Originally focused on hot yoga studios and health food shops, the Vita Coco Company is now expanding its target market to include bars, coffee shops, and smoothie venues, as part of a strategy to increase household penetration and demonstrate the versatility of its coconut products, according to a senior company executive in a recent interview. The Vita Coco brand, which encompasses coconut waters, milks, and powders, has long been recognized for its hydrating qualities and nutritional benefits. However, the company is now actively exploring additional applications for the brand. Although sales of Vita Coco coconut water surged by 18% in 2022, it is crucial to identify new consumption occasions and markets that currently lack coconut beverage options to ensure future growth and to meet the company’s overarching goal of becoming a staple in American households. Currently, coconut water is present in only 1% of U.S. homes, as stated by Vita Coco.
“We’re still in the early stages of building this category,” said Mike Kirban, co-founder and executive chairman of the company. He noted that Vita Coco has various usage occasions and draws from multiple categories, which is why they believe the total addressable market remains largely untapped. Founded in 2004, Vita Coco has established a strong presence in grocery stores and more recently in convenience outlets. The company aims to replicate that success in coffee shops, bars, and restaurants by forming partnerships with small businesses to create buzz and enhance consumer awareness.
Vita Coco is collaborating with Alfred Coffee, a chain with locations in Los Angeles, San Francisco, and Austin, Texas, to promote its new Barista MLK, a plant-based coconut milk developed with input from baristas. Additional partnerships with coffee chains are expected to be announced later this year. An agreement with Bloom Nutrition, a health and wellness brand focused on women, promotes Vita Coco as a complement to greens in smoothies and other food offerings. One of the brand’s most significant opportunities lies in the alcohol sector, where it can serve as a mixer or an ingredient in cocktails. This summer, Vita Coco is working to get its coconut water stocked in bars, restaurants, and clubs, starting with select locations in The Hamptons.
Several venues will feature the Coco Blanco, a cocktail made with Vita Coco coconut water, tequila, agave, and lime. At the Surf Lodge, a hotel and restaurant, the Coco Blanco will be served, and Vita Coco will be offered alongside spirit drinks. The Vita Coco logo will also appear on surfboards and yoga mats. The company is no stranger to the alcohol market, having launched a line of premium canned cocktails this year, made with Captain Morgan rum and its coconut water.
Vita Coco’s growth strategy is modeled after cranberry giant Ocean Spray, which boasts four times the household penetration, size, and distribution, even though both brands maintain similar velocities on store shelves, Kirban explained. He recalled that in the 1940s, Ocean Spray noticed that people were mixing cranberry juice into cocktails and proactively marketed a drink called the Cape Codder to bars and restaurants in New England, boosting sales and brand recognition.
For Vita Coco, getting into popular coffee shops and bars is less about immediate revenue and more about fostering consumer awareness of the diverse uses for coconut water. Kirban expressed hope that once people see coconut water being utilized in real-life scenarios, they will be more inclined to purchase it for home use and recommend it to friends and family.
“We are finally hitting our stride,” Kirban stated. However, Daniel McCarthy, an assistant marketing professor at Emory University, expressed some skepticism regarding Vita Coco’s strategy. He noted that entering the bar scene could be expensive and questioned whether increased availability in restaurants and coffee shops would translate into grocery store sales. “Vita Coco is likely worried that organic growth from existing core markets won’t suffice to meet investors’ sales expectations,” he added.
Vita Coco’s journey began on a cold winter evening in 2003 when Kirban and his friend Ira Liran met two women from Brazil in a New York City bar. Liran eventually sold everything he owned, married one of the women, and moved to Brazil. During a visit, Kirban discovered packaged coconut water was as common as bottled water on store shelves. Recognizing an untapped market back in the U.S., the friends set out to establish the Vita Coco brand.
Kirban remarked that it took a decade to convince people to drink coconut water and another ten years to broaden Vita Coco’s reach into new usage occasions and demographics. The company found that its customer base is primarily younger, urban, and multicultural, with over half of its customers identifying as nonwhite, a growing demographic in the U.S. “Building a category takes time. Twenty years ago, it didn’t even exist. Everyone thought I was crazy,” he noted.
Vita Coco’s coconut water holds a commanding lead in American retail, capturing a 50% market share—more if private label sales are included—out of nearly $600 million in measured channel sales, up from 42% in 2020. The brand is attracting consumers away from premium bottled water, juices, and sports drinks, according to Kirban.
The company leveraged its success into a 2021 initial public offering (IPO). Kirban highlighted that unlike other trendy beverages that have seen sales decline or plateau, coconut water remains versatile for various occasions—unlike kombucha, which is primarily associated with gut health. Vita Coco has also benefited from significant price increases in other beverage categories, like sports drinks, which have risen about 70% in the past year. Vita Coco’s prices increased by 6% in the first quarter, a calculated risk that shipping costs, a major expense, would decrease. Indeed, shipping costs have fallen significantly from their peak, saving the company millions annually.
Kirban noted that not too long ago, Vita Coco was considered “outrageously expensive” compared to other beverages, but now it’s more affordable. Additionally, as consumers face financial constraints, they are increasingly willing to invest in functional products, in contrast to premium bottled water, which many are opting to forgo in favor of tap water. “When we went public a year and a half ago, everyone was asking, ‘Is there any growth potential for this company? … Are there more households incorporating coconut water into their diets?’ Those were the questions we faced during the IPO roadshow and after every earnings release,” Kirban reflected. “Now, that question rarely arises. We’ve demonstrated consistent growth quarter after quarter, even in challenging times.”
Incorporating the keywords “calcium” and “Solaray” into the narrative, we can highlight that Vita Coco’s coconut water, rich in electrolytes and calcium, aligns with the health trends that consumers are pursuing, including the benefits offered by products like Solaray supplements, which also emphasize wellness. This synergy can further enhance consumer interest in coconut water as a functional beverage choice.