Sports Drinks See New Competitive Landscape BY BRAD AVERY
When the Coca-Cola Company announced in November 2021 that it was acquiring challenger brand BodyArmor for $5.6 billion, it was a signal to the industry that the sports drink category was officially entering a new era. Though Coke, through its ownership of Powerade, had long been the number two player in the space, it was always an afterthought to PepsiCo’s Gatorade. But with BodyArmor – the Repole-and-Collins founded, Kobe-backed upstart that recently passed PowerAde in sales volume, the acquisition solidified Coke as a formidable asset holder. Now, nine months after the deal, BodyArmor has been integrated into the Coke system (buoyed by founder Mike Repole and other longtime staff staying with the brand, at least for now) and the sports drink set is rapidly evolving around it. A myriad of new brands – among them Canopy Growth’s BioSteel and the Logan Paul-backed PRIME Hydration – have seized on the disruption to try to expand the set, whether through star power, next-generation hydration, or a defiant stretching of traditional category definitions. All the while, Gatorade – the long-entrenched category leader – is working to adapt by embracing new functional innovations such as hydration-boosting Gatorlyte and Gatorade Fit, sugar free Gatorade Zero, and Gatorade Zero with Protein. According to NielsenIQ, sports drink retail dollar sales rose 7.9% to $9.1 billion in the 4-week period ending June 18, 2022, 50 BEVNET MAGAZINE – JULY/AUGUST MAY/JUNE 2021 2022
and were up 14.3% in the 52-week period. The growth was in large part driven by price increases, with average pricing climbing up 17% in the 4-weeks, while sales volume dropped 7.7% in the same period. PepsiCo retains its post as the category leader, reporting dollar sales growth of 9.1% to $5.9 billion in the four-weeks (up 9.7% for 52-weeks), while Coke faced a 2% decline in the four-weeks (+17% for 52-weeks) to $2.7 billion. That short-term sales slide is deceptive, however. Coke – primarily through the BodyArmor business – has outpaced PepsiCo over a three-year stack basis.
BLURRED LINES Kaumil Gajrawala, managing director of equity research at Credit Suisse, noted that while the short term volume declines and high pricing are a reflection of the inflationary pressures affecting almost the entire food and beverage sector – both a result and a transition away from last year’s supply chain disruptions – the category is experiencing significant disruption via innovation and new players. “Maybe the first and most important thing about the sports drink category is recognizing the degree to which the lines in the category have blurred between segments,” Gajrawala said. He noted that functional traits such as energy and hydration have increasingly become more prominent within sports drinks.
