Big Cola Goes Back To Its
Patent-Medicine Roots
HOLMAN W. JENKINS JR. / Wall Street Journal 8nov00
Just when you thought you had enough snake oil for one election year, now comes word that the granddaddy of "functional" beverages, Gatorade, is in play. Last week its parent company, Quaker Oats, spurned a $14 billion bid from Pepsi. Quaker's stock price jumped on the news.
The future apparently belongs to soft drinks that "do something." Virtually the entire beverage world has stopped whatever it was doing to pursue "nutraceuticals," the notion that food and drink will be peddled in the future not merely to fill you up or tickle your buds but as a means to alter your state of being. That's why Gatorade has been the apple in the eye of so many bidders.
Marketing professors love the Gatorade story. Way back in the 1960s, it was dreamed up by a Florida coaching squad to rehydrate its team for the second half, with a concoction of electrolytes and carbohydrates. Water would work just as well, but humans balk at consuming so much water at a sitting, whereas Gatorade goes down better in volume. It's the drink to have when coach is yelling at you to have more than one.
Soon Gatorade was appearing on sidelines all over the NFL, a brand identity that jocks and jock-aspirants were happy to associate with. In 15 years, sales have gone from $100 million to $1.8 billion.
They may have stumbled across it, but Gatorade's managers have drilled the message home. That includes not just paying Michael Jordan to spout the stuff from his forehead, but a team of researchers at the Gatorade Sports Science Institute to generate advertising copy that will withstand the scrutiny of the FDA and FTC.
And clearly the company has been burnishing the brand for a sale, plowing 30 cents of every dollar back into marketing. This may turn out to be the most prescient move of all.
The market will soon face an onslaught of such products claiming to make you healthier, wealthier and wiser. Anheuser Busch plans to roll out "180," a fruit drink stuffed with vitamins and an extract of the South American guarana plant. Arizona Beverages has its new Rx Line -- "Rx Memory," "Rx Stress," "Rx Energy" and "Rx Health," with kava kava, ginseng and valerian root. Coke is working up its own energy elixir, KMX.
Pepsi just nabbed South Beach Beverage, whose founder predicts the industry will soon rack up $5 billion in annual sales based on the "functional benefit of energizing the body, uplifting the spirit and enlightening the mind, not just replenishing lost fluids." But the cake goes to Real Pure Beverage, with NFLer Brett Favre as its spokesman. The brand uses magnetic resonance to "realign" drink molecules for quicker absorption.
At best the shelves are about to get very crowded with health, performance and mood claims. At worst the industry is setting itself up for a federal crackdown on what often smacks of modern-day snake oil salesmanship.
Calling these new products "functional" is more than a bit ironic. Traditionally, no business has been less functional than the cola business, which has always been about celebrities and symbolism, not about what cola "does." Ten years ago Coke and Pepsi drinkers regarded each other as lepers, though blindfolded most couldn't tell one product from the other.
Advertising magic was Big Cola's stock in trade, but now the muse has passed on to a new breed of soft drink entrepreneurs, like South Beach, Red Bull and Arizona Natural. If there's an explanation for their success, it's the de-spinachizing of "wellness." Who doesn't like the idea that something delicious and fun is also the solution for whatever ails you? Aging baby boomers are especially on the lookout for a new soda fountain of youth.
The beverage industry has already gone a long way toward coalescing with the entertainment industry, becoming a business of hits, fads and cultural symbols. Now that it's converging with the pharmaceutical business too, all kinds of interesting questions pop up.
Let us acknowledge that genuinely good things are bound to come from the marriage of food and biotechnology. Pepsi looks forward to using its Tropicana brands to deliver an array of engineered nutrients. And Gatorade has a joint venture with Swiss pharmaceutical giant Novartis.
But today's "functional" drinks mainly function to command a premium price in a marketplace where Coke and Pepsi are struggling to sell two-liter bottles for 99 cents. A 12-ounce bottle of "vitamin-fortified" water can fetch as much as $2 at the corner deli. Of the 3,069 new drinks introduced last year, nearly 20% claimed to be good for you in one way or another. No small thanks to women's magazines and network news shows, "antioxidant" and "beta carotene" have become conjuring words for opening up wallets.
But our legal and regulatory systems tend to make a stink about verifiability. South Beach was recently rapped by the FDA for proclaiming its Lizard Blizzard concoction was "loaded with nature's most powerful cold and flu fighters." One of the fastest-growing brands is Austria's Red Bull, which has become a favorite cocktail mixer with the all-night rave scene, since it includes caffeine and a jolt of the amino acid taurine.
Who knows what goes on in the minds of consumers, especially idiot kids, but these ingredients carry a holistic aura of perfect safety. All the industry needs is for one of its leading "functional" brands to get caught up in a scandal over teenagers overdosing on ecstasy.
Lately Coke has been spanked by Wall Street analysts for playing the wallflower, letting Pepsi move in on South Beach and being slow to roll out its own new drinks. But maybe this is one party worth being late to. A company with Coke's history may have noticed the striking similarity between today's excitement over functional beverages and the patent medicine boom of a century ago.
That early craze played a key role in the creation of modern advertising, touting sarsaparilla, cocaine (an ingredient in early Coke) and laudanum the way modern marketers have been trumpeting gingko and echinacea. At its peak in 1900, the patent-medicine industry rang up sales of $250 million ($4.5 billion in today's dollars).
Not long after came the passage of the Pure Food and Drug Act of 1906, prompted as much by temperance fanatics as public health types. The verdict laid down by Justice Oliver Wendell Holmes applies today as much as it did then: "Quackery and idolatry are all but immortal."
