US – Coca-Cola, one of the world’s largest beverage companies, is planning to acquire a controlling stake in BodyArmor, a premium line of sports performance and hydration drinks.
The US beverage maker revealed that it has already filed a pre-acquisition notification with the Federal Trade Commission to increase its stake.
A 3 year journey
Coca-Cola first developed interest in the company back in 2018 when it acquired a minority stake for an undisclosed amount.
Coca-Cola hinted at the time it would look to eventually acquire the brand, with the amount it would ultimately pay depending on sales and other performance measures.
The entry of Coca-Cola gave BodyArmor an new impetus for growth and the company has quickly grown over the years to become a meaningful challenger to Gatorade, PepsiCo’s iconic beverage.
BodyArmor however has a long way to go as the PepsiCo brand is far and away the market leader in the sports drink and hydration category, with about 70% market share.
A better-for-you sports drink
BodyArmor however has unique attributes that give it an upper hand compared to its competitors.
Unlike Gatorade and Coca-Cola’s own Powerade, BodyArmor is marketed as a premium sports drink through its use of coconut water, low sodium and high potassium levels, absence of artificial colors and use of sugar in place of high fructose corn syrup.
BodyArmor not only gives Coca-Cola a better-for-you sports drink, but also a hydration beverage for consumers on the go.
And it has a roster of high-profile athletes tied to it, including Kobe Bryant and baseball player Mike Trout.
This gives additional credibility to BodyArmor and boosts its reach among millennials and other consumers concerned about what they drink.
As people look to curtail sugar consumption and exercise more, beverages like BodyArmor will be in high demand and Coca-Cola no doubt wanted a bigger piece of that market.
The sales of the drink have for instance, risen 43.4% year according to Nielsen data cited by Seeking Alpha.
BodyArmor even says it has grown to become the No. 2 sports drink nationwide in the US$40 billion active hydration category and now generates more than US$1 billion in retail sales.
Investing in more profitable, faster growing brands
The acquisition comes at a time when Coca-Cola has been working to consolidate its beverage portfolio to generate more value for its shareholders.
The company acquired Topo Chico premium sparkling mineral water, launched the first Coke-branded energy drink, spent US$5.1 billion to purchase Costa Coffee and acquired the remaining stake in Fairlife milk.
At the same time, it has sold or ended production of Zico coconut water, Tab soda and Odwalla juice as part of a wider plan to eliminate an estimated 200 brands globally to focus on more profitable, faster-growing products coming out of the pandemic.
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