A 16 per cent rise in fourth quarter profits at giant snack food and soft drink maker PepsiCo has been offset by growing concerns about the recently acquired Gatorade sports drink business.
The company said that first quarter sales growth at the Gatorade and Tropicana North America business would be low, as Gatorade faced "intense competitive pressure" from arch rival Coca-Cola and its PowerAde brand.
PepsiCo paid a high price for the Quaker business last year principally because of the strength of the Gatorade brand, but it has yet to see a real return on its investment.
Fourth quarter sales at Gatorade/Tropicana North America fell by two per cent, but operating profits rose six per cent. The company said that it remained confident about the full-year performance from Gatorade, despite the likely difficulties in the first three months of the year.
Recent data from industry newsletter Beverage Digest shows that Gatorade's market share in major food and drug stores in the US dropped by 2.5 per cent last year, exactly the same amount as was gained by PowerAde.
Gatorade's dominance of the sports drink market is such that there is little fear that PowerAde will be able to steal its crown, but PepsiCo officials are likely to be keen to put a stop as soon as possible to relentless loss of market share to the Coke brand.
PepsiCo has other weapons in its armoury to meet the challenge of PowerAde. A new energy drink called AMP produced by Pepsi's Mountain Dew unit is due to debut sometime this year, while a new Gatorade product, fruit-flavoured Xtremo, is being targeted particularly at Hispanic consumers.