Repole Also Contracted to Advise on Vitaminwater, Other Coke Still Beverages.
Coca-Cola has paid $5.6 Billion to take full control of BodyArmor, securing the growing sports drink asset for Coke and its bottlers and setting up a likely expansion of the brand overseas. The deal announced yesterday gives Coke the remaining 85% of BodyArmor that the company didn’t already own. BodyArmor will remain in New York and operate as a separate business within the Coke North America operating unit, much like Coke’s Fairlife dairy business. BodyArmor is on track to generate between $1.1 billion and $1.4 billion in retail sales this year amid growth of about +50%. The deal presumably includes buyouts for 12.5% owner Keurig Dr Pepper and 10% owner Kobe Bryant by way of the late basketball star’s estate. With the deal, Coke now owns the No. 2 and No. 3 sports drinks by dollar share. For the first half of this year, Gatorade held a commanding 68 share, while BodyArmor held a 16 share and Powerade held a 13 share, according to BD data.
MANAGEMENT STAYS. REPOLE TO ADVISE ON STILL PORTFOLIO STRATEGY. Co-founder Mike Repole, President Brent Hastie and other BodyArmor leaders will stay with the brand for at least a year under a consulting and transition-services agreement. “They are committed to executing BodyArmor’s 2022 plan and working on vision and strategy for 2023 and beyond,” according to Coke’s announcement yesterday. Repole’s role with Coke will go further, however. “As part of the agreement, Coca-Cola and Repole will also collaborate on the company’s still beverages portfolio, including marketing, packaging and innovation strategies across multiple brands,” Coke stated. That secures Repole’s expertise for work on brands such as Vitaminwater, Smartwater, and Gold Peak Tea. Repole was instrumental in the success of Vitaminwater as part of the team that eventually sold the brand to Coca- Cola in 2007 for $4.1 billion. Coke’s decision not to leave an ownership stake with the management team likely makes it easier for Repole to help other Coke-owned brands without conflict. In an interview with CNBC yesterday after the deal was announced, Repole said that about half of BodyArmor’s 400 employees will make at least $1 million from equity in the company, while the rest will earn between $100,000 to $500,000.
VALUATION. The deal values BodyArmor at an estimated $6.6 billion to $8 billion, depending on a previously negotiated discount for Coke that hasn’t been detailed by the companies. In a research note yesterday, Consumer Edge Analyst Brett Cooper said Coke is “paying a premium multiple for a scale business,” adding, “To substantiate the purchase, Coca-Cola needs to ensure sustained strong double-digit growth for a long period of time.” In a separate report yesterday, Goldman Sachs Analyst Bonnie Herzog said BodyArmor is “a future growth engine” for Coca-Cola and said the deal was broadly favorable. Analysts valued KDP’s 12.5% stake in the deal at about $825 million.
POWERADE STATUS QUO. Powerade remains untouched and part of Coke’s portfolio. As a minority owner, Coca-Cola had been required by antitrust laws to maintain strict separation from BodyArmor when it came to marketing, sales, and pricing strategies. With control and ownership lines now clear, leaders at BodyArmor and Coke, as well as Coca-Cola’s bottlers, are free to coordinate a strategy to go after Gatorade’s market share and pursue Repole’s stated desire to make BodyArmor No. 1. That could include a strategy to sandwich Gatorade between a higher-priced BodyArmor and a lower-priced Powerade, to siphon off Gatorade consumers from both ends.
BOTTLERS GET WISH. The Coca-Cola bottling system is BodyArmor’s primary US distributor. On Sunday, Repole met remotely with US bottling executives to discuss the deal, according to sources. Prior to this morning’s announcement, multiple Coke bottlers told BD that they wanted Coca-Cola to keep the brand in the system and retain its management team. One system source estimated that BodyArmor products have accounted for about a fifth of a bottler’s growth so far this year. Another said the brand has generated between 2% and 3% of total revenue this year.
BACKGROUND. Coke took a minority interest in BodyArmor in 2018 and was the brand’s second-largest shareholder. An option for Coke to acquire the remaining ownership interests in BodyArmor became exercisable this year. The purchase price was 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. Repole founded BodyArmor in 2011 with serial beverage entrepreneur Lance Collins. Repole is the chief architect of the brand’s success in breaking into a US sports drink category dominated at the time 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. BodyArmor’s portfolio includes a lower-calorie Lyte version, a new caffeinated variant called Edge, and an alkaline Sportwater.
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