Keurig Dr Pepper (KDP) this morning announced a long-term partnership with Mexican beverage company Grupo PiSA to distribute fast-rising sports drink Electrolit across the U.S., filling a major hole the KDP’s portfolio that’s been missing since watching BodyArmor flee into the arms of Coca-Cola back in 2019.
In a press release tied to release of the company’s Q3 earnings report, KDP announced that, starting in 2024, it will sell and distribute Electrolit in the “vast majority” of its DSD territories and across all channels of trade.
“Electrolit has experienced exponential growth in recent years, stepping up in a competitive category driven largely by consumers who discover & love our product’s unmistakable efficacy. Keurig Dr Pepper — a known leader at the forefront of an iconic brand roster — was the right choice to partner with as we enter the next phase of our growth trajectory,” said Caridad Ochoa, President and Chief Executive Officer of Electrolit USA.
“We are thrilled to enter the sports hydration category with Electrolit, broadening our portfolio to address this important beverage occasion for our consumers,” said Andrew Archambault, President – Commercial & Beverage Concentrates. “Electrolit is a differentiated brand with tremendous consumer appeal, and KDP’s proven sales and distribution capabilities are poised to unlock its significant growth potential.”
After decades on the market in Mexico, Electrolit entered the U.S. in 2014 and has spent the last decade carving out a foothold in the category for its rapid-hydration drinks in square 21 ounce PET bottles. The company’s RTDs generated over $394 million in dollar sales (MULO plus-c store) in the 52-week period ended August 31. Just last month, the company launched on-the-go powder sticks.
Analysis
After splashing the cash on Bai and CORE Hydration in the late 2010s, KDP’s growth strategy has since centered around finding and aligning with high-growth-potential brands at the right stage of their developments rather than outright M&A.
And lately that’s served them well: roughly a year after investing $863 million for a 30% ownership stake in C4 Energy parent brand Nutrabolt, along with distribution rights, dollar sales for C4 are up 72.6% year-over-year in the 52 weeks ended August 31. That was followed by similar deals with Polar in 2020, Athletic Brewing, and most recently this July when KDP took a $300 million stake (33%) in Philadelphia-based coffee roaster La Colombe and picked up licensing, manufacturing and distribution of its cold brew RTDs. The company also picked up a bonanza in 2021 off of its minority investment in Body Armor, which then sold to Coke.
But, similar to the evolution seen in energy, the sports drinks category is changing in response to a new set of consumers and need states. As seen at NACS last month, both Pepsi (Gatorade) and Coca-Cola (BodyArmor/Powerade) have used those brands as sub-platforms to push further into different formats and product types (water, energy, rapid hydration, protein, powders), while names like PRIME — already the fourth-largest category brand with well over $450 million in dollar sales this year — and GHOST are only getting started. Don’t forget there’s notable upstarts like Barcode, Local Weather and Lance Collins’ Recover Organic Hydration 180 vying for dollars here, too.
KDP’s timing on the deal is also key: Electrolit’s gains — growing 18% and now sitting as the fifth-largest brand with an over 3.6 share of the category, according to Circana data — have come as Coke’s sports drink portfolio has been in decline. And Electrolit has moved the category quickly, opening the door for the rapid hydration segment.
With KDP’s machine behind it, Electrolit will be expected to keep gaining ground — could more innovation and a potential design makeover be part of the plan? The Pedialyte-esque bottles in plastic wrapped labels have a somewhat medicinal feel, though the square shape hasn’t apparently been a major hindrance to velocities, clearly.
Moving Electrolit into KDP’s distribution system will have a ripple effect on DSDs as well, much like what was seen when C4 joined. But as also seen with C4, New York distributor Big Geyser looks certain to continue working with Electrolit, according to an internal email viewed by BevNET.
KDP commented in the release that Electrolit will be “building on its Hispanic heritage and regional strengths” to capture a “broad multi-cultural consumer base”; note that the company already has strong ties to Mexico via its partnership with Red Bull and Peñafiel brand, which is being reintroduced in the U.S. next year as a flavored sparkling water line.
Without knowing details of the financial agreement — is KDP a shareholder in the deal? — the longer-term implications, at this point, are unclear.