Coca-Cola buys BodyArmor to compete with Pepsi’s Gatorade – Quartz


Coca-Cola is targeting the Gatorade brand owned by its great rival Pepsi by acquiring BodyArmor.

Coke, which already owns 30% of the sports drink, is spending $ 5.6 billion to take full control of the brand, the The Wall Street Journal reported. The agreement values ​​BodyArmor at 8 billion dollars.

The beverage giant is set to buy the remaining stake in BodyArmor from the company’s founders and investors, as well as a group of professional athletes, including James Harden of the National Basketball Association and Mike Trout of the Major League Baseball. This is Coke’s biggest acquisition since its $ 5.1 billion purchase of Costa Coffee acquired in 2018.

The “natural” advantage of BodyArmor

BodyArmor positions its products as a ““natural” alternative to the tastes of Gatorade and even Powerade from Coca Cola thanks to its use of coconut water, low levels of sodium and potassium, the absence of artificial colors and the use of sugar in place of corn syrup. high fructose content.

Additionally, the list of famous athletes endorsing the brand from Harden and Trout to Naomi Osaka and the late Kobe Bryant lends credibility to the brand. His multi-year contract with Major League Soccer from 2019 not only puts its drinks in the spotlight, but its logo is also featured on napkins and kits. Recent campaigns featuring a country singer Carrie Underwood marked the brand’s first attempt to find popularity beyond the sports world.

Body Armor was founded in 2011 by Mike Repole and Lance Collins. In 2018, when Coca-Cola first invested in the business, sales were around $ 250. Since then, its sales have increased more than 43% from year to year to $ 1 billion in February 2021. Combined with Powerade, BodyArmor will give Coca-Cola a share of 22% the US sports drink market.

Scratching Gatorade’s Legacy

PepsiCo’s Gatorade, which was first developed in 1965, is still the market leader, capturing more than two-thirds of the US market.

Powerade, including Coca-Cola presented as a rival of Gatorade in 1992, offered competetion for a while in the early 2000s, but quickly slipped. Meanwhile, Gatorade has stayed on top of its game by innovating and strengthening its product pipeline, evolving with the times by offering, among other things, drinks with no calories and less sugar.

With the BodyArmor deal, Coca-Cola has another chance to squeeze Gatorade into the growing market. Coke could ‘sandwich’ Gatorade by offering BodyArmor at a premium price and Powerade at a discount price, Duane Stanford, editor of Beverage Digest, Recount Le Tambour marketing press agency.

For Coca-Cola, the deal has “the potential to reinvigorate the company’s sports drink business and fuel growth across the portfolio,” Bonnoe Herzog, analyst at Wells Fargo. said.

Sports drinks, coffees and spirits

The war with Gatorade is bigger than sports drinks.

BodyArmor deal is part of broader move away from soft drinks, urgently needed as Classic Coke sales have fell 22% over the past decade.

When CEO James Quincey took the reins of Coke 2017, he said he wanted it to become a “total beverage company. “

Coca-Cola has since acquired Costa Coffee, premium sparkling mineral water Topo Chico brand, and dairy Fairlife brand. He also began testing the waters in the alcohol segment.

Not all of his experiences paid off. Energy, launched to compete with the energy drink Monster was retired within the year due to poor sales. Coca-Cola sold Zico coconut water and Odwalla juice, and discontinued the production of its very first diet cola, Tongue, as part of its closure plan 200 brands in the world and focus on the most profitable and fastest growing products in its portfolio.

But the BodyArmor deal is proof that its diversification efforts are far from over.

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