How Powerade Downed Gatorade in Court

NEW YORK Yesterday's verdict in favor of Coca-Cola's Powerade had a lot to do with endurance -- Gatorade Endurance, court documents revealed.On April 13, Gatorade's parent company, the PepsiCo-owned Stokley Van Camp, filed suit against Coca-Cola's Powerade ION4 product. It alleged false advertising, trademark dilution as well as other claims.The case centered around the fact that Powerade ION4 positioned itself as the more complete sports drink because it added two electrolytes that Gatorade did not have -- calcium and magnesium. At the same time, Powerade called out Gatorade for being incomplete.Manhattan district judge John G. Koeltl ruled on Aug. 4 that SVC "has not shown either a likelihood of irreparable injury or a likelihood of success on the merits."In fact, the judge wrote: "Given SVC's research capabilities and resources [including the Gatorade Sports Science Institute], its failure to present any concrete evidence of harm or likely harm is striking."The judge also explicitly cited Gatorade's "unclean hands" as a key factor in determining the verdict. This referred to the fact that Gatorade was planning to launch a similar product called Gatorade ION+ prior to the debut of Powerade ION4. The court documents said that Gatorade saw this as a "competitive defense against ION4 by blunting any marketing advantage Coca-Cola might achieve."However, PepsiCo was having issues sourcing calcium. So rather than launch the product after ION4, it decided to decry Powerade's claims.But undermining this complaint was the fact that Gatorade Endurance, launched in 2004, had been making the same claims about the benefits of calcium and magnesium in its formulation. "In fact," the court documents said, "SVC appears to have gone further than even Coca-Cola, directly attributing performance and hydration benefits to the presence of these two electrolytes in Gatorade Endurance Formula." It provided a table highlighting these ingredients for its packaging and called them "key electrolytes lost in sweat."Any mention of this was scrubbed from the brand's marketing prior to Gatorade filing suit. And on March 25, SVC issued talking points to its spokespeople claiming that magnesium and calcium are not important in a sports drink. Members of the marketing group expressed "concern" about the tactic, per the court documents.In March, Powerade launched its campaign. Coke said the first phase, which used comparative attack ads painting Gatorade as incomplete, was only meant to appear for 60 days and has since run its course. Some of the ads calling out Gatorade were pulled earlier because "ESPN indicated that Gatorade had called ESPN sales folks and threatened to withdraw millions of dollars in advertising," per the documents.Because the comparative ads have stopped running and aspects of ION4's labeling are currently being changed, the court ruled that SVC's legal complaints against them were moot. "Moreover, there is no evidence that any comparison to Gatorade is false," Judge Koeltl wrote. Plus, "the ratio claim that Powerade 'replenishes four critical electrolytes in the same ratio typically lost in sweat' is literally true." The court also saw no fault in the "Upgrade you formula. Upgrade your game" tagline.Additionally, the judge wrote that Gatorade was unable to prove that the slogan "The complete sports drink" is literally false. SVC took exception to using the word "the." The judge disagreed, saying such puffery is used all the time in advertising.The ruling comes at a time when Gatorade is extremely vulnerable. It was cited in PepsiCo's second-quarter earnings report as one of the key factors dragging down the company's North American net revenue 7 percent.The company has promised new offerings in 2010 to help draw back casual drinkers to the brand. Created in 1965, it still owns more than three-quarters of the sports drink market. Powerade owns 20 percent of the category.Gatorade representative Pete Brace said of the verdict: "We accomplished what we set out to do. When we filed our lawsuit, Powerade stopped its overtly disparaging claims against Gatorade in its advertising and told the court it is changing its labeling. That's why we filed the lawsuit."Coca-Cola spokesperson Scott Williamson had a different take: "This is a complete win for Powerade ION4, the complete sports drink. This brand is energized, and more committed than ever to deliver cutting-edge replenishment to sports drink consumers. Our science and marketing teams will continue to push the industry forward, and we won't let the grandfather of the category make the rules."New York shop Ammirati handles Powerade.DOWNLOAD THE COURT PAPERSNielsen Business Media

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How Powerade Downed Gatorade in Court

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