Inside PepsiCo’s Beverage Overhaul: Gatorade’s Reboot, $2 Billion Poppi’s Buyout, and a Gut Health Play All Under Activist Scrutiny

“We take pride in science,” Krishnan says during his talk. luck Tour the Gatorade Sports Science Institute in Valhalla, New York, 30 miles north of New York City. At this research facility, athletes are evaluated using treadmills, glucose monitors, and other technology to see how their sodium levels vary and how quickly the electrolytes and sodium in Gatorade replenish them.

Krishnan, nearly 20 years old PepsiCo The veteran, who was appointed to the North American beverage job in early 2024, took the reins of a years-long effort to bring Gatorade, the original sugary, brightly colored sports drink known for its orange taste, back to growth. Gatorade’s overhaul included some new protein-focused items and a bigger push for alternative versions of the product such as Gatorade powder. The latest addition: Gatorade Low Sugar, which will be available in stores in early 2026. It has 75% less sugar than traditional Gatorade, and boasts no artificial flavors or sweeteners.

The stakes are high for PepsiCo: With revenue of $29 billion annually, North American Beverages is the food and beverage giant’s largest single division. And Krishnan is facing intense pressure to make bold changes not just at Gatorade but across the beverage portfolio: In early September, activist investor Elliott Management took a $4 billion stake in PepsiCo, which it called a “significantly underperforming” company and sent an open letter outlining ways PepsiCo could improve growth and profitability. Elliott targeted PepsiCo broadly and focused on PepsiCo’s North American beverage business (PBNA), saying: “Despite its strengths, PBNA has underperformed its peers for more than a decade in terms of growth and margins.”

Among the criticisms: PepsiCo’s beverage business consists of an unwieldy assortment of too many products characterized by “strained focus and execution.” In a press release, PepsiCo noted Elliott’s concerns but said it was “confident” that its own initiatives — those that were underway before the letter — would succeed.

Changing consumer tastes

So what are those efforts? The Gatorade refresh is just one part of Krishnan’s efforts to transform PepsiCo’s beverage menu in North America, which also includes Mountain Dew and Pepsi-Cola. Krishnan’s other moves include the nearly $2 billion purchase of prebiotic soda Poppi’s in May and, in late summer, increasing PepsiCo’s stake in Celsius Holdingmaking the brand its flagship energy drink and popular among millennial gym-goers, Generation Z, and other active people. (Gatorade is classified as a “sports” drink because it is about quenching thirst and replenishing electrolytes, not boosting energy.) PepsiCo also recently launched a prebiotic version of its flagship brand, Pepsi-Cola.

PepsiCo’s beverage revamp comes at a time when brands like Gatorade and Pepsi have lost market share. American consumer habits have shifted away from sugary drinks toward so-called functional drinks, meaning they claim to offer benefits other than simple refreshment. In the era of “Make America Healthy Again,” an ongoing campaign from health-conscious consumers and public health groups against artificial colors and dyes in foods and beverages has gained traction.

Focusing on functional beverages makes a lot of sense, says Duane Stanford, editor of the trade publication Beverage Digest. “I call them ‘permitted refreshments.’ Essentially, these are refreshments, so they do what soft drinks do, but in a way that people feel like they have permission to do it.”

in luckIn an interview with Krishnan, which took place before Elliott announced its stake, the executive said Gatorade and the innovations it oversees provided a blueprint for reinventing its sister beverage brands as well. “We’re starting to basically shift from being a sports drink to playing with functional hydration,” he says.

Gatorade problems

Gatorade, which was invented in 1965 at the University of Florida in Gainesville by a group of scientists looking to replenish electrolytes in student football players, is a juggernaut. It achieved annual sales of $7.3 billion last year, making it the leader in the sports drink market by a wide margin, with a 63% share of US industry sales. But it’s the brand that has faltered: Gatorade’s sales fell about 5% by volume last year. While Gatorade still dominates the sports drink market, it faces a slew of smart startups, such as Prime and Electrolit.

That’s why Krishnan intends to explore several potential expansions of the brand. Although many of the new products in Gatorade’s product line are still under wraps, Krishnan hints at a protein-focused product, among other possibilities. In the long term, Krishnan’s team is working on long-lasting hydration, which is drinks that stay longer in a person’s system. “We find all these little requirements, and we think about how to build a brand around them,” he says.

This isn’t PepsiCo’s first attempt to revitalize Gatorade: A few years ago, it launched a version of the product labeled “organic” — despite its bright, somewhat unnatural colors. The efforts didn’t go far, and organic Gatorade products were eventually discontinued.

Krishnan blames some of Gatorade’s recent challenges on claims by some competitors about their sports drinks, which he says have hurt the credibility of the category as a whole. In July, coca cola He was hit Collective business suit Because of the claim that its Powerade brand contains 50% more electrolytes than competing sports drinks. (Coca-Cola said it “stands behind our product.”) “There has been an erosion of confidence from a consumer standpoint about the efficacy of this category,” says Krishnan.

For many consumers, he says, higher prices caused by inflation were the last straw: “They are opting out of that category.”

In fact, all the big players in the sports drink space are hurting right now: Last year, Coca-Cola took a $760 million writedown on its $5.6 billion acquisition in 2021 of BodyArmor, a sports drink on which it had pinned high hopes for growth, due to disappointing sales. Its Powerade brand, No. 2 in the market, has grown only modestly.

Despite these headwinds, and Elliott’s criticism that the brand is spread too thin, Krishnan sees room for new products under the Gatorade banner. “One product formulation may not be able to address everything, from an active occasion to a sporting event,” he says.

It remains to be seen whether the proliferation of new Gatorade products conflicts with the leaner assortment Elliott wants to see across beverage brands. (The company notes that in the past two years, PepsiCo has simplified its overall beverage lineup by eliminating 35% of products.) Reducing diversification and selling underperforming assets is a “likely path for the company,” Gimme Credit analyst Dave Novosel said in a September research note.

The way forward

Elliott’s activist stance adds urgency to Krishnan’s revamp of Gatorade and the beverage business as a whole.

One of Elliott’s big suggestions is for PepsiCo to return to a franchise bottling model, as Coke did — a move that arguably made its assets lighter and allowed it to invest more nimbly in innovation. But following this path is nothing new for PepsiCo, Wall Street analysts say. PepsiCo bought its bottling operations 15 years ago in a deal worth about $7.8 billion, and separating it again would be very disruptive and take time to reap the benefits.

Gimme Credit also complains that a series of acquisitions in both food and beverage added $5 billion to PepsiCo’s debt in the first half of 2025 alone. Meanwhile, sales volume for many PepsiCo products has fallen, with sales rising only because of higher prices, something Gimme Credit’s Novosel says “will become more difficult in today’s environment of consumer uncertainty.”

PepsiCo shares haven’t moved much since Elliott’s announcement, reflecting Wall Street’s belief that the activist investment won’t lead to major changes. (A decade ago, PepsiCo survived a two-year campaign by activist investor Nelson Peltz to split the company in two, separating the food and beverage businesses.)

However, Krishnan says he intends to keep the transformation of Gatorade and the rest of PepsiCo’s beverage portfolio moving along, trying to get ahead of customers when new trends emerge. “One thing we’re very focused on at PepsiCo is that we want to stay ahead of the consumer,” he says.