Coca-Cola taking on PepsiCo with a $5.6B investment in sports drinks

on Nov 1, 2021
  • Coca-Cola buys full control of BodyArmor in a $5.6 billion deal
  • BodyArmor to help Coke compete with PepsiCo in the sports drinks segment
  • Coke acquired a 15% share of BodyArmor three years ago, making it the second-biggest shareholder in BodyArmor

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Coca-Cola Inc. (NYSE: KO) has announced that it has paid $5.6 billion for full ownership of sports drink maker Bodyarmor. This will be the beverage maker’s most significant acquisition so far.

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Coke first bought an interest in bodyArmor in 2018

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In 2018, the company purchased a 15% investment in Bodyarmor, making it its second-largest shareholder. Basketball legend Kobe Bryant was the company’s third-largest shareholder at the time, having invested in Bodyarmor just two years after its establishment. According to The Wall Street Journal, the sale will net the late NBA star’s estate more than $400 million.

The purchase of the outstanding 85% of Bodyarmor was expected. However, in a pre-acquisition filing with the Federal Trade Commission in February, Coke announced its intention to acquire a controlling stake in Bodyarmor.

Although PepsiCo Inc.’s (NASDAQ: PEP) Gatorade is far and away from the market leader with about 70% market share, Coke’s acquisition of Bodyarmor helps the company acquire market share in the sports drink category. Bodyarmor has beaten Coke’s Powerade to become the second-largest competitor in the market by presenting itself as a healthier sports drink. According to Coca-Cola, retail sales of the sports drink brand have increased by about 50% this year to approximately $1.4 billion.

BodyArmor leadership to help steer it to success.

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Mike Repole, co-founder of Bodyarmor, will cooperate on Coca-Cola’s still beverage line as part of the transaction. Coca-Cola owns Smartwater, Vitaminwater, and Energy Brands, all of which  Repole founded. Additionally, as part of the deal, BodyArmor President Brent Hastie and Repole will remain to assist Bodyarmor in its attempt to surpass Gatorade.

Credit Suisse analyst Kaumil Gajrawala told clients in a note on Friday that he expects the merger to be favorable for Coca-Cola, citing Coke’s ability to distribute its sports beverages worldwide and BodyArmor’s brand equity ahead of the agreement’s approval.

Since the start of the COVID-19 pandemic, Coke has been revising its portfolio, eliminating products that haven’t sold well. This includes the Coca-Cola Plus Energy drink, which was only available in North America for a few months this spring. At the same time, the firm has been working on expanding its beverage offerings under CEO James Quincey.

The Bodyarmor agreement is Coke’s greatest brand acquisition, surpassing its $5.1 billion purchase of Costa Coffee in 2018.

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