By Jason Notte Jun 14, 2013
You know how some folks in the U.S. refer to any cola with the generic term Coke? That's exactly how Vita Coco's chief executive wants people to associate his company with coconut water.
Vita Coco is already the kingpin of U.S. coconut water, with roughly 60% of the market, according to research firm Spins. The company made roughly $150 million in revenue last year, and CEO Michael Kirban says it's on track to land at around $250 million in 2013.
"We want to own coconut water like Tropicana owns orange juice or Gatorade owns sports drinks," Kirban told The Huffington Post.
It helps to have folks like Madonna, Demi Moore and Matthew McConaughey signed on as investors, but sweetened water is also a much easier sell when Rihanna and Anaheim Angels slugger Josh Hamilton are pitching it and Dr Pepper Snapple (DPS -0.12%) is distributing it.
Now, with an established lead in the market and big beverage producers like Coca-Cola (KO -0.71%) and PepsiCo (PEP -0.60%) playing catch-up, Kirban says Vita Coco is going to ditch the movie stars and musicians and stick with athletes who serve to explain the "functionality" of his core beverage.
But the pressure is mounting. Coca-Cola jumped into coconut water last year with its $15 million acquisition of Zico. Pepsi has been increasing its investment in O.N.E. coconut water since 2010, according to Beverage Daily. Kirban says both giants are struggling to keep pace because they're too focused on dwindling soda sales and taking on Red Bull and Monster (MSTR +0.91%) in the energy drink market. But that could also be because few Americans actually know what coconut water is.
In Vita Coco's flagship New York City market, Kirban says only 40% of consumers his company surveyed know what coconut water is. Even when people recognize coconut water, it's not immediately clear why they should.
Both Vita Coco and O.N.E. were sued by drinkers in 2011 for overstating the beverage's health benefits and the amount of hydrating electrolytes in them, according to Reuters. The suit alleged that only Coca-Cola's Zico lived up to its claims, though The Wall Street Journal says another lawsuit claims Zico's packaging doesn't warn consumers that its coconut water comes from concentrate.
Vita Coco paid more than $8 million to settle its suit, and Kirban is now weighing whether to take the company public "like Monster" or keep running it on his own "like Red Bull." Given recent revelations about PepsiCo's Gatorade and energy drinks like Monster and Red Bull, maybe Kirban should consider yet another road less traveled.