Inside PepsiCo’s beverage overhaul: a Gatorade reboot, the $2 billion Poppi purchase, and a gut-health play, all underneath activist scrutiny

“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 screens, and different expertise for a way a lot their sodium ranges differ 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, identified 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 akin to powdered Gatorade. The newest addition: Gatorade Decrease Sugar, which can 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 largest division. And Krishnan is going through intense strain 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 referred to 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 considerations however stated it was “assured” 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 remodel PepsiCo’s North American beverage roster, which additionally consists of Mountain Dew and Pepsi Cola. Different strikes by Krishnan embrace 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 vitality drink and one well-liked with millennial and Gen Z gym-goers and different energetic folks. (Gatorade is categorized as a “sports activities” drink as a result of it’s about quenching thirst and electrolytes and restoring sodium, and never about boosting vitality.) PepsiCo additionally not too long ago 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 customers’ habits have shifted away from sugary water drinks in direction of so referred to as “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 give attention to useful drinks makes lots of sense, says Duane Stanford, editor of the commerce publication Beverage Digest. “I name it ‘permissible refreshment.’ Principally, these are refreshment drinks, in order that they do what soda does, however in a approach the place folks really feel they’ve permission to try this.”

In Fortune’s interview with Krishnan, which befell earlier than Elliott introduced its stake, the manager stated 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 enjoying in useful hydrations,” he says.

Gatorade woes

Gatorade, invented in 1965 on the College of Florida in Gainesville by a gaggle of scientists trying 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% 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.

Denver Submit 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 underneath wraps, Krishnan hints at a product targeted on protein, amongst different prospects. Long term, Krishnan’s group 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 an model of the product branded as “natural”—regardless of its brilliant and quite unnatural-looking colours. The trouble didn’t go far, and natural Gatorade was in the end 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 a complete. In July, Coca-Cola was hit by a category motion swimsuit 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 belief from a shopper perspective on the efficacy of this class,” Krishnan says. 

And for a lot of customers, he says, larger 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 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 underneath the Gatorade banner. “A single product formulation most likely can’t tackle the whole lot from an energetic 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 within the final two years, PepsiCo has streamlined its complete 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 belongings is the “seemingly path for the corporate.”

The trail forward

Elliott’s activist stance provides urgency to Krishnan’s revamp of Gatorade and the beverage enterprise as a complete.

One in every of Elliott’s large 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 might 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 worth hikes, one thing GimmeCredit’s Novosel “will grow to be tougher in right now’s atmosphere of shopper uncertainty.”

PepsiCo shares haven’t moved a lot for the reason that Elliott announcement, reflecting Wall Avenue’s perception that the activist’s funding gained’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, making an attempt to maneuver forward of shoppers when new tendencies come up. “One factor we’re very targeted on throughout PepsiCo,” he says, “is that we need to keep forward of the patron.”