Is Coca-Cola’s acquisition of BodyArmor enough to topple PepsiCo’s Gatorade from the top slot?

By Elizabeth Crawford contact

- Last updated on GMT

Source: BodyArmor
Source: BodyArmor

Related tags: Coca-cola, Powerade, Gatorade, Pepsico

The Coca-Cola Co. appears to be making a run for the pole position in the fast-growing sports performance and hydration category with the $5.6bn acquisition of the remaining stake of BodyArmor announced yesterday – but is the deal enough to topple PepsiCo’s Gatorade from the current top spot?

The all-cash deal brings Coca-Cola the remaining 85% of BodyArmor, in which it initially invested in 2018 when it acquired 15% of the business through its North American Venturing and Emerging Brands investment portfolio for an undisclosed sum.

At the time, BodyArmor was valued at about $2bn and Coca-Cola said the deal was “uniquely structured to create value for both companies and allow Coca-Cola to increase its ownership stake in the future under defined terms”​ that were not disclosed.

Since then and with the help of Coca-Cola’s expansive bottling system, BodyArmor has grown about 50% to drive more than $1.4bn in retail sales – allowing it to seize the #2 slot in the sports drink category in measured retail channels, according to Coca-Cola.

According to Euromonitor, Coca-Cola’s Powerade previously held the #2 slot in the US sports drinks category at 13.7% in 2020, and BodyArmor came in third at 9.3%. Both – even combined -- are distant followers to PepsiCo’s Gatorade, which held the largest share of the market at 67.7%. But for how long?

Chasing Gatorade

Even with BodyArmor’s fast growth, it is unclear if the now combined market share of Powerade and BodyArmor will be enough to one day push PepsiCo out of first place – a position it earned by leaning heavily on Gatorade’s legacy status of half a century and substantial body of scientific research into the replacement of electrolytes lost through sweat.

To maintain its leadership, Gatorade has invested heavily in on-trend line-extensions​ that go beyond flavor and pack size to include the launch of an organic line in 2016, a sugar-free line in 2018 and other innovations, such as a smart cap to provide hydration feedback to users.

Not to be left behind, Coca-Cola pushed innovation within its existing Powerade brand, including a sugar free option, the ION4 system that claims to replace sodium, potassium, calcium and magnesium lost through sweat, and Powerade Ultra, which packed creatine, branched-chain amino acids, B vitamins and even more electrolytes than the original option.

But BodyArmor offers something that neither Gatorade or Powerade have – the cache of a premium brand that appeals to consumers seeking ‘better-for-you’ options beyond reduced and no sugar claims. BodyArmor not only skips the sugar, but also is free from artificial sweeteners, flavors and dyes and comes with a “team” of celebrity endorsements, including from performer Jennifer Lopez, tennis star Naomi Osaka, soccer player Megan Rapinoe and a fleet of other athletes across sports.

“It’s a better-for-you option in a huge category with legacy ingredient issues,”​ Danny Stepper, co-founder and CEO of the emerging brand incubator and accelerator LA Libations, told FoodNavigator-USA. “They’ve gone beyond proof of concept and completely disrupted the sports drink space.”

The different positioning of BodyArmor and Powerade could allow Coca-Cola to steal market share from Gatorade by courting consumers at both ends of the spectrum, potentially squeezing PepsiCo out of its long-held leadership position.

Coca-Cola could further steal market share by leveraging pandemic-related supply chain challenges that have plagued the entire CPG industry. While both Coca-Cola and PepsiCo have had to raise prices to offset higher input costs, PepsiCo also is navigating a potential shortage of Gatorade bottles, which could result in gaps on store shelves that Coca-Cola could fill depending on its production abilities.

Still, for Coca-Cola to push PepsiCo from the No. 1 spot is a long-shot that likely wouldn’t happen overnight. However, the deal gives the company a firm hold on the No. 2 position in a fast-growing category that Mintel estimates will be worth $13.6bn in 2025 – up from $10.8bn last year.

Strong leadership remains at the helm

Coca-Cola’s acquisition of BodyArmor brings it more than just a fast-growing brand, it also secures ongoing support from the brand’s executive team, including co-founder and chairman Mike Repole and President Brent Hastie.

Both executives “committed to executing BodyArmor’s 2022 plan and working on vision and strategy for 2023 and beyond,”​ according to Coca-Cola.

Repole is on the record as having set out to create a better-for-you sports drink with the long-term goal of becoming the #1 global sports drink brand, and he has a strong track record on which to lean.

“Mark Repole is the GOAT [greatest of all time] … so many brands have tried to disrupt sports drinks and compete with Gatorade, and he’s actually doing it,”​ Stepper said.

Coca-Cola focuses on bigger, more promising bets

The deal also is notable in that it comes after Coca-Cola purged its portfolio of underperforming brands, including its own energy-drink brand and iconic better-for-you offerings, including Zico and Odwalla.

The discontinuation of Coca-Cola Energy ​in North America came less than two years after its launch in January 2020 – a surprise that suggests the launch was either poorly timed with the unexpected pandemic or a harsh lesson in what Coca-Cola’s commitment to failing fast looks like. s

Coca-Cola’s decision to offload other brands, like Zico​, suggests the CPG giant couldn’t give sufficient personalized attention to the emerging brands it was snapping up in the early 2000s – a theory that is supported by the business’ declaration it wants to focus on top-sellers and emerging brands with more potential.

BodyArmor’s track record and consumers’ current sustained focus on health and wellness suggest that it will not follow the same path of either of these two brands. But only time will tell if it can deliver as a heavy-hitter worthy of its high valuation under Coca-Cola’s long-term ownership.

*FoodNavigator-USA Senior Correspondent Mary Ellen Shoup contribute to the reporting of this article

Related topics: Energy & Sports, Coca-Cola, PepsiCo

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