How They Started (24 page)

Dana’s request was simple: the doctors wanted $1 million for their sports drink. But Stokely-Van Camp’s board balked at this offer, believing they couldn’t sell a salty-tasting drink to the mass market. Instead, believing the product had limited potential, they negotiated a marketing deal with a royalty structure that gave Robert, Dana, Harry and Alejandro a $5,000 signing bonus and 5 cents on every gallon of Gatorade sold. The deal would make them very rich.

Surprised to find himself in the position of a businessman, Robert next approached the university and asked if it would like to buy Gatorade from him, or perhaps give him $10,000 to keep the product coming. The university declined.

Soon after the deal, Stokely-Van Camp worked on making Gatorade more palatable for the mass market. While attempting to maintain the integrity of the science behind the product, the new ownership sought to improve its taste. A number of new flavors were trialed, of which only orange was successful, and they added 2 percent more sugar to the original lemon-lime solution.

Many college football and basketball programs began ordering the drink in bulk, and professional sports teams began to take notice, as well. In the year prior, 1967, Stokely executives had quietly signed a $25,000 deal with the NFL for Gatorade to be the league’s official sports drink—a deal that in hindsight was quite prescient. The agreement meant that every NFL team, whether they drank it or not, was required to keep Gatorade-branded coolers and cups on the sidelines of every game.

A glowing article about the drink in
Sports Illustrated
pushed its profile even higher. Soon the biggest stars of the NBA were claiming the cloudy drink gave them more stamina in high-pressure games. Tennis star Arthur Ashe even called Stokely’s offices personally to see how he could get a shipment of the wonder solution.

Meanwhile, the royalties were pouring in for Robert and the other doctors. By 1969, Gatorade was being sold and marketed nationwide. It was the new official drink of Major League Baseball, and a major marketing campaign with Florida Gators Coach Graves pushed Gatorade ahead of Pork & Beans in Stokely-Van Camp’s portfolio of profitable products. Gatorade was even Elvis Presley’s drink of choice.

Things were on the upswing until later that year when the Food and Drug Administration issued a ban on cyclamate due to new research showing it was harmful to one’s health. Cyclamate, of course, was a key ingredient in Gatorade, and the doctors were forced to regroup. Executives at Stokely-Van Camp were worried about the cost of pulling Gatorade from supermarket shelves, as well as how the product would continue without the sweetener.

Eventually the company replaced the cyclamates with fructose, which, like the banned cyclamates, is sweet and transports quickly through the body. While a number of other companies struggled with their rebranding after the FDA’s cyclamate ban, Gatorade thrived. Company research found that very few consumers knew Gatorade contained cyclamates to begin with, and by simply not rebranding the fructose-based Gatorade, as other drink manufacturers did with their own products, very few knew there was a change in recipe.

In yet another development in what would be a key year for the company, Florida Gators Coach Ray Graves suggested to his friend Hank Stram, coach of the NFL’s Kansas City Chiefs, that his team should drink Gatorade to help cope with the heat and humidity during the team’s summer training camp. Stram agreed, and the Chiefs were so impressed with the “Gator coach’s aid” that Stram kept it on the Chiefs’ sidelines throughout the entire season … which ultimately led to a stunning victory over the Minnesota Vikings.

Gatorade soared to the number one market position, and to capitalize on its popularity Stokely launched the brand’s now-famous lightning bolt logo, which was meant to represent the speed with which the body absorbs Gatorade.

As Gatorade’s profile grew, however, so too did the number of people trying to claim credit. Because Robert had stated in company reports that Gatorade had been partly developed using money from National Institutes of Health grants ($80,000 in total over five years), the federal government sent him a letter declaring its potential ownership of the product. Likewise, the University of Florida also sought its share of the profits, despite passing on the product previously.

Robert, Dana, Harry and Alejandro responded by forming the Gatorade Trust and selling their product to Stokely-Van Camp. While the US government backed off its claim, the University of Florida pressed harder, even spurning Robert’s offer to give his entire share of the trust—13 percent (valued at $2.6 million)—to the school because University officials believed they could win more in court.

“Gatorade started out as fun,” Robert told the
Atlanta Journal-Constitution
at the time. “A lark, just a little probe into man’s machinery. It’s not a joke anymore.”

With the trust’s legal fees—and tensions—rising, Robert left the university in 1971. Finally, in 1972, with the help of a US congressman, both sides reached a resolution. Stokely-Van Camp was allowed to keep the Gatorade trademark, while the University of Florida was granted 20 percent of the product’s royalties, as well as $237,509 in back pay—and as of 2007, the school had claimed more than $110 million in profit from Gatorade.

With their legal woes behind them, the new ownership got back to the business of selling Gatorade. Throughout the 1970s, Stokely-Van Camp sold hundreds of thousands of gallons annually. The company continued to grow and make a tidy sum from the sports drink until 1983 when, following a bidding war with Pillsbury, the Quaker Oats Company purchased Stokely-Van Camp and Gatorade for $220 million.

This marked a turning point in Gatorade’s history. In its first two decades of existence, Gatorade had been marketed solely within the United States, but Quaker Oats saw potential in international markets. Beginning with Canada, Quaker Oats began a program of expanding the drink’s distribution to Europe, South America, Australia and parts of Asia. By the mid-1990s these efforts returned more than $283 million in international sales. Gatorade was being sold in 45 countries, and the addition of 10 more in 1997 led to another 18.7 percent boost in sales.

Clever—and free—marketing campaigns helped drive the brand through this period. Having begun with the New York Giants, the tradition of the “Gatorade bath” soon spread to all professional and amateur sports and gave Gatorade an association with premier athletes and success, which it neither had to pay for nor invest much effort in perpetuating.

During this time the company also landed a major coup over Coca-Cola, which had just launched rival sports drink Powerade, by outbidding them to land Michael Jordan as a spokesman. The year 1991 brought Jordan—arguably the most well-known athlete in the world at the time—into the Gatorade fold on a 10-year, $13.5 million deal.

“I think if you had kept Michael with Coca-Cola and the advertising was well done, they would have been able to dramatically penetrate Gatorade’s dominance in the marketplace,” Jordan’s agent, David Falk, said at the time.

The enduring success of Gatorade’s “Be Like Mike” campaign had led to top stars from all professional sports associations (Peyton Manning, Tiger Woods, Mia Hamm, Derek Jeter and more) signing on to be product spokespeople.

Gatorade used this period of growth to expand its product line. After 20 years of just two flavors, lemon-lime and orange, Gatorade introduced Fruit Punch in 1983, and followed that up five years later with Citrus Cooler. These sweeter flavors appealed to younger consumers and delivered the product a new market audience. In the 1990s Gatorade expanded its flavors even further with Cherry Rush, Strawberry Kiwi and M’mmmandarina, among others.

Clever—and free—marketing campaigns helped drive the brand. … The tradition of the “Gatorade bath” soon spread to all professional and amateur sports and gave Gatorade an association with premier athletes and success.

This was followed by Gatorade Frost. Described as an “active thirst” product, it was intended to appeal to consumers outside of the company’s traditional team sports market. Flavors like Alpine Snow, Glacier Freeze and Whitewater Splash quickly caught on and far surpassed the company’s expectations.

In 2001, another key year for the company, Gatorade marked its first move into the solid food market with the Gatorade Energy Bar. Packed with protein and carbohydrates, the Gatorade Energy Bar was intended to give people the same pick-me-up and endurance that the original drink was famous for. This was followed in the same year by the introduction of the Gatorade Performance Series. This specialist line of sports nutrition products included Gatorade Carbohydrate Energy Drink, Gatorade Nutrition Shake, Gatorade Protein Recovery Shake and Gatorade Nutrition Bar, aimed at elite athletes.

Gatorade was at its peak. It was seemingly going from strength to strength, and in a somewhat surprising move, also in 2001, the Quaker Oats Company was acquired by the mammoth multinational food and drink company PepsiCo. The deal, for $13 billion, solidified Gatorade’s top spot in the market, with even greater marketing and R&D budgets, as well as further expansion into overseas markets. Gatorade was introduced to India, Ireland and the UK. By 2010, Gatorade was being sold in more than 80 countries worldwide, often marketed with localized flavors.

As 1990 dawned
, Kirk Perron was a health-conscious 26-year-old with an idea: he thought fruit-filled smoothie drinks could have popular appeal. The scrappy California native, who’d only made it through a two-year junior college, had no idea just how popular his new company—first known as Juice Club and later as Jamba Juice—would become. Today it’s the largest smoothie chain in the US, with more than 700 stores and over $260 million in annual sales.

How did a young entrepreneur and three of his friends in the small Northern California town of San Luis Obispo come out on top in the smoothie wars, despite scant retail or restaurant experience? It took hard work, networking, a well-timed flat tire, and a fortuitous visit to put Jamba Juice on its way to success.

Growing up in Los Angeles, and later in San Luis Obispo, Kirk showed his entrepreneurial bent early. At 17, he put together a buyer syndicate of adults he knew at school and bought an acre of land in nearby Paso Robles, California, which he soon sold, Jamba Juice co-founder Kevin Peters recalls. With his share of the profits, Kirk purchased a triplex apartment, and later built and sold a duplex next door.

After graduating from Cuesta College, a local two-year junior college, Kirk was drifting. He was working at a Safeway grocery store, and hating it; he was looking to get out and start his own business.

In his 20s, Kirk had become a health and fitness buff, into gym workouts and long bike rides. After exercising, Kirk sometimes cooled off with a smoothie at one of the local stands. At the time, the few smoothie shops in the area were mostly shacks on the beach or hole-in-the-wall places.

Kevin recalls the shops of that era as “strictly geared for the granola people.” In other words, they appealed to only a small segment of the population.

Ever on the hunt for his next business idea, Kirk began to think about the potential for introducing smoothies to mainstream consumers. It was 1990, and the low-fat health craze was just taking hold. Smoothies were a low-fat product. Kirk reasoned that if smoothies were sold in a clean, well-designed, friendly, well-located store, they could attract a broader audience.

There was a growing smoothie chain in the south—Smoothie King had started in 1973—but no established chain on the West Coast. No one had created a systematized
business
around smoothies, with appealing stores and consistently tasty products.