In an attempt to challenge PepsiCo Inc’s dominance in the sports drink arena, Coca Cola has spent $5.6 billion for full control of Gatorade rival Bodyarmor
On November 1st, Coca Cola announced it would be bolstering its sports drink portfolio by acquiring the remaining stake in Bodyarmor for $5.6 billion, its largest brand acquisition to date. This comes as no surprise, with Coca Cola previously purchasing a 15% stake in Bodyarmor in 2018 and filing a pre-acquisition proposal with the Federal Trade Commission in 2019.`
Coke’s acquisition of Bodyarmor expands their presence in a market dominated by rival PepsiCo Inc’s Gatorade, which has a market share of around 70%. By purchasing full control of Bodyarmor, Coke aims to chip away at Gatorade’s monopolistic-like market share. Coke now holds around a 23% stake in the sport drink market when combining its new brand Bodyarmor’s market share, with that of its older brand Powerade. Coca Cola can thus use their newly acquired Bodyarmor to chip away at Gatorade’s position, as well as hedge against Powerade’s losses if consumers switch from Powerade to Bodyarmor.
Coca Cola’s initial 15% investment in Bodyarmor in 2018 enabled the brand to access Coca-Cola’s global infrastructure, leading to the accelerated growth needed to meet the surging demands for premium sports and hydration beverages. As a result of this growth, Bodyarmor has overtaken Powerade as the second-largest player in the sports drink category, with retail sales up around 50% year on year, totalling more than $1.4 billion.
Fast-changing consumer demands for sports drinks, including a growing demand for lower sugar content, ‘healthier’ drinks is further driving the appeal of the Bodyarmor brand. Mike Repole, co-founder of Bodyarmor described the company’s initial vision to “create a better-for-you sports drink”.
Coca Cola are also actively reviving their Powerade brand in the pursuit of greater market share through zero-sugar innovations, which offer a range of hydration needs beyond traditional sports.
The future of the sports drink market will be an interesting one. Although being a much smaller market than soda, the category is “growing at a much faster rate” according to Duane Stanford, editor and publisher of Beverage Digest.
The coronavirus pandemic has also impacted the sports drink market, placing an increased emphasis on health and well-being. Coca Cola has a great opportunity to challenge the dominance of PepsiCo Inc’s Gatorade by channelling the demand for healthier sports drink alternatives through its new asset Bodyarmor and continuing to offer personalised solutions to all level athletes through Powerade.
This move comes at a time when Coca Cola has been overhauling its portfolio, killing off underperforming products, as well as striving to offer a wide array of new beverages.