Vita Coco, the leader in the US and the UK with a majority market share, is credited as the creator of the coconut water market. The independently owned brand originated in Brooklyn a decade ago, when co-founders Ira Lira and Michael Kirban struck up a conversation with two Brazilian women in a bar. Soon after Lira and Kirban launched Vita Coco in its Tetra Pak juice box with New York as their entry point. Last year, the brand sold almost $270 million dollars worth of coconut water— 300 times as much as in 2004, and more than double than in 2011.
Vita Coco wasn’t the only brand to fuel the frenzy. Zico, founded by Mark Rompolla in 2004, is the second largest US brand. Now owned by Coca-Cola, the company doubled its sales last year to become a $87 million dollar business.
PepsiCo owned O.N.E. is the third largest coconut water brand in the US, which has grown over 1,100% since its introduction to the Whole Foods market by Brazilian entrepreneur Rodrigo Velso in 2006. Together, these three players have majority control over the market which has grown from virtually zero sales in 2004 to almost $400 million last year in the US alone.
Retailing for roughly $4 to $6 per litre depending on the brand, this is much higher than most sports drinks or waters. Even if the drink wins credibility for being a lower calorie alternative to other juices, what is it about this beverage that makes people so nutty?
From athletes to an increasingly health conscious middle class, its success is credited as an answer to the growing demand for natural, healthy products. In fact, in 2009 “naturally healthy” products reached $223 billion in global sales, of which the beverage category made up an astounding 63%.
Most tribute the drink’s versatility for its success; the slightly sour tasting water taken from unripe green coconuts is cholesterol free, fat free, and packed with electrolytes and potassium. Marketed as a super healthy miracle beverage with aggressive branding, these US companies crafted a stellar positioning for their manufactured products as “nature’s sports drink”.
Hollywood has played its part as well: Madonna, Demi Moore and Matthew McConaughey all invested in Vita Coco as sales jumped from $4 million in 2007 to $20 million in 2009. Global corporations quickly caught on and catapulted the industry from boutique status toward global market share.
Today, there are over one hundred brands manufacturing coconut water, and over 250 companies have beverages with some form of coconut water in them. In New York, convenience store shelves count more coconut water brands than soda brands. In the UK, coconut water is quickly catching up to the US and estimated to become a £100 million retail category by the end of the year. 39 brands heavy, manufacturers jockey for shelf space in major retailers like Waitrose and Tesco. The product is swiftly gaining popularity across Europe too, with major players like Nestlé investing in a range in coconut water-type products.
Brazil is still the world’s leading seller of coconut water, where its leading brand Kero-Coco is stocked in McDonalds and Pizza Hut. The Brazilian success of “aqua de coco” points toward the industry potential in other tropical countries, where the product is still largely consumed fresh– as in, out of the coconut!
Not All It’s Cracked Up To Be
Coconut water producers have used its alleged health benefits to justify their products’ relatively high price tags compared to other mass market beverages.
In recent years, health experts have began to publicly question whether these beneficial claims are what they are hyped up to be. In 2011, Vita Coco and O.N.E. came under legal fire for falsely advertising their products’ nutritional and “super hydrating” value, costing Vita Coco $5 million in a class action lawsuit.
Though these big companies market their coconut water as a 100% natural juice product, any coconut water “purist” will tell you it’s not quite the same thing as a real coconut. This comes down to their sourcing of raw materials and manufacturing processes. Coconut farming yields year to year and is naturally fraught with issues ofsupply, quality and perishability. Unlike products like green tea, attaining coconut water is a more complex and relatively expensive process largely affected by unpredictable climate change. And where the water of an unripe green coconut was once regarded as waste, it’s global demand is now expected to reach around 350 million litres by 2020.
Vita Coco and O.N.E. originally sourced their coconuts from Brazil, before demands for the beverage soon exceeded the country’s supply capacity. The major players have since shifted their procurement strategies to the Asia Pacific. In the Philippines, coconut water export doubled from 5.7 million litres worth $5.6 million to 10.2 million litres worth US $11.2 million during first half of 2012. Still the big brands make high margins as they buy coconuts for virtually nothing at the expense of the coconut farmer.
“Most coconut water companies use heat pasteurising methods in manufacturing their products, which actually burns out the natural taste and nutrients,” Chai Phonsuwan, co-founder of 100% raw coconut water company Copra who launched their product last year in New York. “We take an opposite approach, using a technique that preserves the nutrients. We also strongly believe in sticking to our Thai roots and values. We source our coconuts from a sole origin in Central Thailand to control taste and quality.”
The New Age Water?
With the demand for raw coconut water rising quickly, a handful of brands like Copra are innovating the industry from the bottom-up, both in terms of their product andprotecting the coconut farmer. As the health benefit controversy is projected into the limelight, more companies also shift toward ethical claims using “organic” and “fairtrade” to spin their products.
Big players like Vita Coco move toward the artificial, infusing their products with different flavours. From tropical fruit punch to chocolate, these flavoured waters are charging the industry into the mainstream.
Coconut water has clearly bypassed the cold teas, smoothies and vitamin waters of the world. As the industry tackles further growth spurts, will it become the next Gatorade?
Source: Lisa Roolant is a writer/editor for TransferWise. She is London’s lead strategist ataudience.io, a transatlantic company helping startups grow internationally. Originally from Belgium, born and raised in Bangkok, Thailand, Roolant is inspired by stories of creativity and innovation from around the globe.