Coconut Water Brand Vita Coco Sees $100 Million In Sales This Year

Date : 05/18/2011 @ 9:16AM
Source : Dow Jones News
Stock : DR Pepper Snapple Grp., DR Pepper Snapple Grp., (DPS)
Quote : 88.74  0.0 (0.00%) @ 8:31AM

Coconut Water Brand Vita Coco Sees $100 Million In Sales This Year

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Coconut water brand Vita Coco is on track to more than double sales this year to $100 million, founder Michael Kirban said Tuesday, hoping to gain share in the niche beverage category where rivals are backed by Coca-Cola Co. (KO) and PepsiCo (PEP).

All Market Inc., owner of Vita Coco, hopes to get a boost as it launches the first national advertising campaign for the seven-year old brand this summer featuring recording artist Rihanna.

"We want to make some really big moves this year," Kirban, chief executive of All Market, said in an interview.

Vita Coco, which had $40 million in 2010 sales, is distributed through Dr Pepper Snapple Group Inc. (DPS). It is privately held, with Kirban and co-founder Ira Liran owning a majority stake. Other investors include Verlinvest SA, a Brussels investment firm tied to Interbrew, now a part of Anheuser-Busch InBev (BUD, ABI.BT), and celebrities like Madonna and Demi Moore.

The seven-year old Vita Coco vies with several other coconut water brands. Coke in 2009 invested $15 million in Zico Beverages and Pepsi last December became majority owner of O.N.E. when it increased its stake in the company. Pepsi also owns the Brazilian coconut water company Amacoco and its Naked Juice line also has a coconut water variety.

In the U.S., Kirban says Vita Coco controls 60% of the coconut water category, which has about $350 million in annual sales. That still makes the drink a tiny player in the $115 billion North American market, according to trade publication Beverage Digest, but investments by both Coke and Pepsi show belief that the category has potential.

The drink is touted as having electrolytes and being high in potassium, both attractive features to consumers interested in so-called functional beverages that are healthier than sugary sodas.

"They are functional, natural and low in calories--it's an attractive proposition," Beverage Digest publisher John Sicher said.

He added that flavored versions of coconut water will likely do better than the plain variety since the taste doesn't appeal to everyone. "With some consumers in the U.S., there's some taste resistance," Sicher said. "The jury is still out on how coconut water is going to play out in the U.S."

In addition to regular flavor, Vita Coco also comes in tangerine, pineapple and peach and mango flavors.

Like other drink brands, Vita Coco has grappled with higher commodity costs this year. Prices for coconut oil, which is harvested from mature coconuts, have surged over the past year, Kirban said. As a result, farmers are leaving coconuts on trees longer, in turn sending prices from coconut water, which comes from young coconuts, higher.

The weak U.S. dollar is also sending costs higher, since Vita Coco sources most of its coconut water from Brazil and southeast Asia.

The higher costs forced to company to raise prices 7% in April, the first increase in a year. An 11-ounce carton of Vita Coco now costs about $2 and 17-ounce cartons cost around $3.

Kirban says he's received offers to buy the brand, but, "When you're growing at 200% a year, it doesn't feel like the right time to sell," Kirban said. The New York Post recently said that the company had a valuation of $200 million.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;

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