This is an English adaptation of a FoodBud historical article originally published on October 5, 2021.
As of June 30, 2021, Vita Coco's Asia-Pacific business accounted for 15% of its international business, compared with 60% for Europe.
Coconut water brand Vita Coco filed its S-1 registration statement with the U.S. Securities and Exchange Commission on September 27, 2021, Eastern Time, planning to list on Nasdaq under the ticker "COCO." Goldman Sachs, Bank of America and UBS were among the joint bookrunners. Market expectations at the time put the potential IPO valuation above US$2 billion.
Vita Coco traces its origin to 2003, when co-founders Michael Kirban, co-CEO and chairman, and Ira Liran encountered Brazilian coconut water. Liran later moved to Brazil, and Kirban noticed that coconut water was as common there as bottled water but largely absent from the U.S. market.
Within four months, Kirban began building Vita Coco. By 2021, its products were sold in more than 100,000 points of distribution across 24 countries.
In 2009, Coca-Cola and PepsiCo entered coconut water through acquisitions, raising concerns that Vita Coco would be crushed by the beverage giants' distribution power. Instead, Vita Coco continued to grow and positioned itself as the leading coconut water brand.
As demand rose, Vita Coco expanded its supply chain from Brazil into Southeast Asia, including cooperation with the largest coconut-products producer in the Philippines. Coconut water was initially treated as a byproduct, so Vita Coco helped fund equipment upgrades in exchange for long-term exclusive supply agreements. The model was later replicated in Sri Lanka, Indonesia, Malaysia and Thailand.
By the filing period, Vita Coco's supply network spanned 10 countries, with 15 coconut-water production plants and five co-packing plants, consuming 2.5 million coconuts per day. Its top three suppliers accounted for 54% of procurement in 2020.
Kirban stated in the prospectus that the company was committed to using its business "as a force for good." During the pandemic, sales surged by more than 100%, and the company donated US$1 million to No Kid Hungry and Feeding America.
Vita Coco began with coconut water and later expanded into coconut oil, coconut milk products, Runa energy drinks, acquired in 2018 under a consideration arrangement capped at US$51.5 million, and PWR LIFT protein water, a functional beverage sold only through Amazon at the time. With celebrity support including Madonna, Vita Coco built a "natural sports drink" image in Europe and the U.S.
Coconut water remained the core business. It accounted for 85% of revenue in 2019 and 84% in 2020. For the six months ended June 30, 2020 and June 30, 2021, coconut water represented about 82% and 88% of revenue, respectively.
Euromonitor data cited in the filing put global non-alcoholic beverage retail sales above US$952 billion in 2020, with an expected US$1.36 trillion by 2025 and a 7% CAGR. SPINS data put the U.S. beverage market above US$119 billion, including roughly US$13 billion for natural beverages, growing twice as fast as traditional brands. Vita Coco described itself as the largest brand globally in coconut water and plant waters.
IRI Custom Research data showed Vita Coco's U.S. coconut-water market share rose from 42% to 46% from September 2020 to September 2021, 36 percentage points ahead of the second-largest player. IRI UK data showed Vita Coco held more than 70% share in the U.K., while it was still early-stage in other European and Asian markets.
Euromonitor estimated the global coconut water market at US$2 billion. In the U.S., during the 26 weeks ended September 5, 2021, Vita Coco drove 15% year-on-year category growth; its own sales rose 33%, compared with 4% growth for sparkling water.
According to the prospectus, Vita Coco generated revenue of US$284 million in 2019 and US$310 million in 2020. Revenue for the first half of 2021 was US$177 million, compared with US$153 million in the prior-year period.
Operating profit was US$13.37 million in 2019 and US$46.86 million in 2020. For the first half of 2021, operating profit was US$11.84 million, compared with US$16.53 million a year earlier.
Net profit was US$9.42 million in 2019 and US$32.69 million in 2020. For the first half of 2021, net profit was US$9.42 million, compared with US$6.58 million a year earlier.
Co-CEO Martin Roper, previously CEO of Boston Beer Company for nearly 20 years, joined Vita Coco in 2019. The company emphasized his experience in internal innovation, strategic M&A and consumer insight.
Vita Coco's largest distributor customer was Keurig Dr Pepper, and its largest retail customer was Costco. For the year ended December 31, 2020, they accounted for about 19% and 35% of sales, respectively. For the six months ended June 30, 2021, they accounted for about 22% and 32% of net sales.
The company outlined six growth priorities:
Numerator data showed 55% of Vita Coco consumers were non-white, with a large share Asian or Hispanic; 43% were Gen Z, and 41% had families. In the year ended July 25, 2021, Vita Coco added more than 860,000 new households. In the most recent six months, consumers purchased coconut water at a rate 22% higher than ordinary water.
For the 12 months ended July 31, 2021, Numerator estimated Vita Coco's household penetration at 9.5%, compared with about 21% for the category. The U.S. Midwest remained underpenetrated, with household penetration at 66% of the national average.
In 2004, the U.S. coconut-water market was only US$10 million. By the filing period, Euromonitor data put it at US$658 million. Vita Coco believed it could double its distribution footprint. It also launched canned Vita Coco coconut water to enter more channels, increase items per store and gain shelf space.
The company also saw whitespace in foodservice, especially casual dining, as well as e-commerce and DTC. Amazon sales in the Americas represented about 6% of total sales in 2020 and grew 45% in the 12 months ended August 28, 2021.
In 2021, Vita Coco identified functional beverages as a growth opportunity and launched Vita Coco Boosted, positioned without high caffeine or coffee flavor.
For the six months ended June 30, 2021, international markets contributed 15% of sales. Within international revenue, Europe contributed about 60%, Asia-Pacific about 15%, and other regions about 25%.
Vita Coco used CE as a shipment measure: one CE equals a case of 12 bottles of 330ml liquid beverages, or the same liter volume of oil.
In early international expansion, Vita Coco entered the U.K., China, France and Spain. In 2019, it adjusted its expansion strategy to focus on key markets and strong distributor relationships. The U.K. team also covered Europe and the Middle East, while China had a localized execution team with costs shared with local distributors.
The company used different market-entry models by country and said it would tailor products and packaging to local cultural characteristics. Given consumer interest in natural and healthy elements and market size, it planned to focus on Western Europe and China.
Vita Coco's shareholder base included the Verlinvest family associated with AB InBev, actors Matthew McConaughey and Demi Moore, singer Madonna, and Reignwood Group, parent of Red Bull China. Before the IPO, Verlinvest Beverages SA and RW VC S.a.r.l. each held more than 5%.
In 2014, Vita Coco sold a 25% stake to Reignwood Group at a US$665 million valuation, raising US$166 million. The two parties formed a strategic partnership and established Vita Coco China, with Reignwood holding distribution rights for Greater China.
By 2021, Vita Coco had distribution in consumption scenes popular with younger shoppers, including Hema and Sam's Club.
Major FMCG companies including PepsiCo, Danone and Coca-Cola had already entered coconut water, and Wahaha had also launched a coconut-water product. In 2013, Coca-Cola acquired coconut-water brand Zico and brought it to China in 2016.
Vita Coco and Zico had similar packaging and both sourced raw materials from Southeast Asia. In the U.S. coconut-water market, they once ranked first and third, respectively. After Zico entered China, Coca-Cola's channels brought it into direct competition with Vita Coco.
Vita Coco's China promotion was more sustained than Zico's. During peak seasons, it placed displays in hypermarkets and advertised in high-traffic subway stations. Vita Coco also offered a broader coconut-water range, including original and pineapple-flavored green-coconut juice coconut water.
In 2020, amid the pandemic, Coca-Cola cut brands globally. Zico, despite becoming the second-largest U.S. coconut-water brand, was included in the cuts and discontinued. The source attributes this to competition from stronger brands such as Vita Coco and to coconut water's relatively niche category size. During Coca-Cola's ownership, Zico's market share never surpassed Vita Coco's.
In 2021, health trends and plant-based beverages kept coconut water in focus in China.
In August 2021, Genki Forest quietly announced a low-sugar coconut drink called "Summer Wind" on its official account. A new coconut-water brand founded in October 2020 completed three financing rounds within less than one year.
Genki Forest's "Summer Wind" was priced at RMB9.5 per bottle, while Cocoa Full Score coconut milk was priced at about RMB12 per bottle. Both were positioned above legacy Coconut Palm coconut juice at around RMB4 per box, and were expected to compete with Vita Coco in e-commerce, convenience stores and fresh-food supermarkets. Vita Coco and similar youth-targeted coconut-water products were generally priced around RMB10 per unit.
Caissa Tourism Group also launched a fresh coconut-juice brand, Mixiaoye. At the time, it was mainly sold through online channels including Tmall and Mi Mall, with plans to enter railway, aviation and other specific channels, followed by offline channel expansion.
As of June 30, 2021, Vita Coco had only US$19.48 million in cash and cash equivalents. The source also stated that as of December 31, 2020 and June 30, 2021, Vita Coco had US$2.5 billion and US$38 million in outstanding debt, respectively.
Note: IPO valuation, forward targets, market forecasts and expansion plans are historical figures from the 2021 source article.