Is Prime Hydration Worth Billions?
Docere
Recently, there has been a lot of chatter regarding KSI and Logan Pauls Prime Hydration and its potential valuation of $10 Billion. We will be discussing why this may not be the case. Does this make Logan Paul and KSI Billionaires? Lets find out
In the beverage business, the big 2 (Pepsi and Coca-Cola) only consider an acquisition of a brand to operate under its umbrella if it has achieved more than a 5% market share in its respective sector as that is “considered significant” – Kevin O’Leary. Here is a list of some notable recent Coca-Cola acquisitions alongside their acquisition value.
Costa Coffee (CC) – $5 Billion
Vitamin Water (VW) - $4 Billion
Glaceau Smartwater (GSW) - $4 Billion
Fairlife (FL) - $1.2 Billion
BODY ARMOUR (BA) - $5.6 Billion
We will be focusing on Body armour and Vitamin Water as they operate in the sector most relevant to PRIME (Energy drink and Vitamin). The Body armour purchase is the largest acquisition by Coca-Cola to date, it was an attempt to break into the Sports drink industry as PepsiCo’s Gatorade has managed to gain a 70% Market share.
BA had a 19% market share and reports state VW had a 55% market share at its peak in 2007 in the Vitamin sector. Although exceeding expectations, Prime is yet to make a dent in this yet and there is a possibility it won’t due to the following factors.
1. Supply chain issues
2. Ownership issue
3. Branding
Prime has struggled to deal with the hype of the drink, clearly not expecting the demand to be so high, with many (including myself) struggling to get their hands on it. This issue won’t be a problem for Coca-Cola but will affect how quickly they can get their hands on some all-powerful market share as only 10% is up for grabs…
Who owns Prime? This detail is somewhat clear on the surface, Logan Paul and KSI, but dip your head under the water and you see Congo Brands, delve deeper and you find MolsonCoors who purchased a minority stake in the brand, most likely leveraging their manufacturing plants across the world.
Who are CongoBrands? Owned by Trey Steiger and Max Clemons, they are a Drinks accelerator, think Y Combinator but for beverages. Influencers love using them for scaling, but their true power is in their distribution network, able to get goods across the world with ease. They have never taken on a project of this scale before. They own a majority of Prime. This leads us to the second issue.
The brand is directly linked to a personality. An acquisition of Prime is an acquisition of Logan and KSI. The hype around the brand is not based on its good taste or excellent health benefits despite what they might tell you. The hype is around the branding, take that away… and you have a drink that is no different to anything else.
The fact they do not own a majority in the brand is a red flag for any investor, Coke would need to agree on a strategic partnership and perhaps agree to be distributors instead of owners to maintain this current structure that has so far proved to be beneficial.
To conclude, it is simply too early to put a $10 billion valuation on a drink that has only clocked in $10 million in monthly sales due to its attachment to a brand, one that doesn’t even own its brand. A minority stake purchase however is not out of the question. When Coca-Cola purchased Body armour, they first did so with a 15% initial purchase 5 years prior. This would make sense for Coca-Cola.
Overall, the brand is closer to being valued at $500 million by its first year from the outside. Although they haven’t even gone through a full year of trading so I’m not sure why folk are jumping the gun here.
