Sports Drink Wars: Coca-Cola Acquires BodyArmor Stake In Challenge To Gatorade

The Coca-Cola Co KO's Powerade may never been able to match up with PepsiCo, Inc PEP's Gatorade, but Coca-Cola has a new plan to win the sports drink wars.

What Happened?

Coca-Cola announced Tuesday it has acquired a minority stake in the fast-growing sports drink company BodyArmor, with a path to ownership under defined terms. The terms of the deal were not disclosed.

Why It Matters?

Founded in 2011 by VitaminWater/Smartwater founder Mike Repole, BodyArmor is a fast-growing drink in the category and is expected to hit $400 million in revenue in 2018 — up from $235 million in 2017.

The brand has high-profile minority owners including Kobe Bryant, who has a 10-percent equity stake, and is touted as a healthier alternative to Gatorade and Powerade.

BodyArmor has 2 percent of the sports drink market, while Gatorade has 75 percent and Powerade sits at 15 percent, according to Beverage Digest. 

Whats Next?

At a time when consumers are opting for drinks with less sugar, Coke is searching for alternatives to bolster a healthier drink portfolio.

The brand has shown a committment to acquiring stakes in fast-growing healthier drink alternatives to diversify from the high fructose corn syrup-heavy brands for which it's known. 

Keurig Dr Pepper Inc KDP's Dr. Pepper Snapple Group has a 15-percent stake in BodyArmor, but following the close of a merger with Keurig, Wells Fargo analyst Bonnie Herzog said that the newly formed company is not interested in minority stakes. That could create an opportunity for Coca-Cola to acquire an even larger stake in the brand. 

Coca-Cola will likely position BodyArmor "as a premium, isotonic brand above Powerade," Herzog said. 

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