This is an English adaptation of a FoodBud historical article originally published on October 21, 2021.
Vita Coco, the coconut water brand, listed on October 21, 2021. Its shares fell 10% intraday, and its market capitalization was about US$750 million.
According to filings submitted to the U.S. SEC, the company’s IPO valuation was about US$833 million. Goldman Sachs, Bank of America and UBS were among the joint lead underwriters. Earlier market expectations had put Vita Coco’s possible IPO valuation above US$2 billion.
The IPO priced at US$15 per share, below the expected range of US$18-21. The company sold 2.5 million shares, while existing shareholders sold 8 million shares. The offering raised about US$173 million.
Vita Coco’s portfolio centered on coconut water, with extensions into coconut oil, coconut milk products, the plant-based energy drink RUNA, and other functional beverages.
The company’s origin story dates to 2003, when co-founders Michael Kirban, co-CEO and chairman, and Ira Liran encountered coconut water in Brazil. Kirban saw that coconut water was common locally, much like bottled water, but was not yet available in the U.S. market in the same way. Over the next four months he began building Vita Coco.
By the time of the IPO, Vita Coco products were sold in more than 100,000 distribution points across 24 countries, and the company described itself as the leading coconut water brand.
In 2009, Coca-Cola and PepsiCo entered coconut water through acquisitions, raising concerns that Vita Coco could be squeezed by their distribution networks. Vita Coco positioned itself as having won that category battle.
As Vita Coco expanded, it needed more coconuts. Its supply chain started in Brazil, expanded into Southeast Asia, and included cooperation with the Philippines’ largest coconut product producer.
When Vita Coco first sourced coconut water from Philippine producers, the idea was reportedly mocked because coconut water had been treated as a byproduct. Vita Coco proposed investing in equipment upgrades in exchange for long-term independent supply agreements, then replicated that supply-chain model in Sri Lanka, Indonesia, Malaysia and Thailand.
At the time of the article, Vita Coco’s supply-chain network covered 10 countries, with 15 coconut water production plants and 5 co-packing plants. It consumed 2.5 million coconuts per day to meet demand. Its top three suppliers accounted for a combined 54% of procurement in 2020.
Michael Kirban said Vita Coco was committed to using business as a force for good. During the pandemic, when sales surged by more than 100%, 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, and PWR LIFT, a protein water and functional beverage sold at the time only through Amazon. RUNA was acquired in 2018, with earnout arrangements and total consideration not exceeding US$51.5 million. With help from celebrities including Madonna, Vita Coco built a “natural sports drink” image in European and U.S. markets.
Coconut water remained the core product:
Euromonitor data cited in the article showed global non-alcoholic beverage retail sales exceeded US$952 billion in 2020 and were expected to reach US$1.36 trillion by 2025, implying a 7% CAGR.
SPINS data put the U.S. beverage market at more than US$119 billion, with the natural beverage market around US$13 billion and growing at twice the speed of traditional brands. Vita Coco was described as the largest brand globally in coconut water and plant water.
IRI Custom Research data showed Vita Coco’s U.S. coconut water category share rose from 42% to 46% from September 2020 to September 2021, leading the second-ranked brand by 36 percentage points.
In international markets, IRI UK data showed Vita Coco held the largest UK share, above 70%, while its presence in other European and Asian markets was still early-stage.
Euromonitor data put the global coconut water market at US$2 billion. In the U.S., for the 26 weeks ended September 5, 2021, Vita Coco drove 15% year-on-year category growth; its own sales volume grew 33% year on year, compared with 4% for sparkling water.
Vita Coco reported revenue of US$284 million in 2019 and US$310 million in 2020. Revenue in the first half of 2021 was US$177 million, compared with US$153 million in the same period of the prior year.
Operating profit was US$13.37 million in 2019 and US$46.86 million in 2020. In the first half of 2021, operating profit was US$11.84 million, compared with US$16.53 million in the same period of the prior year.
Net profit was US$9.42 million in 2019 and US$32.69 million in 2020. In the first half of 2021, net profit was US$9.42 million, compared with US$6.58 million in the same period of the prior year.
Co-CEO Martin Roper had previously been CEO of Boston Beer Company, where he worked for nearly 20 years. He joined Vita Coco in 2019, bringing experience in internal innovation, strategic M&A and consumer demand insight.
Keurig Dr Pepper was Vita Coco’s largest distributor customer and Costco was its largest retail customer. For the year ended December 31, 2020, they represented about 19% and 35% of annual sales, respectively. For the six months ended June 30, 2021, they represented about 22% and 32% of net sales, respectively.
Vita Coco’s stated growth strategy included:
1. Increase brand awareness. Vita Coco attributed much of its success to marketing based on a sincere and authentic brand tone, using bold and dynamic campaigns to connect with a broad consumer base. 2. Expand distribution and reach more outlets. The U.S. coconut water market was about US$10 million in 2004 and had grown to US$658 million, according to Euromonitor. Vita Coco believed it had room to double its distribution points and launched canned Vita Coco coconut water to enter more channels, increase items per store and gain shelf space. 3. Build foodservice, e-commerce and DTC opportunities. The company saw a white-space opportunity in foodservice, with a long-term focus on casual dining. Amazon sales in the Americas represented about 6% of total sales in 2020 and grew 45% in the 12 months ended August 28, 2021. 4. Continue product innovation. In 2021, Vita Coco saw an opportunity in functional drinks and launched Vita Coco Boosted, positioned without high caffeine or a coffee taste. 5. Expand internationally. For the six months ended June 30, 2021, international markets represented 15% of sales. Within international sales, Europe accounted for about 60%, Asia-Pacific about 15%, and other regions about 25%. 6. Use growth and scale to improve margins. 7. Pursue strategic M&A to strengthen the portfolio. Since acquiring RUNA in 2018, Vita Coco had accumulated experience in business and brand integration and planned to continue looking for synergistic brands.
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. Numerator estimated that, as of July 25, 2021, Vita Coco had added more than 860,000 new households over the prior year. In the most recent six months, consumers bought coconut water at a rate 22% higher than regular water.
For the 12 months ended July 31, 2021, Numerator data showed Vita Coco’s household penetration was only 9.5%, while category household penetration was about 21%. The U.S. Midwest was underpenetrated for Vita Coco, with household penetration at 66% of the national average.
For shipment data, the company used CE as a standard volume measure: one case of 12 bottles of 330ml liquid beverages, or the same liter volume of oil.
In early international expansion, Vita Coco entered the UK, China, France and Spain, then in 2019 adjusted its approach to focus on key markets and stronger relationships with key distributors. The UK market team also covered Europe and the Middle East. In China, Vita Coco had a local execution team, with costs shared with local distributors.
The company said it would use different go-to-market models by country, maintain a cautious financial perspective, customize products and packaging based on local culture, and focus on regions including Western Europe and China given consumer interest in natural and healthy products and market size.
Vita Coco entered China in 2014. Its shareholder base included the Verlinvest family linked to AB InBev, actor Matthew McConaughey, Demi Moore, Madonna, and China Red Bull parent Reignwood Group. 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, parent of China Red Bull, at a valuation of US$665 million, raising US$166 million. The two parties formed a strategic partnership and established Vita Coco China. Reignwood Group held distribution rights for Vita Coco in Greater China.
At the time of the article, Vita Coco had broadly covered consumer venues popular with younger shoppers, including Hema and Sam’s Club.
Large FMCG players including PepsiCo, Danone and Coca-Cola had already moved into coconut water, and Wahaha had also launched a coconut water product. Coca-Cola acquired coconut water brand Zico in 2013 and formally brought the product into China in 2016.
Vita Coco and Zico had similar packaging, both sourced ingredients from Southeast Asia, and had ranked first and third respectively in the U.S. coconut water market. After entering China, Zico used Coca-Cola’s channels to compete directly with Vita Coco.
Vita Coco’s sustained promotion in China was described as stronger than Zico’s. During peak seasons, Vita Coco displayed products in hypermarkets and placed ads in high-traffic subway stations. Its coconut water portfolio included original flavor and pineapple-flavored coconut juice coconut water.
In 2020, under pandemic pressure, Coca-Cola cut brands globally. Although Zico had become the second-largest coconut water brand in the U.S., it was included in the cuts and discontinued. The article attributed this to competition from stronger brands such as Vita Coco and to the coconut water category’s relatively niche scale. During Coca-Cola’s ownership, Zico’s market share never surpassed Vita Coco’s.
Health trends and plant-based beverages kept coconut water in the spotlight in 2021. In August 2021, Genki Forest quietly announced a low-sugar coconut drink called “Summer Wind” through its WeChat account. A new coconut water brand founded in October 2020 completed three financing rounds within less than a 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. Compared with long-established Coconut Palm coconut juice at about RMB4 per carton, these two products targeted higher-priced channels such as e-commerce, convenience stores and fresh-food supermarkets, where they would compete with Vita Coco. Vita Coco and similar youth-oriented coconut water products were generally priced near RMB10 per unit.
Caissa Tosun Development also launched a fresh coconut juice brand, Mixiaoye. At the time, Mixiaoye was mainly sold online through Tmall and Mi Mall; in the next phase, it planned to enter specific channels such as railways and aircraft, and later expand offline sales.
As of June 30, 2021, Vita Coco held only US$19.48 million in cash and cash equivalents. The original article stated that Vita Coco had US$2.5 billion and US$38 million of outstanding debt as of December 31, 2020 and June 30, 2021, respectively.
Note: IPO figures, market-share data, forward targets and company plans are historical as of the 2021 source article.