On Tuesday, Coca-Cola Co. said it will purchase a minority stake in sports beverage brand that is backed by former NBA star Kobe Bryant. The soft drink maker is looking to mount a significant challenge to Gatorade, which is owned by PepsiCo.
The investment by Coca-Cola in BodyArmor comes as its own Powerade drink continues losing market share to the more popular Gatorade. Coca-Cola will become the second largest BodyArmor shareholder with its investment.
Bryant, the former star of the Los Angeles Lakers and a future Hall of Famer, tweeted that he was proud of the BodyArmor team and its new partnership reached with Coca-Cola, who is a believer of the mission BodyArmor has to become the top sports drink worldwide.
Gatorade and the other sports drinks of PepsiCo represent close to a third of the U.S. market of $20 billion. Monster Beverage and Red Bull are close behind, while Coke is far behind in fourth with a share of 7%. Coca-Cola has a stake of 16.7% in Monster.
One financial analyst on Wall Street said that the investment in BodyArmor was positive for Coca-Cola, which continues to pursue its diversification strategy of its product portfolio.
BodyArmor’s other large shareholders include Dr Pepper Snapple, which is under the Keurig Dr Pepper umbrella, which made an investment of $20 million in 2015 and increased its ownership to 15.5% in 2016.
However, one analyst said that the investment by Coca-Cola in BodyArmor, could end the agreement the sports drink brand has with Dr Pepper.
The analyst said that BodyArmor notified Keurig Dr Pepper it would be terminating its existing distribution agreement.
Coke did not release the amount it invested or any other financial details related to its investment, but did say it could increase the stake in BodyArmor, whose energy drinks, which are higher-priced, use natural flavors as well as sweeteners like coconut water concentrate and pure cane sugar.
An analyst on Wall Street said he would not be surprised if at some point Coca-Cola acquired all of BodyArmor.
However, Coca-Cola has stayed away from complete acquisitions settling to acquire partial stakes in businesses, a strategy allowing it to test drive the potentially risky investments.
Bryant is BodyArmor’s third largest investor. The brand has endorsement deals with NBA star James Harden and MLB star Mike Trout.