3 Thoughts: BodyArmor & Coca-Cola
On Tuesday The Coca-Cola Company announced a minority stake in @BODYARMOR SuperDrink with a reported clear path to full ownership. As expected, the media has covered it widely in the 48 hours since. Three thoughts from me on the deal (financial terms not disclosed):
- MONEY: Many reporters and analysts wonder if BodyArmor can become a $1B brand for the Coca-Cola portfolio. One word: YES. Two words: YES, QUICKLY. When Coke (KO) bought Glaceau (vitaminwater, smartwater, etc.) in 2007 vitaminwater was a $350M brand. Within two years it was comfortably above the magic $1B threshold; smartwater was quick to follow. BodyArmor will reportedly break $400M in sales this year. A national launch in the Coca-Cola system will dramatically expand availability and rapidly push the brand past $1B.
- MARKETING: The press has made great mention of the outstanding stable of professional athletes who endorse BodyArmor. This is NOT a competitive advantage for the natural hydration/replenishment brand. These endorsers are likely all financially compensated. Several own equity in the company. The rapper 50 Cent endorsed vitaminwater in exchange for equity. He made $100M+ when it sold to KO. Bonus: Mike Repole the creator of BodyArmor also created vitaminwater. Look for a similar marketing play book.
- GATORADE: Many speculate about the role BodyArmor will play in the KO hydration (PowerAde, Dasani, etc.) portfolio relative to Gatorade. (While BodyArmor has more sugar/fluid ounce than Gatorade or PowerAde, its sugars are more complex and provide relatively more sustained energy. It is also made of natural ingredients, including coconut water.) I do not expect BodyArmor to directly attack Gatorade on ingredients as this is also an (admittedly somewhat indirect) attack on KO brand PowerAde. Gatorade is about 75% of the sports drink category, PowerAde a hard-earned 15%.
What are your thoughts on the deal? My comments? Ready...GO!