Gu's sticky dilemma
Berkeley, California, is a hotbed of health-related entrepreneurship. First there was PowerBar, then Clif Bar. And now there is Gu Sports.
Gu is the inventor of a product category called energy gels. Sold in foil-wrapped packets, they deliver a convenient oral dose of carbohydrates, electrolytes, and amino acids that are rapidly digested. Started in the early 1990s, the product has been adopted by endurance athletes like runners and triathletes. It has grown into a $15 million business, and is no ready to move to the next stage, a wider market.
Gu Sports, with 50% of the market, should be thrilled. But as is pointed out in a Wall Street Journal article ("Big Rivals Can Open Up Markets, But It's Risky," 11/7/2006), it may be poised for disaster.
#2 in the sport gels fields is Nestle/PowerBar with 35% of market, while Clif Bar, seller of the Luna Energy Bar, has about 15% of the energy gel market.
But Nestle is about to break the market open. It recently signed a deal with Wal-Mart to distribute the product in 1,200 stores, and an ad campaign is the works. In way, this builds product awareness, good for Gu Sports. On the other hand, a tiny company like Gu will be shut out of anywhere but the specialty stores it now sells through.
Nestlé's rivals and private equity firms are certainly knocking on Gu's door. The question is whether the principals can hold out, especially when they see Nestle get rich off what was their basic idea. And how long will it take for PepsiCo to come out with a Gatorade sports gel? It may be that Gu Sports, like Clif Bar, can survive as an independent. But the odds are against it.
10:06:45 PM 
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