The largest amount in history, Coca-Cola acquired the sports drink Bodyarmor for US$5.6 billion

When Double 11 was celebrated in China, Coca-Cola also broke its own acquisition record.

On November 1, Coca-Cola announced the acquisition of Bodyarmor, a sports drink manufacturer, for US$5.6 billion, realizing its wholly-owned ownership. This is Coca-Cola's largest brand acquisition to date, surpassing its $5.1 billion acquisition of Costa Coffee in 2018. Bodyarmor is currently valued at approximately US$8 billion.

Bodyarmor is a North American sports drink brand founded in 2011 and headquartered in New York, USA. According to the official website, Bodyarmor combines sports drinks with coconut water, which is rich in electrolytes and vitamins, does not contain artificial colors, and can provide hydration.

In addition, Bodyarmor LYTE series is a low-sugar and low-calorie version. Bodyarmor SportWater is a sports water with a pH value of 9+ and containing electrolytes. It has not yet entered the Chinese market.

This sports drink brand used to be little-known, and its reputation is mainly attributed to the late basketball player Kobe. In 2013, Kobe invested more than US$6 million in Bodyarmor and obtained 10% of its shares, becoming the third largest shareholder at the time.

Under Kobe's endorsement, many NBA stars have recognized Bodyarmor, and it has also become the official designated sports drink for events such as the Ultimate Fighting Championship, Major League Soccer, and U.S. Open.

▲ Picture from: Bodyarmor official website

Before Kobe joined, Bodyarmor had annual sales of approximately US$3 million; in the first year after Kobe’s investment, its sales exceeded US$36.9 million.

Since then, Bodyarmor has ranked among the top three in the US sports drink market and currently ranks second. The other two brands are Gatorade and Powerade. Gatorade is owned by Pepsi, Powerade is under the Coca-Cola banner, and Bodyarmor has now joined the Coca-Cola camp.

Therefore, this market is essentially Coca-Cola and Pepsi vying for you and me.

▲ Powerade (Bang Rui), entered the Chinese market in April 2019.

But Pepsi's dominance in the sports beverage industry cannot be shaken. According to market analysts, Bodyarmor's retail sales this year will reach approximately US$1.4 billion. Calculating Bodyarmor and Powerade together, Coca-Cola’s share of the sports drink market only reached 23%, and Pepsi’s Gatorade is still far ahead with a market share of 68%. In 2020, Gatorade’s sales exceeded 6.7 billion U.S. dollars. This is an increase of about 6% compared to 2019.

Although the gap is not small, Bodyarmor's growth rate and Coca-Cola's distribution capabilities are enough to pose a threat. As early as 2018, Coca-Cola acquired a 15% stake in Bodyarmor for US$300 million and took over the distribution channels of Bodyarmor.

Bodyarmor's financial report predicts that from 2018 to 2021, sales growth of approximately 6 times will be achieved. According to Nielsen's statistics, Bodyarmor's sales from February 2020 to February 2021 increased by 43.4% year-on-year to more than US$1 billion.

Since the beginning of the epidemic, Coca-Cola has been reforming its product portfolio. It can be said that "the old will not go away and the new will not come."

▲ Coca-Cola's brand portfolio. Image from: Coca-Cola official website

In October 2020, Coca-Cola cut off more than 200 poorly-selling brands, including coconut water brand Zico. Coca-Cola CEO James Quincey said at the end of 2019:

We analyzed about 2,000 beverage products we launched in the past five years and found that 30% of beverages accounted for only 1% of sales. In 2018, we killed more than 700 zombie products, which allowed us to redeploy resources in areas where we see more growth opportunities.

At the same time, James Quincey has always hoped that Coca-Cola will become a "all-category" beverage company and develop more "non-carbonated beverages" businesses. To meet market demand, it has introduced organic tea, juice, water, and ready-to-drink coffee. On June 1 this year, Coca-Cola launched its first alcoholic beverage in the Chinese market-Topo Chico hard soda sparkling wine.

James Quincey believes that for large companies, the fear of failure is usually the biggest obstacle to innovation. "I call it New Coke syndrome. People are afraid of doing new things." According to Harvard Business Review, in 2019, nearly 25% of Coca-Cola's revenue came from new products or re-formulated products. Before 2017, this proportion was about 15%.

Coca-Cola is betting on sports drinks, on the one hand for Pepsi to maintain competition, on the other hand because of the development potential of the sports drink market.

Because of the epidemic, outdoor consumption of beverages was once sluggish. Bloomberg believes that as people gradually return to restaurants and stadiums, both Coca-Cola and Pepsi will benefit. Market research company Technavio predicts that from 2020 to 2025, the sports drink market is expected to increase by USD 11.97 billion.

Grapes are not the only fruit.

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Ai Faner | Original link · View comments · Sina Weibo