As a educated engineer, Ram Krishnan likes to nerd out on the science of Gatorade.
The CEO of PepsiCo’s U.S. Drinks division desires to know issues like ‘What is the optimal balance between sodium and potassium given the different ‘sweating’ profiles of Gatorade customers?” He’ll ask his workers, “How much protein can be added to help with muscle building?”
“We take pride in the science,” says Krishnan as he offers Fortune a tour of the Gatorade Sports activities Science Institute in Valhalla, N.Y., 30 miles north of New York Metropolis. At that analysis facility, athletes are evaluated utilizing treadmills, glucose screens, and different know-how for the way a lot their sodium ranges range and the way rapidly the electrolytes and sodium in Gatorade work to replenish them.
Krishnan, a virtually 20-year PepsiCo veteran who was appointed to the North American beverage job in early 2024, has taken the reins of a years-long effort to return Gatorade, the unique bright-colored sugary sports activities drink, recognized for its orange thunderbolt, to progress. The Gatorade overhaul has included some new objects targeted on protein and an even bigger push for various variations of the product reminiscent of powdered Gatorade. The newest addition: Gatorade Decrease Sugar, which is able to hit shops in early 2026. It has 75% much less sugar than conventional Gatorade, and boasts that it has no synthetic flavors or sweeteners.
The stakes are excessive for PepsiCo: With $29 billion a 12 months in income, North America Drinks is the food-and-beverage big’s single greatest division. And Krishnan is going through intense stress to make daring adjustments not simply at Gatorade however throughout the beverage portfolio: In early September, activist investor Elliott Administration took a $4 billion stake in PepsiCo, which it known as a “dramatic underperformer,” and despatched an open letter outlining methods PepsiCo may enhance progress and profitability. Elliott took intention at PepsiCo broadly and zeroed in on PepsiCo’s North American drinks enterprise (PBNA), saying: “despite its strengths, PBNA has underperformed its peers for more than a decade on both growth and margins.”
Among the many criticisms: PepsiCo’s drinks enterprise consists of an unwieldy assortment of too many merchandise that has “strained focus and execution.” In a press launch, PepsiCo famous Elliott’s issues however stated it was “confident” that its personal initiatives—these underway earlier than the letter—would succeed.
Altering shopper tastes
So, what are these efforts? The Gatorade refresh is only one piece of Krishnan’s efforts to rework PepsiCo’s North American beverage roster, which additionally contains Mountain Dew and Pepsi Cola. Different strikes by Krishnan embody the practically $2 billion buy in Might of prebiotic soda Poppi and in late summer time, PepsiCo’s elevated stake in Celsius Holdings, making it its chief power drink and one well-liked with millennial and Gen Z gym-goers and different lively folks. (Gatorade is categorized as a “sports” drink as a result of it’s about quenching thirst and electrolytes and restoring sodium, and never about boosting power.) PepsiCo additionally lately launched a pre-biotic model of its flagship Pepsi Cola.
The PepsiCo beverage revamp comes as manufacturers like Gatorade and Pepsi have misplaced market share. American shoppers’ habits have shifted away from sugary water drinks in direction of so known as “functional” drinks—that means they declare to supply advantages apart from easy refreshment. Within the period of “Make America Healthy Again,” the continuing push from health-conscious shoppers and public well being teams towards synthetic colours and dyes in meals and drinks has gained traction.
The concentrate on purposeful drinks makes a whole lot of sense, says Duane Stanford, editor of the commerce publication Beverage Digest. “I call it ‘permissible refreshment.’ Basically, these are refreshment beverages, so they do what soda does, but in a way where people feel they have permission to do that.”
Ram Krishnan,
CEO of PepsiCo Drinks U.S.
PepsiCo
In Fortune’s interview with Krishnan, which occurred earlier than Elliott introduced its stake, the manager stated Gatorade and the improvements he’s overseeing have supplied a blueprint for reinventing its sister beverage manufacturers too. “We are starting to fundamentally shift from being a sports drink to playing in functional hydrations,” he says.
Gatorade woes
Gatorade, invented in 1965 on the College of Florida in Gainesville by a bunch of scientists trying to replenish the electrolytes of pupil soccer gamers, is a juggernaut. It took in $7.3 billion in annual gross sales final 12 months, making it by far the sports activities drink market chief, with 63% of U.S. business gross sales. However it’s a model that has sputtered: Gatorade gross sales fell by about 5% by quantity final 12 months. Whereas Gatorade nonetheless dominates the sports activities drink market, it’s going through a slew of nimble up-and-comers, like Prime and Electrolite.
Developed by scientists within the Nineteen Sixties, Gatorade was formulated to replenish misplaced fluids, electrolytes, and sugars for athletes.
Denver Put up by way of Getty Pictures
That’s why Krishnan is intent on exploring numerous potential model expansions. Although most of the new merchandise within the Gatorade pipeline stay below wraps, Krishnan hints at a product targeted on protein, amongst different potentialities. Long term, Krishnan’s group is engaged on longer lasting hydration, drinks that keep longer inside an individual’s system. “We’re finding all these micro demands,” he says, “and thinking how you build a brand around it.”
This isn’t PepsiCo’s first go at reinvigorating Gatorade: Just a few years in the past, it launched an model of the product branded as “organic”—regardless of its brilliant and relatively unnatural-looking colours. The hassle didn’t go far, and natural Gatorade was finally discontinued.
Krishnan blames a few of Gatorade’s current challenges on the claims some rivals have made about their sports activities drinks, which he argues have harm the credibility of the class as an entire. In July, Coca-Cola was hit by a category motion go well with over the declare that its Powerade model has 50% extra electrolytes than competing sports activities drinks. (Coca-Cola has stated it “stand(s) behind our product.”) “There’s been an erosion of trust from a consumer point of view on the efficacy of this category,” Krishnan says.
And for a lot of shoppers, he says, increased costs brought on by inflation have been the final straw: “They’re opting out of the category.”
Certainly, all the massive gamers in sports activities drinks are hurting proper now: Final 12 months, Coca-Cola took a $760 million write-down on its $5.6 billion acquisition in 2021 of BodyArmor, a sports activities drink it had pinned excessive progress hopes on, due to disappointing gross sales. And its Powerade model, No. 2 available in the market, solely grew modestly.
Regardless of these headwinds, and Elliott’s criticism concerning the model being unfold too skinny, Krishnan sees room for brand spanking new merchandise below the Gatorade banner. “A single product formulation probably cannot address everything from an active occasion to a sporting occasion,” he says.
Whether or not a proliferation of recent Gatorade merchandise runs counter to the leaner assortment Elliott desires to see throughout drink manufacturers stays to be seen. (The corporate notes that within the final two years, PepsiCo has streamlined its whole beverage lineup by eradicating 35% of merchandise.) GimmeCredit analysts Dave Novosel stated in a analysis observe in September that lowering assortment and promoting off underperforming property is the “likely path for the company.”
The trail forward
Elliott’s activist stance provides urgency to Krishnan’s revamp of Gatorade and the beverage enterprise as an entire.
One among Elliott’s huge ideas is for PepsiCo to return to the franchising mannequin for bottling, like Coke did—a transfer that arguably made it asset-lighter and allowed it to speculate extra nimbly in innovation. However following that path is a non-starter for PepsiCo, Wall Avenue analysts say. PepsiCo purchased its bottling operations 15 years in the past in an roughly $7.8 billion deal and to separate them once more may very well be very disruptive and take time to reap advantages.
GimmeCredit additionally complains {that a} run of acquisitions in each meals and drinks have added $5 billion to PepsiCo’s debt in simply the primary half of 2025. On the similar time, quantity gross sales of many PepsiCo merchandise have fallen, with gross sales solely up due to value hikes, one thing GimmeCredit’s Novosel “will become more challenging in today’s environment of consumer uncertainty.”
PepsiCo shares haven’t moved a lot because the Elliott announcement, reflecting Wall Avenue’s perception that the activist’s funding gained’t result in huge adjustments. (A decade in the past, PepsiCo survived a two-year push by activist investor Nelson Peltz to separate the corporate in two, separating its meals and beverage companies.)
In any case, Krishnan says he intends to maintain the transformation of Gatorade and the remainder of the PepsiCo beverage lineup going apace, attempting to maneuver forward of shoppers when new traits come up. “One thing we are very focused on across PepsiCo,” he says, “is that we want to stay ahead of the consumer.”
