Coca-Cola Co is buying a minority stake in a sports drink brand backed by basketball star Kobe Bryant, it said on Tuesday (14 August), seeking to mount a stronger challenge to PepsiCo's Gatorade.
Coca-Cola's investment in BodyArmor - which will make it the brand's second largest shareholder - comes as its Powerade drink steadily cedes market share to more popular Gatorade, and as the beverage giant faces falling demand for its fizzy colas.
While Coke says there is "much work to be done" at its sports drink unit, PepsiCo said last month that Gatorade was seeing higher demand after launching zero-sugar versions.
US Sports Drinks
PepsiCo dominates the roughly $20 billion U.S. sports and energy drinks market with a 30.7% share, according to Euromonitor International, followed by Monster Beverage and Red Bull, while Coca-Cola is at fourth place with a 7% share as of 2017. Coca-Cola also owns a 16.7% stake in Monster.
"(BodyArmor) is a positive for Coca-Cola, which is continuing to pursue its product portfolio diversification strategy," said RBC Capital Markets analyst Nik Modi.
The companies did not disclose the size of the investment or other financial details but Coca-Cola said it could increase its ownership in BodyArmor, whose energy drinks are priced above average and are known for using natural ingredients.
BodyArmor is also backed by Dr. Pepper Snapple, now part of Keurig Dr. Pepper, which made a $20 million investment in 2015 and boosted its ownership to 15.5% in 2016.
Bryant, who first invested in the brand in 2013, is now its third-biggest shareholder. BodyArmor also has endorsement deals with baseball player Mike Trout and another NBA star, James Harden.
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