Quaker Oats and PepsiCo rise like Jordan as Gatorade conquers the sports drink market.
Gatorade, the sports drink developed to quench the thirst of energy depleted football players at the University of Florida in 1965 was bought by Quaker Oats in 1983 for $220 million.
The oatmeal and breakfast cereals titan which also financed the 1971 film Willy Wonka & the Chocolate Factory beat out Pillsbury in a bidding war for Gatorade and subsequently grew the sports drinks business through international expansion until selling to PepsiCo in 2001.Buying Gatorade became increasingly successful for Quaker Oats as sports stars like Michael Jordan helped the sports-drink pioneer sell new flavors, supplementing its traditional lemon-lime and orange drinks. Increased visibility on professional sidelines and new flavors helped Gatorade market its products to Asian, South American and European consumers in the 1980s. For Quaker Oats, other drinks acquisitions like a $1.7 billion purchase of Snapple in 1994 didn't pan out. In 2001, Quaker Oats was bought by PepsiCo for $13 billion, as the soda, snacks and juices giant added Gatorade's portfolio of sports drinks to take on Coca-Cola (KO). With Gatorade, PepsiCo bet on an increasing consumer trend toward non-soda drinks, diversifying from its namesake cola brand. PepsiCo took the market share lead in non-carbonated drinks after buying Quaker Oats, nearly doubling its share to 33% and leaping past Coca-Cola's 21% share, according to New York Times reports. Quaker Oats' deal to buy Gatorade and PepsiCo's later acquisition appear to be an opportunistic diversification from healthy breakfast products and less-healthy snack foods. As of 2010, Gatorade commands nearly 75% of the sports drink market according to Beverage Daily and the unit is responsible for a significant chunk of PepsiCo's revenue. Gatorade is PepsiCo's fourth largest brand, drawing in over $6 billion in annual sales - eclipsing Tropicana revenue - and only surpassed by Lay's Potato Chips, Mountain Dew and Pepsi-Cola, as of 2010. Meanwhile, Quaker Oats flagship brands acquired by PepsiCo haven't maintained their importance. Annual Quaker Oats sales are roughly $4 billion as of 2010, the tenth largest PepsiCo brand. For Quaker Oats, a sports drink venture by a breakfast-foods giant in the early 1980s turned out to be a hidden gem and an attractive asset as PepsiCo looked to diversify away from carbonated drinks in the 2000s.