Coca Cola is fighting Gatorade by investing in BodyArmor

Coke vs. Pepsi: The cola wars are back
Coke vs. Pepsi: The cola wars are back

Coca-Cola is doubling its efforts to compete with Pepsi's Gatorade.

Coke said it will take a big stake in red-hot sports drink maker BodyArmor, becoming the company's second-largest shareholder. Body Armor is an attractive competitor to both Gatorade and Coke's own Powerade, the biggest players in the sports drink sector.

The sports drink company has drawn attention from both athletes and other big beverage companies. Kobe Bryant is Body Armor's third-largest shareholder. In 2016, Dr Pepper Snapple (DPS) said that it has increased its investment in Body Armor's parent company to $26 million, giving it a 15.5% stake in the company.

"They've really made an impact in the market," said Duane Stanford, executive editor of Beverage Digest.

Gatorade has controlled the nearly $8 billion US sports drink industry for decades, grabbing about 75% of the market, according to research firm Euromonitor International. But sales ticked down 0.5% last year to $5.9 billion in the United States, according to Euromonitor. And the brand lost market share.

That may be because people are seeking healthier options. Gatorade recently launched a sugar-free drink for the first time in its history.

Body Armor has a line of low-calorie drinks that use natural sweeteners, natural flavors and coconut water. They come in flavors like peach mango, blueberry pomegranate and orange citrus. It also makes water with electrolytes and vitamins like potassium and calcium.

bodyarmor sports drink

The company's strategy is an "example of the way entrepreneurs are really capitalizing on consumer trends and getting the attention of big players," Stanford said.

Coke has made a habit of taking a minority stake in attractive young companies before purchasing them outright, as it did with Honest Tea.

And Coke already has a relationship with Body Armor co-founder and chairman Mike Repole, Body Armor's largest shareholder. Repole co-founded both Smartwater and Vitamin Water, both now owned by Coke.

Coca-Cola did not disclose the terms of its deal, but it said Tuesday that the partnership will give Body Armor access to Coca-Cola (KO) bottling facilities. Body Armor will continue to operate as its own brand. Coke may acquire more shares in the future.

— CNN's Nathaniel Meyersohn contributed to this report.

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