Case Analysis Ultimate_Writer

Xiaoyi Yin

Team, T. (2015, August 18). Sports Drink Wars In The U.S. To Get Exciting? Forbes. Retrieved

from https://www.forbes.com/sites/greatspeculations/2015/08/18/sports-drink-wars-

in-the-u-s-to-get-exciting/#7989b80b1769

Despite the decline in the consumption of the carbonated soft drinks, the last five years have recorded a growth in the Liquid Refreshment Beverage market. This is mainly due to the introduction of the most preferable alternatives including bottled water, sports drinks, teas and coffees, and energy drinks among others. The consumption of Carbonated Soft Drinks has gone down from 47 to 41 percent, with bottled water making the second largest consumed beverage in the USA at 35%. Others such as the sports drinks still register a small percentage but have gradually recorded growth thus attracting large beverage manufacturers including Dr. Pepper Snapple.

Dr. Pepper gestured interest in sports drink by buying a stake of 11.7% of BodyArmor, a sports drink startup from Mike Repole. In 2014, BodyArmor recorded $30 million in retail sales and a 180% increase in 2015. In 2007, Coca-Cola purchased Energy Brands Inc. which Mr. Repole was also a co-founder, for $4.1 billion and in about one year leading to May 2015 made $1.2 billion from its two primary products, Vitaminwater, and Smartwater.

The growth of BodyArmor was expected to rise in 2015 owing to the distribution channels developed by Dr. Pepper. One of the major advantages of BodyArmor is “because it is a sports drink, and sports drinks are marketed as thirst quenchers which are substitutes for water” (Team, 2015, paragraph 4). This saw the BodyArmor market grow by 3.8% CAGR in the five years leading to 2015, making it worth $6.81 billion by that period. This was a huge growth compared to only 1% recorded in the entire LRB market. Pepsi and Coca-Cola held the largest share of the sports drink market with Gatorade and Powerade having 77% and 20% respectively. However, BodyArmor is marketed as more natural as it only contains coconut water, vitamins, and potassium-packed electrolytes. Compared, Gatorade contains artificial colors, and Powerade contains high amounts of fructose corn syrup. Consumers are given sufficient access to BodyArmor which is made readily available. These factors coupled with backing from Kobe Bryant will enhance BodyArmor’s ability to take a good share of both Powerade and Gatorade’s market and grow, not only due to the increased popularity of sports drinks but also as a result of the rising market share.

More and more consumers are moving away from sugary sodas and other drinks with calories and opting for healthier alternatives. This implies that the 4.6% market segment that the sports drinks currently hold will keep on increasing with time. It is this fact that has prompted Dr. Pepper to diversify its non-carbonated soft beverages to enhance growth since the Carbonated Soft Drinks make 80% of its net volume.

Pepsi and Coca-Cola have registered more robust growths in their non-carbonated portfolio over time despite a dismal growth in CSD. This had however not been the case with Dr. Pepper in the past since it lacked strong brands the non-carbonated category including sports, and energy drinks, and bottled water. In the first half of 2014, there was particularly a letdown in the non-carbonated beverages volume which offset the better performance of the same recorded in the second half leading to an overall 1% decline. However, it was estimated that the segment would grow by 5% and 3% in the first and second quarter of 2015 respectively.