Duets Blog : Creativity and the Law: DuetsBlog

I commend Gatorade for shifting their philosophy in 2010. In 2010, they will redefine their target consumer. Their 2010 efforts will focus on the serious athlete that desires peak athletic performance. This is closely aligned with their origins. For many years, Gatorade has tried to widen their audience, and not succeeded. It is very difficult to be all things to all people, and a laser focus on a specific group of people is a strong strategic approach.

The best decision that Gatorade made for 2010 is to remove high fructose corn syrup from all of their products. A few years ago, Gatorade changed the sweetener from sugar to high fructose corn syrup. The nutrition value (or lack thereof) of high fructose corn syrup has been intensely debated in recent years (here, here and here). Many attribute high fructose corn syrup to causing higher rates of obesity. It is not smart strategy to use an ingredient that can be perceived as harmful to health, particularly when your target consumer is athletic and health conscious. This move gives Gatorade a competitive advantage over chief category rival Powerade. High fructose corn syrup is an ingredient in Powerade products other than Powerade Zero (low calorie version). It also falls in line with the Coca-Cola model of returning a product to the original formula.

Gatorade is planning to revamp their packaging, for both G and the lower calorie G2. Packaging was a key reason why Gatorade struggled in 2009. Consumers did not recognize the nebulous “G” packaging and had no perceptions of the meaning of the “G” brand. The decision to redevelop the packaging is correct. The execution is likely to be a failure. Recently, PepsiCo has redesigned the packaging on the Pepsi line of products and Tropicana. Both redesigns were poorly conceived and executed. There was such a strong backlash against the Tropicana redesign that PepsiCo quickly reverted back to the old packaging. With regards to Gatorade, the only acceptable package redesign is a reversion to classic Gatorade packaging. If the packaging does not resemble classic Gatorade packaging, they will be wasting time and money.

The worst aspect of Gatorade’s 2010 marketing strategy is the expansion of the product line. A product line extension should accomplish at least 1 of the following 2 things: expand the size of the market and/or expand the number of a brand’s product offerings that a given consumer purchases. Gatorade’s line extension will not accomplish either.  By adding the “Prime” and “Recover” beverages to the existing product line (G and G2), Gatorade now has at least 4 distinct segments of their product line. It is bound to cause consumer confusion.  Generally speaking, it is difficult for consumers to perceive how the brand’s multitude of products is going to benefit them. Because of this confusion, consumers are more likely to choose a simpler alternative. This strategic problem is augmented by the current economic climate. Asking the target consumer to adopt product line extensions in the worst recession since the Great Depression is a recipe for disaster. Through this decision, Gatorade is showing how out-of-touch they are with their target consumer.

Gatorade’s stubborn refusal to return to its roots and provide simplicity in its branding strategy will continue to damage brand equity and negatively impact revenue. In the first four decades of its history, Gatorade had all of the makings of an iconic brand. The product was consistent, as well as the overall themes of the marketing communication messages. Consumers perceived the brand as valuable in its category. This is similar to iconic brands such as McDonald’s, Nike, Budweiser, BMW and Crest. Coca-Cola also fits this description, with the exception of a period of temporary insanity in the mid 1980s. Coca-Cola remains the best precedent for Gatorade, but Gatorade continues to reject their methodology in restoring a classic brand after an ill-conceived revitalization.

—David Mitchel, Norton Mitchel Marketing

What makes a good brand name? Landor Associates, a well known brand consultancy, identifies three key criteria: strategic, linguistic and legal.

Strategic criteria:

• Does it capture your brand’s essence in a meaningful way?
• Is it appropriate and appealing to your target audience?
• Is it as brief as possible?
• Does the name connect to what the business is about?
• Does it have the potential to be memorable?
• Does it limit you in any way?

Looking at the strategic criteria, the brand name Gatorade excels. It does capture the brand’s essence and connects to what the business is about. In the 1960s, University of Florida scientists developed a chemical mix that enabled the Florida Gators football team to stay hydrated and enhance athletic performance. Just over a year after the creation of Gatorade, the Gators won the Orange Bowl. The name is brief, memorable and non-limiting.

In terms of G, it doesn’t capture brand essence, it is undifferentiated, it doesn’t connect to the business, it is not memorable and it is limiting. G is so nebulous that it can be interpreted in many different ways and many of these interpretations are destructive to brand equity. Does PepsiCo want Gatorade’s G to be associated with Gangstas and the illegal drug trade? I think not.

Linguistic criteria:

• Is it appropriate in meaning in all major languages?
• Is it easy to spell and say?
• Does it limit you in any way?
• Have you considered all relevant cultural sensitivities?
• Is it too similar to an existing trademarked brand that it may cause consumer confusion?

Gatorade passes all of these linguistic criteria with flying colors. G does not. While it is easy to spell and say, it is limiting and doesn’t consider relevant cultural sensitivities with possible connotations to gang and drug trafficking subcultures. Trademark attorney Steve Baird has already pointed out many of the possible points of confusion with G.

Legal criteria:

• Can you use it without infringing on another trademark?
• Can you own and protect it as your trademark?
• Is the domain name available?
• Can you use it and protect it in all relevant geographies?

Gatorade passed all the legal criteria. G didn’t-it can’t be owned and there are potential infringement issues which Baird has documented.

Since we have seen that G fails as a quality brand name, it is a logical conclusion that Gatorade sales will slump. Existing brand data supports this conclusion.

Gatorade lost a 4.5% share of the sports-drink market and volume slipped 17.5% in the first six months of this year, according to Beverage Digest estimates. It now has about a 75% share of the sports drink market. In July, a Gatorade spokeswoman told the Wall Street Journal that sports drink volume has slipped more than 12%. This means that Gatorade underperformed in the first half of 2009 as compared to its peers in the market.

Gatorade’s slump has really dampened PepsiCo’s performance. Pepsi Americas’ beverages unit had revenue fall by 6% in the 2nd Quarter of 2009. Coca-Cola North American beverage unit only experienced a 1% drop. It is worth mentioning that Coca-Cola owns the Powerade brand, Gatorade’s main rival. Powerade volume sales increased by 23.6% in the 1st Quarter of 2009. 

In a desperate attempt to revitalize sales, Gatorade called on former pitchman Michael Jordan to enhance the sagging brand. This coincided with Jordan’s entry into the Basketball Hall of Fame in September. According to Bill Sipper of Cascadia Consulting, a food and beverage consultancy, Michael Jordan wasn’t the right person to help out the brand. Sipper said “Anyone who followed Michael Jordan 30 years ago is not their prime consumer today.” Sipper also had harsh words for the G campaign as a whole. He said “It's the worst ad campaign in 30 years. The most uncool thing is trying to be perceived as cool.” Consumer perception of G certainly reflects Sipper’s sentiments, as the aforementioned sales numbers indicate.

On October 1^st, PepsiCo CEO Indra Nooyi said the company is planning a “massive Gatorade transformation” for 2010. Part of this “massive transformation” will be the introduction of new products formulated to the needs of different types of athletes, according to CFO Richard Goodman. For the sake of PepsiCo’s financial performance, all products should be branded as Gatorade and have absolutely no indication of G. Now is the time to retire the G campaign, just as Coca-Cola retired New Coke when it was obvious that New Coke was a failure. At that point, Coca-Cola underscored its history of cola excellence. In 2010 and beyond, every aspect of Gatorade’s marketing mix should emphasize Gatorade’s rich tradition of enabling athletes to achieve peak performance. This recipe should help PepsiCo’s achieve peak performance in the same manner that an athlete achieves peak performance by drinking Gatorade.

—David Mitchel, Norton Mitchel Marketing

Despite the failing grade, G apparently is claiming victory anyway because Powerade agreed to cease running the challenged comparative ads and stop calling Powerade "incomplete" during the pendency of the case. The problem with G's victory chant is that it had these concessions before the Court ruled on the preliminary injunction motion. By failing to simply gain Powerade's concessions on the record and moot the need for the Court's decision on the motion for a preliminary injunction, G pushed the Court for more, and, it appears, the strategy backfired, leaving G being found guilty of unclean hands.

Gatorade's false advertising claim challenged four specific Powerade advertising claims as being literally false:

1. Powerade ION4 is "THE COMPLETE SPORTS DRINK" and "COMPLETE," while Gatorade is "INCOMPLETE" and "MISSING" "CRITICAL" electrolytes, namely, calcium and magnesium;
2. Powerade ION4 "replenishes 4 critical electrolytes in the same ratio typically lost in sweat. Other sports drinks don't";
3. Powerade describes calcium and magnesium as "critical" electrolytes; and
4. Powerade's slogan "UPGRADE YOUR FORMULA. UPGRADE YOUR GAME."

Because Powerade agreed to at least temporarily stop calling G "incomplete" and not refer to it as "missing" anything, the Court considered those claims moot for purposes of the requested emergency injunctive relief and it was left to rule on G's remaining weaker claims. Indeed, the Court didn't break a sweat in concluding that none of the remaining challenged statements were literally false. While G is free, of course, to continue pursuing each claimed false advertising statement to a final conclusion, it cannot prevail on any of them without actually proving consumers were misled by submitting valid consumer survey evidence or some other kind of extrinsic evidence of actual consumer deception.

Trying to argue a meaningful difference between "the" and "a" got G nowhere with the Court. After recognizing that G had admitted Powerade is "a" complete sports drink, it ruled use of "the complete sports drink" phrase to be non-actionable puffery upon puffery "because consumers understand that the advertiser is not contending that the particular attribute or feature can only be found in its product."

Moreover, the Court found that G's initial and preferred strategy for dealing with the competitive threat from the new Powerade formulation simply was to compete, by removing the feared point of differentiation: adding calcium and magnesium to G's formula. But it scrapped this legitimate plan only after learning of a widespread commercial shortfall of calcium that would delay G's ability to get to market with an updated formula before Powerade's new ION4 sports drink.

Finally, the Court didn't lose a drop of sweat dispensing with G's false advertising claims because of G's unclean hands:

There is no question that [G's] conduct has a 'material relation' to the equitable relief that it seeks. [G] complains about [Powerade's] claims regarding the presence of calcium and magnesium in Powerade ION4, but it has made virtually identical claims about calcium and magnesium in its own Gatorade Endurance Formula. Courts in this Circuit and elsewhere have routinely found that a plaintiff's misconduct relates to the subject matter of its claims where, as here, the plaintiff has engaged in the same kind of behavior that it challenges.

[G] cannot, having jumped on the bankwagon of calcium and magnesium first, now jump off and claim that [Powerade] must get off too. Therefore, although [G] is not entitled to a preliminary injunction because it has not shown either a likelihood of irreparable injury or a likelihood of success on the merits, its own unclean hands also precludes the equitable relief of a preliminary injunction.

It is clear from the Court's opinion that G's lawyers knew about G's recent and prior history of touting calcium and magnesium in a sports drink prior to suing Powerade. Indeed, according to the Court's decision, they actually directed G's marketers to "purge its advertising -- including its website -- of positive references to calcium and magnesium. On or about April 16, 2009, [G] changed its website to remove the statement that calcium and magnesium are 'vital for proper nerve transmission and muscle contraction.'"

It's kind of hard to complain about the use of the word "critical" when you freely use the term "vital," right?

Even putting aside the unanswered legal questions in Gatorade's truncation to a single letter, the makers of "G" -- in the end -- may be sorry they asked the bold question, not necessarily for legal reasons, but business reasons, after hearing the infinite number of possible responses to the question, many of them negative or otherwise unhelpful associations with the otherwise famous and dominant sports drink brand.

For example, the campaign already has been criticized for apparently ignoring "Gangsta" as one possible answer. Unbound Edition cleverly noted that "Gatorade Fumbles With Its G Spot". How about a "G" of cocaine or some other illegal substance? As Bob Garfield of Ad Age recently posted: "In a world where X stands for Ecstasy and H stands for heroin, you'd better take care how you sling around your Gs." Some apparently use "G" as an abbreviation for GHB, a/k/a "Liquid Ecstasy". How long will it take the keepers of the Gatorade® brand to recognize the need to avoid having the iconic "Gatorade Shower" become an abbreviated "G Shower", after recognizing that "G" is also an abbreviation for the word "Golden"? So, it is probably safe to say that the J (jury), so to speak, is still out on whether asking "What is G?" is an effective way to re-brand Gatorade®.

Finally, some have argued that any Gatorade® re-branding should have moved toward making the word mark synonymous with the Lightning Bolt logo. That is a topic for another day. In the meantime, to test this argument, you may want to check out my post concerning non-verbal logos that truly can stand alone. As for today, the "G" re-branding campaign seems to go way too far in attempting to "own" one of the twenty-six letters in the alphabet, especially so, with the crowded field demonstrated above. As Graphicology Blog aptly noted: "A couple spots cannot give meaning to a letter overnight, and I’m not sure many years of advertising can either."