Business

Vita Coco wants its coconut water to be your cocktail mixer — and your hangover cure

In this article

Vita Coco water.
Tim P. Whitby | Getty Images

For nearly two decades, Vita Coco has sold its coconut water to health-conscious consumers as a fresh way to hydrate. This year, it’s changing the pitch.

The beverage company is pushing its namesake brand into new use cases and occasions, partnering with Diageo on a canned cocktail and marketing the drink as a hangover aid.

Co-founder Mike Kirban compared Vita Coco’s transformation to that of Ocean Spray, the agricultural cooperative that sells cranberry products.

“Ocean Spray is a brand that’s four times our size, that’s all based on one ingredient,” the company’s executive chairman told CNBC. “And we should be bigger than Ocean Spray pretty quickly, because I think the coconut is cooler than the cranberry.”

Founded in 2004, Vita Coco started as a coconut water brand but has since expanded into other beverage categories, like energy drinks and water. Its namesake brand still accounts for three-quarters of the company’s revenue, which reached $335.8 million in the first nine months of 2022.

The company went public in October 2021, just before the market for initial public offerings dried up as inflation, the war in Ukraine and economic uncertainty weighed on investors.

Vita Coco’s stock is up less than 1% since its IPO, but it’s fared better than many other consumer companies that went public around the same time, like Sweetgreen and Allbirds.

In May, Kirban transitioned from co-CEO at the company to his current role, leaving Boston Beer veteran Martin Roper as the sole chief executive — another step of Vita Coco’s evolution.

Coke and Pepsi’s loss, Vita Coco’s gain

Just months before Vita Coco’s IPO, both Coca-Cola and PepsiCo exited coconut water. Coke sold Zico back to its founder as it slimmed down its portfolio, and Pepsi offloaded O.N.E. as part of the $3.3 billion sale of its juice business.

Despite the beverage giants’ size, they had been unable to compete with Vita Coco, which is credited with bringing coconut water to the U.S. and still holds 50% share of the market, excluding its private-label business.

Their exits from the segment opened a new distribution avenue for Vita Coca. As long as Coke and Pepsi were in the coconut water business, their contracts with venues ranging from stadiums to college campuses shut Vita Coco out.

With the momentum of new growth opportunities, Vita Coco is now pushing into bars and restaurants. Step one of the plan is teaming up with Diageo for three canned cocktails mixing Captain Morgan rum and Vita Coco coconut water: a mojito, a piña colada and a strawberry daiquiri.

“If you go to Brazil or Southeast Asia, coconut water is what you mix with cocktails,” Kirban said. “The idea is to start getting consumers used to drinking coconut water cocktails with the ready to drink with Diageo partnership.”

Kirban said Vita Coco would be partnering with a spirits company for its broader on-premise expansion plans, but declined to name the partner.

Over the last few years, alcohol and nonalcoholic beverage companies have been teaming up, leaning on each others’ brand equity and expertise to gain so-called “share of throat.” For example, Captain Morgan can introduce itself to Vita Coco’s health-conscious, younger consumers, while Vita Coco benefits from the rum’s mass market appeal.

The morning after

Vita Coco has also been leaning into its reputation as a hangover “cure.”

Since late 2019, the brand has used New Year’s Day as way to pitch hangover recovery kits and subscriptions that feature its products in collaborations with Postmates, Lyft and Reef Kitchens.

This year it’s partnering with DoorDash for a promotion Monday morning following the Super Bowl.

The marketing strategy is something of a reversal, after years of resisting the association.

“With our board, there was always a discussion,” Kirban said. “When you talk marketing, do we want to talk about hangovers? Is that OK for us to talk about?”

And it’s not done there. After the hangover subsides, Vita Coco wants to be the non-dairy milk in your coffee.

In late January, the brand announced it’s partnered with Alfred Coffee, a high-end chain with locations in California and Texas, to create a non-dairy coconut milk for its baristas to use.

Vita Coco plans to expand the product designed specifically for coffee — separate from the coconut milk it sells in supermarkets nationwide — to other coffee shops and eventually to store shelves.

Articles You May Like

Credit Suisse bondholders sue Switzerland in the U.S. over $17 billion writedown of AT1 debt
Family offices are planning big investments in private companies
GameStop shares slide 12% following Friday’s 40% sell-off
PGA, Saudi-backed LIV in ‘active discussions’ one year after announcing proposed deal that rocked the golf world
Got Questions About Medicare Hospice Services? Here Are Some Answers

Leave a Reply

Your email address will not be published. Required fields are marked *