Pepsi to Make Low-Cal Gatorade

NEW YORK - Pepsi is offering a new low-calorie version of Gatorade in an effort to keep customers who have strayed from the sports drink in search of lower calorie drinks.

PepsiCo Inc., which announced plans for the low-cal G2 version of Gatorade on Friday, and its bigger rival The Coca-Cola Co. are aggressively competing for sales of non-carbonated beverages as health-conscious consumers shy away from carbonated soft drinks.

PepsiCo, the nation's second biggest soft drink company, said in July that its sales of carbonated soft drinks fell 4 percent in the second quarter while non-carbonated drinks grew 3 percent.

Last year, non-carbonated beverages accounted for 69 percent of PepsiCo Beverages North America's $9.57 billion in 2006 revenue, more than double that from soft drinks that made up 31 percent of the unit's total. Gatorade has been a key growth driver but sales have slowed recently.

"G2 should help limit the downside risk to a Gatorade slowdown," Morgan Stanley analyst Bill Pecoriello told investors in a research report.

Gatorade sales slowed in the second quarter after a 2 percent to 3 percent price hike in March and in comparison to sales that had grown 29 percent a year earlier.

G2, PepsiCo said, will have 25 calories per eight-ounce serving and is the first new Gatorade product since the original drink was introduced in 1967. The original lemon-lime Gatorade has 50 calories per eight-ounce serving.

Purchase, N.Y.-based PepsiCo said it will distribute G2 starting in December to convenience stores, gas stations and retail outlets. The new Gatorade will come in three flavors: fruit punch, grape and orange.

PepsiCo also announced on Friday that it would introduce a bottled water with caffeine and vitamins called Propel Invigorating Water; reformulate its SoBe Life Water with sucrose, antioxidants, vitamins and fewer calories; and use a new sweetener blend with fewer calories for its Aquafina Alive water.

In June, Coca-Cola bought VitaminWater maker Glaceau for $4.1 billion, a price tag that signaled the company's seriousness in pursuing growth of non-carbonated beverages. Since then, the company has also given its Glaceau management team control of its Powerade sports drink brand, which competes directly with the more popular Gatorade.

PepsiCo also owns the Frito-Lay snacks, Quaker foods and Tropicana orange juice businesses.

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AP Business Writer Lauren Shepherd in New York contributed to this report.