Why is Coca-Cola Acquiring Bodyarmor?

Why is Coca-Cola Acquiring Bodyarmor?

Coca-Cola swings for the fences with its purchase of sports drink producer Bodyarmor, but will this prove to be a home run for investors?

On Monday, Coca-Cola (NYSE: KO) announced a full purchase of sports drink manufacturer Bodyarmor. The deal cost $5.6 billion and is the largest brand acquisition the company has ever made, topping its $4.9 billion purchase of Costa Coffee in 2019. 

The company had previously bought a 15% stake in Bodyarmor and made its intentions to purchase clear with a pre-acquisition filing in February.

Why does this matter to investors?

Bodyarmor is now the second-largest producer in the sports drink market. It recently passed Coca-Cola’s own Powerade, but both still lag far behind the market leader Gatorade. The PepsiCo product commands roughly 70% of the market share so Coca-Cola will be hoping this purchase can help them close the gap and establish a semblance of dominance within the very lucrative market.

Bodyarmor has done exceptional work to position itself as a healthier option in the sports drinks market. Now, with Coca-Cola’s wide distribution network and considerable spending power, the brand has the potential to expand rapidly. This should all bode well for investors, as the company looks to grow its portfolio of beverage offerings worldwide.

So should I buy Coca-Cola stock?

Coca-Cola typically represents a strong, stable stock that can be held long-term. This acquisition does little to change that and, if anything, strengthens the company’s position as one of the market leaders in the beverage world. Investors should feel confident about the company’s future prospects and should welcome the news of this purchase as a sign of a continued dedication to growth.

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