Coca-Cola invests in Bodyarmor, challenges Pepsi’s sports drink dominance

15 Aug 2018 --- Coca-Cola is to acquire a minority ownership stake in Bodyarmor – a fast-growing line of premium sports performance and hydration beverages – in a move that signifies Coca-Cola’s challenge to the strong market player Gatorade, which is owned by Pepsi. Financial terms of the agreement, including the size of the acquired stake, have not been disclosed.

With the acquisition move, Coca-Cola is positioned to potentially loosen Pepsi’s stronghold on the sports performance market. Pepsi’s Gatorade currently occupies three-quarters of the market. Coca-Cola’s Powerade has the second-largest market share and Bodyarmor is third, according to media outlet Fortune.

The initial investment is structured to create value for both companies and allow Coca-Cola to increase its ownership stake in the future under defined terms. Through the agreement, Bodyarmor will have the opportunity to gain access to the expansive Coca-Cola bottling system, enabling the expanding brand to accelerate its growth to meet the demand for its line of sports performance and hydration drinks. 

“If you look at the total hydration category, it’s growing at about 6 percent annually in a big, US$20 billion business. And Bodyarmor is well positioned to succeed in that category. It’s the sixth-fastest-growing trademark in retail value in the entire non-alcoholic ready-to-drink beverage industry this year and has posted 100 percent CAGR growth over the last four years,” Jim Denkins, Coca-Cola North America President says in an internal company interview.

“Bodyarmor competes in the expansive and fast-growing sports performance and premium hydration categories that are much larger than sports drinks. This is where the Bodyarmor brand has been growing exponentially.”

Concerning how Bodyarmor will sit alongside Coca-Cola's existing hydration portfolio, Denkins says, “Powerade, Vitaminwater, Smartwater and Dasani – will continue to be priorities to our system and have important roles in our overall hydration strategy.”

“Bodyarmor is one of the fastest growing beverage trademarks in America and competes in exciting categories. I have no doubt it will prove to be a strong offering to our system alongside our already powerful hydration portfolio as we accelerate our position as a total beverage company.”

The fast-growing Bodyarmor trademark includes Bodyarmor Sports Drink, Bodyarmor Ltye Sports Drink and Bodyarmor SportWater. Created by co-founders Mike Repole and Lance Collins. In 2013, basketball superstar Kobe Bryant became the number three shareholder in the company and is said to have been an integral part of the success of the brand with his involvement in creative, marketing and partnerships. Bryant will continue to be heavily involved in the brand, especially as Bodyarmor expands to global markets in the future. Bodyarmor is touted as containing no artificial colors or flavors and is made with potassium and other electrolytes, vitamins and coconut water.

Is the sports nutrition market mainstreaming?
The sports market is forecast to continue to grow by around eight percent annually to reach more than US$17 billion in 2021, with protein powder and protein ready-to-drink (RTD) being the two most significant and fastest growing product categories, reports Maartje Geraedts in The World of Food Ingredients July/August edition.

The sports nutrition market has indeed expanded beyond its base of professional athletes and the intensifying interest of key industry players such as Coca-Cola and Pepsi arguably indicates this. The market has responded with products that are more relevant to the broader demographics interested in sports nutrition, such as active consumers. Key to this demographic is convenience, which highlights the potential for RTD sports drinks which can be consumed on the go.

The RTD sports drinks remain somewhat limited in comparison with other sports nutrition subcategories as they accounted for less than four percent of launches reported by Innova Market Insights in the 52 weeks ending October 2017, but it’s worth noting that the numbers have risen by more than 35 percent over a five-year period. This marks growth. Protein-enhanced waters are also increasingly popular, with many launches reported in the second half of 2017 claiming to support recovery and hydration.

Key trends within the sports nutrition market include a variety of flavors, clean and natural ingredients, active ingredients and plant-based power.

Bodyarmor touts itself as being a source of “natural” hydration and offers not only sports drinks but sports waters. Both these ranges utilize critical trending features such as a wide variety of flavors, natural flavors and sweeteners, plant-based water and a section of electrolytes.

By Laxmi Haigh