Updated Feb. 19, 2021
2:15 pm 
Adds BodyArmor Response

Coca-Cola has notified US anti-trust regulators that the company plans to acquire a controlling stake in fast-growing sports drink brand BodyArmor, Coke has confirmed to BD. Timing and terms of the pending transaction have not been disclosed. If completed, the transaction would leave Coke with the second- and third-largest sports drink brands in the US, creating additional retail leverage for Coke against category leader Gatorade (PepsiCo), which holds about 70% of the market. Coke also gets a brand that sells at a premium to Gatorade and Powerade.

SECOND-LARGEST SHAREHOLDER.  Coke took a minority interest in BodyArmor in 2018 and is the brand’s second largest shareholder. While Coke’s current stake is estimated by BD to be between 13% and 49%, the precise holding has never been disclosed.

COKE RESPONSE.  “We can confirm that The Coca-Cola Company has filed a pre-acquisition notification with the Federal Trade Commission (FTC) relating to its intent to acquire a controlling interest in BodyArmor,” Coke said in a statement to BD. “In 2018, Coca-Cola became a shareholder in BodyArmor, in a deal that was structured to create value for both companies while also defining a path to ownership in the future. Until closing, both companies will continue to operate independently in accordance with their existing agreement.”

BODYARMOR RESPONSE.  This afternoon, BodyArmor sent the following statement to BD from Co-founder and Chairman Mike Repole: "Although Coca-Cola buying a controlling interest in BODYARMOR is a distinct possibility, reports that Coca-Cola is purchasing a controlling interest in BODYARMOR are premature. While this is one scenario for BODYARMOR, there are other potential options for the future of the business. Our focus continues to be to build BODYARMOR into the #1 brand in active hydration. Our president Brent Hastie, our leadership team, 400+ passionate employees and I remain excited and committed to building this business with the Coca-Cola bottling system for future years to come."

VALUATION.  With the 2018 agreement, Coke’s franchise bottling system took on the majority of BodyArmor’s US distribution. An option for Coke to acquire the remaining ownership interests in BodyArmor became exercisable this year. The option price will be set by a pre-determined formula, according to previous regulatory filings. At the time of the 2018 deal, BodyArmor was said to be worth $2 billion. In an interview this month, BodyArmor President Brent Hastie, a former Coca-Cola executive, said BodyArmor is on track this year to reach $1 billion in annual revenue. The brand’s portfolio includes a lower-calorie Lyte version, a new caffeinated variant called Edge, and alkaline Sportwear.

KEURIG STAKE.  Keurig Dr Pepper, BodyArmor’s distribution partner prior to Coke, still owns 12.5% of the sports drink maker. In addition, the estate of late basketball star and entertainment executive Kobe Bryant holds 10% of BodyArmor, according to media reports. Co-founder and Chairman Mike Repole is said to be the largest shareholder. It wasn’t clear as of this morning whether Coke’s planned transaction includes the purchase of the KDP and Bryant stakes.

MANAGEMENT?  Coke and BodyArmor declined to disclose post-transaction plans. Given Coke’s use of the words “controlling interest,” the company could decide to try to keep key BodyArmor management on board after the transaction, perhaps leaving them with a minority stake in the company to be sold back later based on future performance and valuation. Repole founded BodyArmor in 2011 with serial beverage entrepreneur Lance Collins. Prior to that, Repole had co-founded and sold Glaceau, maker of Vitaminwater and Smartwater, to Coca-Cola for $4.1 billion. At BodyArmor, Repole has been the chief architect of the brand’s success breaking into a US sports drink category dominated by PepsiCo’s Gatorade and Coca-Cola’s Powerade. In early 2019, Repole brought in Hastie from Coca-Cola and COO Paul Lukanowski from bottler Swire Coca-Cola to further expand the brand’s sales and distribution execution.

BRAND PERFORMANCE.  In 2020, BodyArmor sports drink sales at US retail grew +41%, down from +90% in 2019 before pandemic-related lockdowns and economic turmoil. The brand ended 2020 with a 13 dollar share of the US sports drink category, nearing the 15 share held by Powerade. Gatorade led with a 70 share.