As a educated engineer, Ram Krishnan likes to nerd out on the science of Gatorade.
The CEO of PepsiCo’s U.S. drinks division needs to know issues like, “What’s the optimum stability between sodium and potassium given the totally different ‘sweating’ profiles of Gatorade customers?” He’ll ask his workers, “How a lot protein may be added to assist with muscle constructing?”
“We take pleasure within the science,” says Krishnan as he provides 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 displays, and different know-how for a way a lot their sodium ranges range and the way shortly 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 yearslong 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 a much bigger push for various variations of the product similar to 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 large’s single greatest division. And Krishnan is going through intense stress to make daring modifications 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 goal at PepsiCo broadly and zeroed in on PepsiCo’s North American drinks enterprise (PBNA), saying: “regardless of its strengths, PBNA has underperformed its friends for greater than a decade on each progress 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 mentioned it was “assured” that its personal initiatives—these underway earlier than the letter—would succeed.
Altering client tastes
So, what are these efforts? The Gatorade refresh is only one piece of Krishnan’s efforts to remodel PepsiCo’s North American beverage roster, which additionally consists of Mountain Dew and Pepsi Cola. Different strikes by Krishnan embody the almost $2 billion buy in Could of prebiotic soda Poppi and in late summer season, PepsiCo’s elevated stake in Celsius Holdings, making the model its chief power drink and one standard with millennial and Gen Z gym-goers and different lively individuals. (Gatorade is categorized as a “sports activities” drink as a result of it’s about quenching thirst and replenishing electrolytes, and never about boosting power.) PepsiCo additionally lately launched a prebiotic model of its flagship model, Pepsi Cola.
The PepsiCo beverage revamp comes as manufacturers like Gatorade and Pepsi have misplaced market share. American client habits have shifted away from sugary drinks towards so-called useful drinks—that means they declare to supply advantages aside from easy refreshment. Within the period of “Make America Wholesome Once more,” the continuing push from health-conscious customers and public well being teams in opposition to synthetic colours and dyes in meals and drinks has gained traction.
The deal with useful drinks makes a variety of sense, says Duane Stanford, editor of commerce publication Beverage Digest. “I name it ‘permissible refreshment.’ Mainly, these are refreshment drinks, so that they do what soda does, however in a means the place individuals really feel they’ve permission to do this.”
CEO of PepsiCo Drinks U.S.
Courtesy of PepsiCo
In Fortune’s interview with Krishnan, which befell earlier than Elliott introduced its stake, the chief mentioned Gatorade and the improvements he’s overseeing have provided a blueprint for reinventing its sister beverage manufacturers, too. “We’re beginning to basically shift from being a sports activities drink to taking part in in useful hydrations,” he says.
Gatorade woes
Gatorade, invented in 1965 on the College of Florida in Gainesville by a bunch of scientists seeking to replenish the electrolytes of scholar 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% in 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 Electrolit.
Denver Put up/Getty Photos
That’s why Krishnan is intent on exploring varied potential model expansions. Although most of the new merchandise within the Gatorade pipeline stay underneath wraps, Krishnan hints at a product targeted on protein, amongst different potentialities. Long term, Krishnan’s crew is engaged on longer lasting hydration, drinks that keep longer inside an individual’s system. “We’re discovering all these micro calls for,” he says, “and pondering the way you construct a model round it.”
This isn’t PepsiCo’s first go at reinvigorating Gatorade: A couple of years in the past, it launched a model of the product branded as “natural”—regardless of its vivid and relatively unnatural-looking colours. The trouble 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 damage the credibility of the class as an entire. In July, Coca-Cola was hit by a class action suit over the declare that its Powerade model has 50% extra electrolytes than competing sports activities drinks. (Coca-Cola has mentioned it “stand[s] behind our product.”) “There’s been an erosion of belief from a client viewpoint on the efficacy of this class,” Krishnan says.
And for a lot of customers, he says, greater costs brought on by inflation have been the final straw: “They’re opting out of the class.”
Certainly, all the large 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 out there, grew solely modestly.
Regardless of these headwinds, and Elliott’s criticism in regards to the model being unfold too skinny, Krishnan sees room for brand new merchandise underneath the Gatorade banner. “A single product formulation in all probability can not deal with every little thing from an lively event to a sporting event,” he says.
Whether or not a proliferation of recent Gatorade merchandise runs counter to the leaner assortment Elliott needs to see throughout drink manufacturers stays to be seen. (The corporate notes that previously two years, PepsiCo has streamlined its complete beverage lineup by eradicating 35% of merchandise.) Gimme Credit score analyst Dave Novosel mentioned in a analysis word in September that lowering assortment and promoting off underperforming belongings is the “doubtless path for the corporate.”
The trail forward
Elliott’s activist stance provides urgency to Krishnan’s revamp of Gatorade and the beverage enterprise as an entire.
Certainly one of Elliott’s large strategies 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 take a position extra nimbly in innovation. However following that path is a nonstarter 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 could possibly be very disruptive and take time to reap advantages.
Gimme Credit score 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 identical time, quantity gross sales of many PepsiCo merchandise have fallen, with gross sales solely up due to value hikes, one thing Gimme Credit score’s Novosel says “will grow to be tougher in at the moment’s surroundings of client uncertainty.”
PepsiCo shares haven’t moved a lot for the reason that Elliott announcement, reflecting Wall Avenue’s perception that the activist’s funding received’t result in large modifications. (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 consumers when new developments come up. “One factor we’re very targeted on throughout PepsiCo,” he says, “is that we need to keep forward of the patron.”
