Photographer: Andrew Harrer/Bloomberg

Vita Coco to Near $1 Billion in Sales as Potential Buyers Circle

  • World’s top-selling coconut-water brand seen as buyout target
  • Company pushing into categories such as coconut milk and oil

Vita Coco, the world’s largest coconut-water brand, expects to approach $1 billion in sales this year by expanding into new categories, raising its profile as a possible acquisition target. 

All Market Inc., the brand’s parent company, has branched out into coconut milk, coconut oil and other products -- a move that will vault the Vita Coco name into the dairy and personal-care aisles of supermarkets. The expansion also has brought interest from large beverage companies looking to tap into the growth, Chief Executive Officer Michael Kirban said in an interview.

“We’re probably the largest independently owned natural-beverage company in the world,” he said, adding that strategic acquirers have contacted him. “We talk to quite a few of them regularly.”

Shifting consumer tastes have brought upheaval to the beverage industry, prompting Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group Inc. to seek acquisitions. They’re looking for ways to diversify away from traditional soda and high-calorie juices, which are losing favor with many shoppers -- especially in developed economies. Coca-Cola previously purchased Vita Coco’s chief competitor, Zico, in 2013.

Vita Coco already has ties to a number of beverage giants. The startup got its first major investment from Verlinvest, a private equity firm controlled by the Belgian families behind Anheuser-Busch InBev NV. It also works with Dr Pepper as one of many U.S. distribution partners. And the owner of Red Bull China, Reignwood Group, has a 25 percent stake.

Kirban, 41, declined to discuss specific sales figures, but says the New York-based company is profitable. It paid a $30 million dividend to investors last year.

‘Owning the Coconut’

Vita Coco plans to near $1 billion in sales by “owning the coconut in different areas of the store,” said Kirban, who co-founded the company 13 years ago. In addition to selling coconut milk and oil, the company has added an artisanal line and a chilled 1.5-liter juice that comes in flavors like lemonade and grapefruit. The idea is to attract consumers who are ditching soda and looking for alternatives.

The global market for coconut water hit $2.2 billion in 2016, up from $533 million five years earlier, according to Euromonitor International. The industry’s sales have grown more than 20 percent annually in the past nine years. Compare that with carbonated soft drinks, which have been growing in the low single digits.

Vita Coco accounted for 46 percent of the $889 million U.S. market, more than triple the share of Zico, its next-closest competitor.

Milk Alternative

By offering flavored juices and coconut milk, the company aims to capitalize on consumers ditching traditional supermarket staples. Sales of regular milk declined in the U.S. between 2011 and 2016, but plant-based alternatives -- including coconut milk -- have surged 61 percent.

Vita Coco Coconut Milk is launching in March, first at the Safeway supermarket chain and then at other grocers and independent retailers. The target audience is consumers drinking organic milk who want a nondairy option that doesn’t taste watered down, Kirban said.

The milk is created by mixing coconut water with coconut cream, creating a drink that has more calcium than dairy milk. Coconut water is made from the liquid inside green coconuts.

The company’s new lineup of chilled coconut water, meanwhile, will be on shelves next to brands like PepsiCo’s Tropicana and Coca-Cola’s Simply -- an attempt to capitalize on the decline of once-popular juices. The 1.5-liter bottles launched in test markets in the second half of last year and are now being rolled out nationally in stores such as Target and Safeway.

Vita Coco also is spending $25 million on its first major ad campaign. Until now, the company has been relying on the star power of celebrity investors: Its backers include Madonna, Rihanna, Demi Moore and the Red Hot Chili Peppers’ Anthony Kiedis.

Finding an Exit

Kirban expects to eventually sell the business to a strategic buyer, though an initial public offering also is possible, he said.

Beverage startups have been attracting investments from Big Soda. Coca-Cola bought stakes in juice company Suja Life, aloe-water maker L.A. Aloe and lactose-free dairy company Fairlife. In November, PepsiCo announced the acquisition of KeVita, which makes fermented probiotic and kombucha beverages, and Dr Pepper agreed to purchase Bai Brands for $1.7 billion.

Vita Coco could go that same route, Kirban said.

“I don’t see this as a business I’m going to pass on to my children -- they’d screw it up,” he said. “When the time is right and with the right partner, we’ll find either a strategic exit or an IPO.”

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