of nonalcoholic beverages sold in the U.S. these days claim to have “zero calories.”

While soda may have had its reckoning, what didn’t change until lately was the size or sugar content of another popular beverage—so-called sports drinks. Typically sold in 20-ounce bottles, this class of liquid famously led by Gatorade and Powerade (owned by Pepsi and Coke, respectively) often has about 130 calories and 35 grams of sugar—just shy on both counts of a can of Coke.

Here, too, the big names have begun to pivot, but they remain far behind the curve—America’s lucrative fitness craze has already moved on when it comes to sports drinks. Beyond just being healthier with less sugar, there’s a whole new generation of high-tech, all-natural libations looking to hydrate gym minions. Their aim? Blowing soda, sugary sports drinks—and plain old H2O—entirely out of the water.

But first, these upstarts need to figure out how best to do that.

The U.S. fitness industry generated almost $28 billion in revenue last year

When it comes to exercise, water has been the old standby since the dawn of time. But anyone with skin in today’s multibillion-dollar hydration game will tell you that, when it comes to thirst-quenchers, that clear liquid is for amateurs. Meanwhile, the old days of grunting weightlifters washing down questionable supplements with protein shakes have been replaced by athleisure-clad millennials fielding gym subscription pitches on their iPhones. CrossFit, Flywheel, Orangetheory, and other single-sport venues have joined organized running and cycling to match the existing landscape of yoga, barre, and Pilates.

And the money has been rolling in. The U.S. fitness industry generated close to $28 billion in revenue last year, while gym attendance surpassed 66 million, a record. Unsurprisingly, the $8 billion sports drink industry has sought to take full advantage—both of the truly athletic and of people who down these beverages all day long. But while sports drink makers have been changing ingredients, there’s still a lot of sugar being used—high fructose corn syrup, sucralose, and maltodextrin—that many consider unhealthful.

“Consumers are more concerned than ever about ingredients,” says Matt Powell, a sports industry analyst at NPD Group. “Sugar content has an especially high awareness.” Duane Stanford, executive editor at trade publication Beverage Digest, says legacy soda makers are under assault from all sides—bottled water, coconut water, and sports drinks. “Because of that diversification, the big brands that once dominated sports hydration are starting to find many points of competition,” he says.

So what’s in that bottle of blue liquid with a ballplayer or lightning bolt on it? Most sports drink ingredients are typically what the U.S. Food and Drug Administration consider “generally recognized as safe,” or GRAS. Several additives, however, are distinctly unnatural. Sodium hexametaphosphate, an emulsifier, is commonly used in cosmetics. Sucralose is a chlorinated, artificial sugar. Then there’s the laundry list of artificial colors still used by Gatorade and Powerade.

The third generation of sports drinks is getting rid of all this stuff, or at least saying it is. In the 12 months ended September 2016, 35 percent of new product launches in the sports and energy category carried some kind of “natural” claim, an increase of 6 percentage points from the previous year, according to Mintel. A report by KPMG and the Consumer Goods Forum stated “the number of products being formulated or reformulated is rising dramatically.”

Natural, of course, doesn’t really mean all that much when you see it on a package. Organic and non-GMO are tougher to dodge and increasingly de riguer for a segment that was previously the exclusive province of a certain fluorescent yellow drink.

The science, however, is deceptively simpler than the labeling: Water alone doesn’t replace the electrolytes we lose when we sweat. A 2 percent drop in total body water can “significantly hinder aerobic performance and cognitive function,” says Douglas Kalman, a sports nutritionist and scientist. Electrolytes—sodium, calcium, magnesium, potassium, phosphate, and chloride­­—maintain natural functions. Using a drink that replaces them before, during, and after a workout will alleviate many symptoms—mental focus may sharpen, headaches may vanish, and any soreness you typically feel may be a thing of the past. 

But it’s not just about replacing what you’ve lost—it’s what you replace it with. “There is significant blood flow diverted from the gut to supply the needs of the muscle and skin” during exercise, says Stacy Sims, a performance and nutrition expert. “You want to minimize additional stress from the food and fluid you consume.” Thus, you need low sugar and sodium to rapidly get water to other places in the body, but at the same time, sugar and sodium also activate mechanisms that do the delivery work. Therefore, there needs to be a perfect mix “that is optimal for hydration,” says Sims, who contends most products miss the mark by supplying a too-concentrated carbohydrate—or sugar—replacement.

Sugar presents an additional complication. If you watched a stage of the Tour de France this summer, you may have noticed cyclists churning through as many as eight bottles of liquids. Team Cannondale-Drapac, which took home second place overall, used sponsor-provided Skratch Labs, which includes cane sugar and dextrose in their drinks. “The ratio of sugar to water to salt is really palatable and not overwhelming like most sports drink mixes—Gatorade or whatever,” says Taylor Phinney, an American on the team. As soon as they’re off the bike, each rider also throws back a recovery drink plus a little treat from Nigel Mitchell, the team’s head of nutrition.

“We give the riders diluted pineapple juice after the stage—one part pineapple juice to four parts water,” says Mitchell. “This increases the riders’ desire to drink, and it helps keep the mouth fresh.”

While the need to replace sodium is easy to understand (just taste your sweat), sugar is a double-edged sword. Sure, sugar in the mix is necessary, but there’s another reason we reach for it. The brain has a reward center, and the taste of something sweet tricks you into working harder. “When the brain feels better, it will decide to keep going,” says Dr. Krista Austin, a sports science consultant.

But as you exercise, your palate becomes more sensitive. What was just enough sugar at the fifth mile of a marathon becomes sickly sweet by mile 10. This is a big complaint, according to John Halvorsen, race director for the Ottawa Marathon, a weekend of races attended by 50,000 people. When Gatorade is supplied, it’s in a powder form. For Halvorsen’s teams this caused inconsistent mixes: “We did have runner complaints about the product being too sweet and making them sick.”

Everything fake is being tossed

Famously developed in 1965 by University of Florida doctors to help the football team (the Gators) survive the Gainesville heat, Gatorade tasted awful at first but replaced electrolytes. The debut flavor, lemon-lime, is still one of the most popular, and it remains the official drink of professional, amateur, and youth sports leagues. It’s also regularly touted by athletes with multimillion-dollar endorsement contracts. Not coincidentally, Gatorade and its rival Powerade account for about 94 percent of the U.S. sports drink market, with Gatorade’s latest reported revenue at $5 billion, while Powerade’s came in at roughly $1 billion.

“The marketing effect induced millions of people worldwide to drink calories that they really don’t need,” says Kalman, the sports nutritionist. “The reality is that if you are not exercising harder—75 minutes or longer—you don’t need a sports drink” given how much sugar they contain.

In an emailed statement, Gatorade says it only recommends its “products for the active occasion” and that “years of scientific research” support the need for carbohydrates in the form or sugar for “fuel during athletic activity.”

But just as public opinion swung against corn syrup-filled sodas, it’s starting to turn away from their sweet sports drink cousins. Next-generation sports drink maker Body Armor, the only privately owned brand to break the top 10, earned just $135 million in annual revenue, according to its most recent figures. That’s a 127 percent increase from the previous year, however, thanks in part to a distribution deal with stakeholder Dr Pepper Snapple Group. Another contender may be Seattle-based Nuun. It’s been No. 1 in sports specialty stores for a decade.

When it comes to building a perfect sports drink, humans are the problem

Beyond the push and pull of sodium and sugar, there’s a more intractable problem to constructing a one-solution-fits-all sports drink: you. Dr. Brad Thomas, an orthopedic surgeon for the Los Angeles Lakers, echoes the American College of Sports Medicine guidelines, which say it’s “not plausible to recommend a standardized fluid replacement protocol for all people.” That’s because everyone has varying needs to best move replacement electrolytes to where they’re needed.

While a sports drink that will work the same for most people can’t be had, the newest formulations are rallying around all-natural hydration.

When Kevin Rutherford, formerly of Kashi and Mrs. Meyer’s Clean Day, stepped in as Nuun’s chief executive officer in 2013, he chose to reformulate the entire product line. “We had a lubricant so that the tablets didn’t stick together. We changed it to avocado oil,” he says. Other fake ingredients ditched were binding agents, artificial versions of caffeine, and the source of sweetness. Instead of the organic label, which the company felt had softer standards, he opted for the higher integrity of non-GMO.

When Kevin Rutherford, formerly of Kashi and Mrs. Meyer’s Clean Day, stepped in as Nuun’s CEO in 2013, he chose to reformulate the entire product line.
Source: Nuun

Sims, the performance expert, joined Rutherford and helped the company move to such ingredients as vegan cane sugar, monk fruit extract, stevia, and dextrose. For flavoring, a partner company that uses lasers was brought on to reduce fruit to tiny particles. Other drink manufacturers still use older options like sorbitol, xylitol, fructose, sucrose, acesulfame potassium (Ace-K), aspartame, and maltodextrin. Fructose can contribute to weight gain. Sorbitol is a sugar alcohol and laxative. Ace-K is an artificial sweetener that’s 200 times sweeter than sugar. Sucrose can be a diuretic.

Nuun’s Performance line has 11 grams of sugar, compared with Gatorade’s 28 grams (in a 16-ounce serving). Its Electrolytes line has only 1 gram of added sugar. NPD says the brand now commands about 32 percent of the specialty market, and the company’s sales were roughly $25 million last year, up $5 million from a year earlier. 

Nuun’s main specialty store competitor is Hammer, which uses maltodextrin, a fact that doesn’t bother Zandy Mangold, an ultra-runner from New York who says he takes Hammer Nutrition electrolytes exclusively. While some may not process certain sugars easily, Mangold says Hammer’s drink doesn’t bother his gut—another indicator of the one-size-doesn’t-fit-all nature of sports drinks.

Other products hoping to meet the increasingly specialized demands of everyday athletes include Generation UCAN, which is made of SuperStarch, a slow-releasing carbohydrate that doesn’t spike blood sugar; Nooma, a bottled electrolyte drink made from fruit flavor, coconut water, and sea salt; Detox Water, which includes aloe flakes, agave, and lemon juice; and Aspire, which adds in caffeine sources from green tea and guarana. Thomas, the Lakers orthopedist, teamed up with Liquid I.V., an electrolyte-replacement drink that matches what he used to make for his own long-distance paddle racing. “That’s where I really became interested in sports hydration and nutrition, just to figure it out for myself and not bonking,” he says, using the slang term for when an athlete is completely spent.

Even Gatorade is attempting its own reinvention. It increased the electrolytes in its Propel line of flavored water; launched an organic line (albeit with the same amount of sugar as the regular version); and this fall plans to introduce Gx, a personal sports drink bottle that users can tailor to their own needs.

The company, responding to a question of whether it would lower sugar levels or shrink drink sizes, says only that it would “continue to innovate based on athlete insight” while “providing choice.” Powerade says it “remains dedicated” to “adapting to the changing preferences and needs” of consumers.

After years of struggling with Gatorade, the Ottawa Marathon switched to Nuun. Other races are following suit. Jack Murray, co-owner of High Five Events, which operates dozens of road races, switched to the specialty brand; and Virgin Sport, a new festival of fitness from Richard Branson’s Virgin Group, will also use Nuun exclusively.

Kalman notes an irony about the industry’s movement toward more scientifically balanced sports drinks, one related to recent studies showing how, overall, the health of Americans is declining.

“Approximately 63 percent of people in the general population don’t get nearly enough electrolytes like magnesium and potassium, and an equal amount don’t get an adequate amount of calcium,” the nutritionist says. The new generation of sports drinks, if adopted by consumers who don’t necessarily have healthy habits, let alone exercise, will help them fill “the gaps of getting the key nutrients that help cellular hydration and muscle function.”

Michael R. Bloomberg, majority owner of Bloomberg LP, supports initiatives to promote public health, including reduced sugar and salt consumption.

Editor: David E. Rovella
Design and Development: James Singleton & Steph Davidson