Once upon a time, the only way to drink pure coconut
water was with a machete in a tropical location.
Today, the global coconut water market is valued at
$6.64 billion and is expected to reach $20
billion by 2030.
You can thank, in part, this man.
People in Brazil were drinking it for everything.
They were drinking it at the breakfast table,
drinking it on the beach after a workout, and their
smoothies with their cocktails for their
hangover. We started to think, there's got to be a
market in North America for coconut water.
This is Michael Kirban, co-founder and executive
chairman of the Vita Coco Company, along with his
friend Ira. The two started the sports drink
alternative-company shortly after a chance encounter
with two Brazilian women in a bar.
The company, which celebrates its 20th year
this year, is valued today at over $1 billion.
Coconut water today is the fastest growing category in
the beverage aisle in North America, one of the most
common consumed beverages in the entire tropical
world.
In the past few years, revenues and profits have
overall increased, with $39 million in profit for 2023
as of Q3.
There are three numbers to look out for in this story:
$75,000, the cost of the very first shipments of
coconut water from Brazil; 51%, the market share
percentage Vita Coco has in the United States today; and
over $380 million, the company's 2023 revenue as of
Q3.
It tastes great. It's incredibly hydrating.
Luckily, we were right.
It's taken 20 years to really ingrain the culture
of drinking coconut water into the American consumers
mindset. But it's coming along and it's really
mainstream.
This is the story of how two friends helped introduce the
American consumer en masse to coconut water.
This is Founder Effect.
I always knew I was going to be an entrepreneur.
I always knew I was going to have my own business.
I went to the University of Alabama for a year, and then
dropped out middle of an economics course and a big
lecture hall, and I realized college wasn't for
me. It started several businesses, including a
computer software company, which I still have today.
I love consumer goods.
I love being able to make something and then see
people enjoy it and use it in their daily life.
Through a random acquaintance Mike met Ira,
the two connected immediately.
We were friends right away.
We actually opened an event space in New York together.
We were throwing parties as a business.
On a freezing cold night in 2003, Mike and Ira were at a
bar in Manhattan when they saw two Brazilian women.
There putting their coats on and walking out of the bar.
They're leaving and he's like, "I'm going to go get
them. I'm going to go bring them back." And they come
back into the bar and we talk for about an hour or
two hours, just about all sorts of things.
The women tell Mike and Ira that one of the things they
miss most about home is coconut water, a product
they just couldn't really find in the United States.
Absolutely smitten with one of the two women, Ira would
go on to sell all of his belongings and move to
Brazil to be with her.
I went down to visit a few months later.
We were in Rio, sitting on the beach, drinking out of a
coconut, talking about different business
opportunities. And coconut water was only one of the
ideas. But as we're drinking out of a coconut on
the beach, coconut water sounded super interesting
and fun. It was that idea that I got excited about.
And then from there we started a business.
It wasn't long before the two started creating a
coconut water beverage company.
Mike and Ira noticed a big, glaring opening in the
United States market for the beverage.
When we started Vita Coco in 2004, there were no other
real coconut water companies in the United
States. There were some ethnic food brands that had
canned coconut water, but they weren't readily
available in general trade.
Before long, Mike put together $75,000 money he
had gathered from his software company for the
first shipment.
Part of that was money that I put in.
I had some money that I made in the computer
software business, which was doing well.
And then, yeah, we started maxing out credit cards on
top of that to operate the business.
We raised money starting in 2007 from a key investor
that has been with us ever since.
We raised money a couple of other times in those early
days, and then we were basically profitable in cash
generative from around 2010 2011.
A large part of Vita Coco's success can be linked to its
look. The packaging container itself, known as
the Tetra Pak, would become synonymous with the product.
The 330 mL debuted in 2004 with the 500 mL and the one
liter packages to follow in the years to come.
So this is our iconic package.
It's kind of this odd square box.
You don't see a lot of beverages in this type of
packaging. And it's the way coconut water was packaged
in Brazil at the time it came in this Tetra Pak,
because they had taken the same technology that they
use for packaging shelf stable milk and applied it
to coconut water, because coconut water oxidizes very
quickly and Tetra Pak keeps it from oxidizing.
A few months after launching the original coconut water,
Mike and Ira felt they needed different flavors for
continued success.
When we started Vita Coco, we only had one item and it
was a 330 mL regular Vita Coco -- blue one, looks like
this. And then quickly we realized we were sitting
there with one little facing on the shelf and we
needed more. So we came up with two new items which we
launched, which was the peach, mango and the
pineapple. And now instead of having one item on the
shelf, we'd have three and we'd have these bright
colors. You start to create a billboard effect, which
has been amazing for us.
Right around the same time, Vita Coco launched rival
coconut water company Zico was starting as well.
Mike caught wind of it the very first week he was out
selling his product to local bodegas in New York.
The same week that we launched in 2004, another
guy on his own launches another coconut water.
The same concept, same color packaging, in the same
city at the same time.
I knew I had to beat him.
I couldn't have happened to me in other stores.
What happened to me in that first store where I
discovered Zico.
The great coconut water War had begun.
In the beginning, it was me against Mark, and we were
just fighting it out in the streets. And then as I
started to hire people, everybody had the same
mentality. It was like, we're going to crush Zico.
And that's what drove us.
The first thing on our mind was, how do we crush Zico?
And that's all we did. So it actually forced us to
move faster. It forced us to go broader, and it forced
us to do more.
Then I think we would have done if we didn't have the
competition.
Coca-Cola would go on to acquire Zico in 2013.
PepsiCo would also enter the fight, investing in
coconut water brand ONE.
However, Vita Coco would soundly beat it as well.
Eventually, in 2021, Coke sold Zico back to its
founder, and PepsiCo divested ONE.
Today, Vita Coco holds a 51% market share in the
United States.
You've got to always focus on your consumer because in
the end, that's who's buying your product.
That's who you need to cater to.
But if you focus on your competitor, you move faster
and you become more aggressive and you want to
win more and you want to do it before the other guy does
it, and I think it's quite beneficial to have a strong
competitor when you're starting a business.
As the company grew, Vita Coco couldn't solely rely on
Brazilian coconuts anymore.
Looking to expand, Vita Coco would begin sourcing
coconuts from other countries. Starting in the
Philippines and later in Sri Lanka, Indonesia,
Malaysia and Thailand, the company approached suppliers
and offered them the right equipment for long-term
supply agreements.
Today, the global network sources from thousands of
farms across ten countries and 19 factories with their
signature coconut water sold in more than 30
countries. Mike attributes two major components to the
company's success over the next decade getting into
Whole Foods in 2006 and celebrity endorsements.
We sold part of the company to a group of celebrities
Madonna, Matthew McConaughey, Anthony Kiedis.
They invested in the business, and then they
started talking about the category and the brand in
interviews on stage.
All of these type of things, which helped really
put coconut water on the map.
And then the next big moment for us was Rihanna.
We created a partnership with Rihanna in, I believe,
2009. Right as she was exploding, the timing was
perfect and we actually used her in advertising.
We had billboards, we had media.
In 2012, a class action lawsuit regarding Vita
Coco's marketing began citing misleading health
claims and false advertising.
In the early days, we had marketing claims like we
would say it's nature's Gatorade, or we would say
it's got more potassium than two bananas.
And then the question is, how big is the banana?
And that became an issue for us.
So now we say more potassium than one banana.
So these type of things are very complicated.
The company is committed to having a positive impact on
the farming communities where it sources
ingredients. In 2014, it launched its social impact
program, the Vita Coco Project, with which 12,000
farmers have partnered.
The project has donated $15 million worth of product,
built 36 schools and classrooms, and distributed
over half a million coconut seedlings across the world.
In 2022, the Vita Coco Company announced their B
Corp certification.
In the past few years, revenues and profits have
overall increased, with $380 million in revenue and
$39 million in profit for 2023 as of Q3.
Vita Coco is our core business, but at the Vita
Coco Company, we're looking to, over time create a
portfolio of healthy beverage brands.
Although coconut water accounts for 91% of overall
sales, the Vita Coco Company brand family has
expanded over the years to include coconut milk, juice,
oil and cream as well.
Aluminum-canned water, Ever & Ever, and protein-infused
water PWR LIFT have also recently been added to the
company's catalog.
In October of 2021, Mike and Ira rang the opening
bell at Nasdaq when their company went public.
To ring the opening bell, it was just an incredible
feeling. It was a moment to stop and think, recognize
what we had achieved, but then focus on the next
objective and that's exactly what we've done.
The company hit a significant milestone in
2023. In a single year, across their thousands of
coconut farms in over 30 countries, at a rate of
about 3 million a day, 1 billion coconuts were
cracked to meet the demand for their consumer goods.
Everybody would tell me in the early days, it's a fad.
You're never going to be successful. We've grown the
business tremendously since the IPO, and I think we're
in the process of creating an incredible company.
We're really excited about expanding further into a lot
of the countries that we're in. So we see a big
opportunity to continue to expand across the globe for
Vita Coco.