Coca-Cola bets on coconut water-based sports drink brand BodyArmor

By Adi Menayang contact

- Last updated on GMT

Coca-Cola bets on coconut water-based sports drink brand BodyArmor

Related tags: Coca-cola, Coca-cola company, Sports drink

Riding on the ‘clean label’ sports nutrition movement, beverage giant Coca-Cola announced that it is acquiring a minority stake in BodyArmor, structured to lead to a full acquisition.

The investment will allow BodyArmor to remain independent but grants it access to Coca-Cola’s bottling and distribution system, poising it for global expansion.

Financial terms of the agreement were not disclosed when both companies made the announcement on Tuesday. The investment will be part of the Coca-Cola North America Venturing and Emerging Brands investment portfolio, according to a press release​.

Jim Dinkins, Coca-Cola North America President, said in a corporate Q&A piece on Coca-Cola’s website​ that BodyArmor is well positioned to succeed in the ‘total hydration category,’ which he described as $20 billion business growing about 6% annually.

“It’s the sixth-fastest-growing trademark in retail value in the entire nonalcoholic ready-to-drink beverage industry this year and has posted 100% CAGR growth over the last four years. So we see it as a great addition to our bottlers’ portfolio,”​ he explained.

Full ownership overtime

The initial investment was structured so that, with time, Coca-Cola will continue to increase its ownership stake, potentially pushing out Keurig Dr. Pepper which owned a 16% stake of the company in 2016​.

Headlines have described the investment as a calculated move against rival PepsiCo’s Gatorade. Data from Euromonitor indicated that, for 2017, BodyArmor had a market share of 3% of the 'sports drinks' segment, compared to 74.7% for PepsiCo's Gatorade and 17.5% for Coca-Cola's Powerade.

Boasting its use of natural flavors and sweeteners, and free of artificial colors, it seems like today’s consumer preference tips to BodyArmor’s favor.

Last year, Wells Fargo securities senior analyst Bonnie Herzog described​BodyArmor as having “a strong appeal to athletes and today’s consumer that is far more ‘label-focused.’ We think Gatorade’s recent challenges in c-stores can be partially attributed to BodyArmor’s success,” ​adding that, based on Wells Fargo analysis,the brand is up 110% in c-stores [in 2017].”

BodyArmor's market share in 2017

According to data from market research firm Euromonitor International, BodyArmor's share of the 'sports drink' market in 2017 was at 3%.

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In a communique sent to the press yesterday, Howard Telford, head of soft drinks at market research firm Euromonitor International, said that BodyArmor is a shining star in a category that has been flat. 

Sports drinks volumes were flat last year in the US, as both of the big two brands (Gatorade and Powerade) have struggled to evolve and reach consumers eager for natural isotonic alternatives,”​ he said.

“The one real exception in an otherwise flat category has been Body Armor ​(sic), a brand that has had success blending the athletic positioning of sports drinks with a more ‘natural’ coconut water-based product.”

Cannibalizing Coca-Cola’s Powerade?

Gatorade aside, another top contender in the space is Coca-Cola’s very own Powerade. “From Coca-Cola’s perspective, it will be interesting to see how this minority investment in BodyArmor impacts their approach to the sports drink/isotonic category in the near future.”

“Powerade is a direct competitor of Body Armor on the shelf, but this ‘natural athletic hydration’ space is also potentially occupied by Zico coconut water and Honest (through the Honest Sport launch 2 years ago), both Coca-Cola VEB brands,”​ he added.

In a Q&A piece​ on Coca-Cola’s corporate website, Dinkins said that the two actually compete in slightly different categories.

“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 beengrowing exponentially,” ​he explained.

“The Coke North America hydration portfolio – POWERADE, vitaminwater, smartwater and DASANI – will continue to be priorities to our system and have important roles in our overall hydration strategy. There are a growing number of consumer occasions in the hydration category, and we see each of these brands playing a unique role in meeting specific consumer needs in our bottlers’ total portfolio.”

Related topics: Markets, M&A, Sports nutrition

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