Coke bought a controlling stake in Body Armor for 5.6 billion dollars at an 8 billion dollar valuation.
10 years after the brand was founded in 2011.
The largest acquisition Coke has ever done.
Valuation up 400%, from when Coke bought a 15% stake in Body Armor in 2018 for 2 billion.
To get an idea with Body Armor’s growth, Kobe Bryant purchased a 10% stake in the brand for 6 million in 2014 and now that equity is worth 800 million.
Big questions are what Body Armor did in 10 years and is this a good move for Coke?
First up, watched an interview with the companies founder Mike Repole in from last year and I have to say the guy has a vision.
“This is either going to bankrupt in five years or be the number one sports drink in the world.”
He also said in his 2014 pitch to Kobe Bryant that this has a 99% chance of failing and a 1% chance of being as big as Gatorade.
Mike Repole who worked as an executive for other food brands in interviews has a charisma, which I’d compare to some Silicon Valley founders, but is in beverages.
I can sort of see why this would sell someone like Coke.
For the second part, the numbers are impressive.
Body Armor is 7% of the sports beverage market, just a decade after launch.
Gatorade created in 1965 is 72%.
Powerade created in 1988 is 20%.
Body Armor came in 2011 is 7%.
Couldn’t find much for exact revenue numbers, but found Gatorade sits at 6.7 billion, Powerade is a little under 2 billion and Body Armor projects to be at 3.8 billion by 2028.
Does this all make sense?
For Coke, I think it makes sense from the point of view of fear.
Realistically, Body Armor is on a growth track to surpass Powerade as number 2.
Combined, it doesn’t look like they’ll pass Powerade, but can get market share under 60% for the first time ever.
The reason I ultimately think this happened is Coke isn’t actually as good of an investment as people really believe.
Revenue was 33 billion in 2020.
Down from 35 billion in 2010.
Profit has also never surpassed 2010 levels, where it hit 11 billion, but in 2020 was 7.7 billion.
Comparing that, Pepsi grew from 57 billion to 70 billion from 2010 to 2020, due to a much more diverse portfolio.
Coke trades higher as a company, because I believe it’s the most MBA run company in the world, which doesn’t innovate/invest in itself and opts for buybacks and dividends to live.
Big example is Coke’s market cap being 242 billion and Pepsi being 225 billion.
For this purchase, I really think it was just about Coke not having the PR issue to the stock market of losing the number two spot in the energy drink market.