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Coca-Cola's (KO) Investment in BODYARMOR to Augment Sales

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The Coca-Cola Company (KO - Free Report) announced plans to buy a minority ownership stake in BODYARMOR. This strategic investment will form part of the company’s North America Venturing and Emerging Brands (VEB) investment portfolio. Per the deal, this investment paves the way for Coca-Cola to raise its ownership stake in BODYARMOR moving ahead. Notably, this makes the beverage giant the second largest shareowner in BODYARMOR. However, financial terms of the agreement remained under covers.

This latest move will not affect BODYARMOR’s leadership position and management team as it will continue functioning independently. Further, BODYARMOR will have access to the Coca-Cola bottling system, thus speeding up growth for demand of the sports and hydration drinks. This apart, Coca-Cola has been gaining from its POWERADE sports drink, which is significantly boosting its financial results. Also, it is benefiting from the acceleration of its sparkling soft drinks category through investment and innovation, particularly the restaged Zero Sugar and new flavors of Diet Coke.

Being among the fastest-growing beverage trademarks in America, BODYARMOR is likely to strengthen the company’s position in the beverage industry. Meanwhile, it is catering well to the hydration needs of the athletes and expects to become the world’s major sports performance and hydration brand. Per analysts, Coca-Cola’s investment in this sports drink brand along with its POWERADE drink might give a tough fight to PepsiCo’s (PEP - Free Report) Gatorade.

Launched in 2011, BODYARMOR drinks are prepared with potassium and other electrolytes, vitamins and coconut water, thus contain no added colors or flavors. In fact, BODYARMOR LYTE Sports Drink contains all the nutrients of BODYARMOR and is naturally sweetened, having 20 calories and 3 grams of sugar per serving. This drink was launched last year. In 2018, the company launched BODYARMOR SportWater, which is designed by athletes for athletes along with a performance pH 8+ as well as electrolytes.

We believe that this evolving phase of BODYARMOR drinks along with Coca-Cola’s premium sports drink category will fortify the company’s portfolio, thereby generating higher revenues and profitability.

Currently, Coca-Cola has an impressive portfolio of globally recognized brands offering an ever-growing choice of quality beverages, including low- and no-calorie options. Its wide portfolio of more than 500 sparkling and still beverages has allowed the company to consistently gain volume and value share in the beverage market. Also, Coca-Cola has a commanding presence in the developing and emerging markets of Latin America, India, Russia and China, encouraged by growth opportunities that these countries provide.

 


 

In the past three months, this Zacks Rank #3 (Hold) stock has gained 9%, ahead of the industry’s 7.5% rally.

Two Better-Ranked Stocks in the Consumer Staples Space

Archer Daniels Midland Company (ADM - Free Report) pulled off an average positive earnings surprise of 18.6% in the last four quarters and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Boston Beer Company, Inc. (SAM - Free Report) has a long-term earnings growth rate of 9.5%. The company carries a Zacks Rank #2 (Buy).

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