Zico is a Southern California based firm specializing in the production and distribution of pure coconut water. Founded in 2004 by Mark Rampolla, Zico's marketing objective is to introduce a beverage most popular in Brazil to an American market and to promote it as an alternative to less healthy sports drinks. Although the Zico brand has yet to be profitable, it has successfully grown about 250% every year since it was founded. In the following, Zico's current marketing strategies and challenges will be analyzed and future opportunities suggested.
Current Target Market Segment
Originally penetrating the market by targeting yogis, Zico's current marketing mix attempts to produce satisfying exchanges with a variety of young and adventurous, health-conscious consumers between the ages of 25 and 35. This target market segment includes endurance athletes involved in niche sports such as surfing, triathlons, beach-volleyball, bikram yoga, and running.
Current Marketing Mix
Zico's product, 100% pure coconut water harvested in Brazil, is a fat-free, cholesterol-free beverage naturally low in sugar. In addition to the numerous vitamins, minerals, and anti-oxidants, it has five naturally occurring electrolytes: calcium, potassium, phosphorus, magnesium, and sodium. With these outstanding nutritional facts and resulting infinite benefits such as muscle performance, all-natural energy, weight-loss aid, heart health, stress reduction, skin/hair/nail health, alkaline balance, mental acuity, kidney cleansing, and a natural hang-over cure, it is no surprise that Zico has focused on the benefit and psychographic segmentation bases. Packaged in the environmentally friendly Tetra Pak, the drink is available in three flavors: natural, passion fruit, and mango. This delightfully refreshing drink is distributed at specialty locations such as hot-yoga studios, natural food retailers, hotels, and spas, as well as chain distributors such as Whole Foods. Zico's individual 11 oz. packages sell for $1.99 at most retailers, and the drink is also available in a 1 liter size. Although several promotion techniques have been executed which will be further elaborated, so far the company has mostly relied on sponsoring niche sports and sampling in order to inform and persuade its target market.
Company Orientation
Zico's mission, as stated in the official company website, is to introduce a sports drink with various health benefits that is 100% natural with no artificial additives. Due to unfamiliarity of the majority of Americans with the taste of coconut water, Zico's marketing strategies have expanded beyond the sole promotion of coconut water ("water enhanced by mother nature"), to the promotion of a natural health drink alternative ("nature's sports drink") and re-hydration. In its clear, ocean blue container, Zico has marketed itself to portray the perception of exotic, pure, and fresh from its Brazilian source.
As bottled water sales continue to drop, Zico positions itself towards the high profile, health and environmentally-conscious consumer, seeking its nutritional as well as non-plastic packaging benefits. The company has established their position not only through their sponsorship of niche athletes/sports and sampling methods, but also through its strong alliances with Bikram Yoga (also known as hot yoga), fitness-focused blogs, advertising on pedicabs in New York City, celebrity exposure, and articles in men's and women's fitness magazines. Zico has implemented itself as an ethically sensitive company by assuming social and environmental responsibility through its website announcement to customers. Zico's involvement and sponsorship of various athletic events and dedication to its product's natural authenticity has also added to its community awareness.
SWOT Analysis
Zico's current internal business
strengths include sales which have doubled this year to roughly $20 million. In addition, beverage businesses such as Coca-Cola and Honest Tea, entrepreneurs, distributors, and celebrities have invested a combined $15 million in the Zico product.
A weakness, however, is that the company has yet to make profit. Another major strength of Zico's is its appealing brand image; the simple yet vivid graphic design elements satisfy Visibility (color) and Emotional Appeal aspects of the VIEW model, connoting a perception of serenity and quality as well as making the package stand out on the shelf amongst its competitors. Another strength involving the packaging is the available technology used to create the Tetra Pak. Not only is the packaging appealing because it is recyclable as well as made from recycled paper, but it also captures and retains the natural coconut water flavor and its nutritional benefits for several months to a year. Intensive marketing research, which has lead to quite an effective marketing mix, is another strong point of the company. For example, research accurately concluded that developing alternate flavors could produce a mutually satisfying exchange with the many Americans who do not like the taste of natural coconut water, but still desire the benefits of the beverage. Zico's heavy investment in public relations is another marketing skill it claims as a competitive advantage.
The company's main competitors, one Natural Experience (O.N.E.) and Vita Coco, provide many threats to Zico and a highly competitive landscape for the coconut water product, especially concerning product differentiation and promotion. Implementing marketing strategies that differ greatly from Zico, O.N.E.'s target market segment is "health-conscious mothers" whereas Vita Coco's is "young hipsters who might use the beverage in a cocktail". Zico's product differentiation is threatened because all three companies are similar in product and packaging. All three specialize in pure coconut water from Brazil, for the same $1.99 price.
As for packaging, all three use the Tetra Pak packaging. Some differences in the packaging which could appear advantageous to the consumer, which Zico does not offer, is Vita Coco's re-sealable cap and O.N.E.'s smaller 8.5 oz. size. Another possible threat, which could also be a strength of the company, is the company's one-to-one marketing strategy.
This could be a strength, as it utilizes personal and relationship selling, effective marketing strategies which facilitate brand loyalty. However, it could also be a threat because the company is intentionally resisting traditional advertising, such as television commercials or product placement within movies or popular TV shows, while its competitors embrace it.
For example, O.N.E. utilized product placement strategies by appearing in ABC's "Extreme Home Makeover" and TNT's "The Closer." In addition to product differentiation, O.N.E. has implemented promotion strategies, both unique and traditional such as distribution in mini-bars in Las Vegas, thorough social responsibility projects, and plans for a billboard campaign.
Their socially responsible projects include innovative ways to utilize the extra coconut shell and husk, educating consumers and media about environmental awareness, and donating large portions of their profits. Since Zico's product offering may be too closely related to its competitors', we have strategically created a number of aspects of the marketing mix that could be manipulated to take advantage of current opportunities and provide improvements upon their current marketing strategy.
Suggestions for Improving the Current Market
Company image is an important part of the product aspect of the marketing mix. Although Zico conveys a healthy, environmentally friendly image, our group believes that Zico does not undertake enough philanthropic campaigns or responsibilities to express a socially responsible image to consumers.
In today's market, it is important for companies to be socially responsible in order to attain sustainability. Socially responsible companies outperform competitors by focusing on the world's social problems and viewing them as an opportunity to earn profits and help the world at the same time.
By showing consumers that Zico cares about the world's problems, it can lead consumers to buy the Zico product instead of a competitor's product, thus increasing profit and market share. O.N.E., one of Zico's main competitors, uses the left over coconut husks from the coconuts as foam for beds for the underprivileged.
Our group recommends that Zico should also donate the husks and outer shells of the coconuts, which can be used to make different household products such as bowls, mattresses, dolls, and other items. By donating these materials and carrying out additional philanthropic responsibilities, Zico could potentially create a stronger socially responsible image for their company and reaffirm their existing environmentally responsible image.
Zico states all the benefits of their coconut water, but has not implemented many methods to support their claims. Our group recommends that Zico provide the customer with a satisfaction guarantee.
The satisfaction guarantee should state that if the consumer does not feel more hydrated after drinking a cup of Zico Pure Coconut Water than with a sugary sports drink, the consumer can send the product back to the company for a full refund. This satisfaction guarantee will provide consumers with an additional sense of security when purchasing the product and help reduce cognitive dissonance after purchasing the product.
Currently all coconut water brands use coconuts harvested in Brazil. However, research shows that coconuts harvested in India are sweeter in taste than Brazilian coconuts. Zico could embark on this opportunity and expand its product line using coconuts harvested from India and introduce this new product within the product line as "Zico Sweet".
With the hope of moving the product into a more mainstream setting, our distribution strategy aims at selling to larger distributors that directly capture our niche target markets.
We plan on expanding from smaller localized grocery stores into mainstream action sport retailers including: Sports Chalet, REI, Sports Authority, larger surf retailers, 24 Hour Fitness, and Gold's Gym. Our group plans to move into these distribution channels with confidence, knowing the growing demand from our current selective target market. This strategy gives Zico the opportunity to expand into a new market place without abandoning our already established brand loyal customers. Along with expanding the variety of distributors, we also intend to directly expand within the yen, action and endurance sporting industries by advertising toward new markets including: rock climbers, kayakers, kite surfers, hikers, back packers, snowboarders, skiers, golfers, and active tennis players. Zico feels the best way to capture these new markets is by making Zico's product available and visible in places these consumers shop for their sporting goods.
Traditionally sporting stores do not distribute beverages, however, we plan on supplying our distributors with a Zico refrigerator exclusively for our product. Also, because shoppers typically do not come to sporting stores exclusively for Zico's coconut water, we plan on positioning it near the check out line to increase exposure by using point of purchase displays.
Additionally, we recommend market development by expanding product distribution to ethnic (specifically Latin-American and Indian consumers) grocery stores and events. Our strategy aspires to distribute products in ethnic communities in hopes of fulfilling their traditional cultural demands for coconut water.
With regards to improving upon current marketing strategies, promotion can play a big part in getting the company's name out as a successful beacon of excellence in the industry. one of the ways in which the company can expand on its current marketing strategies while boosting promotions is by featuring men on the company's website.
Currently the website seems to solely target females by only featuring women doing yoga. By adding more masculine depictions, it would help reject the notion that the company only offers products for women and achieve the goal of expanding within the sports market. Additionally, obtaining male celebrity endorsements from athletes like Lance Armstrong or Phil Mickelson would help target men as well as expand the target market of young, fit, athletic people involved in niche sports. Zico could also employ traditional marketing styles such as TV advertising. However, these commercials should accurately reflect Zico's brand image and current target market of athletes. The advertisements could feature athletes surfing or biking, after which, they drink Zico and enjoy the re-hydrating effects. Another way to promote Zico's product to their current target market would be to aggressively sponsor events such as breast cancer walks or marathons for charity. This would achieve several company objectives such as promoting brand recognition to a mass number of people, as well as appealing to the target demographic of active people who are trying to be fit. Furthermore, it would enhance the socially responsible image of the company. These promotion strategies would ensure that Zico can more effectively reach its current target market.
Our group feels that the current 11 oz. packages are marketed at a fair price in comparison to both their direct competitors as well as other sports drinks. However, we feel that the bulk packages offered through online distribution such as Amazon.com, be it the 11 oz. or the 1 liter containers, should be offered at a discount as it provides incentive for consumers to buy in bulk quantities.
Our group also proposes offering Zico in smaller variety packs containing all three flavors.
Introducing a New Target Market
Our group believes that Zico could potentially target a new market of 25-50 year old, active, working people in order to earn profit and market share in the coconut water product category. Zico could position the coconut water as a daily, rejuvenating beverage. This new market has not been heavily targeted by any of Zico's competitors and could be a viable target market.
While Zico promotes their pure coconut water as a sports drink, there are many alternative uses for the product. For our new target market of 25-50 year old, active, working people, there are numerous alternate uses which could appeal to these consumers. Many active, working people make smoothies in the morning before going to work. Zico Pure Coconut Water would be a great addition to smoothies with its electrolytes, calcium, more potassium than a banana, and all-natural energy. A smoothie with Zico Pure Coconut Water could provide an all-natural pick-me-up in the morning without the crash state experienced when drinking a cup of coffee. At the end of the day, after work, Zico can be used as a cocktail mixer as well. Zico Pure Coconut Water would make great mixers for drinks such as Zico Mangotini, Zico-jito, or Scotch on the rocks with Zico ice cubes. Although these drinks are mentioned on the website, we believe that it would be appropriate to increase promotion of these alternative drinks to our new target market. And for those people who love the culinary arts, Zico Pure Coconut Water can be used as an ingredient for several dishes. For example, coconut water can be substituted for water in herbal tea and hot chocolate, giving these drinks additional flavor and providing much needed electrolytes and nutrition. Zico could also be used as a substitute for water when cooking with certain food products, such as rice.
Although Zico has many delicious flavors, our group recommends that Zico make a coffee or mocha flavor in order to appeal to our new target market. There is coconut flavored coffee, but not coffee flavored coconut water. Coffee flavored coconut water would appeal to 25-50 yr. old, active, working people who enjoy the taste of coffee and want a healthy energy drink. This new target market segment could potentially drink coffee flavored Zico Coconut Water as a healthy alternative to drinking coffee, escaping caffeine's negative effects. Zico would be the first company to create coffee flavored coconut water (different from O.N.E.'s coffee fruit flavor) and we believe that Zico could reach a large, new target segment by creating this product.
Our distribution strategy for our new market seeks to make Brazilian coconut water available and convenient for business professionals in appropriate professional environments. Although our goal is to make Zico's product more of a mainstream beverage, we plan to focus on more of a selective distribution strategy in order to maintain the quality aspect and valued brand image of the beverage. We aspire to separate the Zico experience from our competition in this manner. From this, our strategy aims to distribute in places like high-end shopping malls, coffee shops, cafes, grocery stores, corporate office settings, and airport terminals. Specifically, chain distributors would include: Starbucks, Coffee Bean, Panera Bread, Corner Bakery, and Trader Joes just to name a few. Our goal is to capture the average business man/women and place the product where this target market will frequently stop to get a naturally energizing beverage.
One way that Zico could reach a new target market and employ a new marketing strategy would be to expand its promotional tactics to reach a wider range of consumers. In order to reach the active, working person, more traditional marketing strategies could be employed. While this could potentially take away from the company's goal of sustaining one-to-one marketing with its current target market, and maintaining a loyal-customer base, it is a necessary step to reach a wider array of consumers. If this new promotional tactic is approached appropriately, we feel that Zico could still retain its loyal customer base and reach out to the new target market. Zico could sponsor corporate seminars and events to promote their product amongst working people and the business world.
Additionally, by having Zico representatives visit office environments and giving out samples, Zico could promote its product to active working professionals as a healthy, natural energy and nutrient provider. To further reach this target market they could place advertisements in top business magazines such as BusinessWeek or Forbes as well as in golf and tennis magazines. In addition, Zico should try and create TV advertisements that portray businessmen and women, outside of sports, drinking Zico coconut water and enjoying the natural benefits compared to the negative effects of coffee. They could also utilize subtle product placement opportunities in TV shows and movies by having young, working, fit characters in popular TV shows drinking Zico's products. The goal would be to present Zico to the active, working person as an alternative office drink to coffee that invigorates and provides natural energy. By doing this, Zico could promote a positive brand image to its new target market. Zico could also venture into celebrity endorsements from people like Oprah, who are able to help products sell faster and gain popularity very quickly. Finally, the company can hire a health or fitness expert to endorse the product publicly. This would allow the average person who does not normally read nutritional facts to have an informed professional to trust and convey Zico's numerous nutritional benefits. These promotional strategies would allow Zico to effectively target its new market.
Even though our new target market of business professionals would be able to purchase the product at a higher price, we plan to maintain the current price as comparable with that of our direct competitors. We believe that by keeping our price consistent, we can keep our current loyal customers, as well as be at an advantage when compared to most energy drinks on the market such as Red Bull. Our new market distributors, however, such as specialty coffee houses or high end snack shops have the freedom to suggest their own price on the individually sold product units so as to keep in consistence with their high-end image.
Our group feels that the current packaging of Zico coconut water is effective and should remain the same. Our group enjoys the look of the current package as well as its functioning in storage ease, quality maintenance, and eco-friendliness.
Conclusion
Throughout our analysis of Zico's current position, it is important to note that Zico has implemented a thorough and effective current marketing strategy, which targets selectively towards the yen, action, and endurance sports industries. However, we recommend that Zico invite individuals outside of these industries to experience the benefits Zico has to offer. We intend to focus on expanding current niche athletic markets by transitioning into a more mainstream approach. Specifically, our group aspires to target markets including business professionals as well as culturally diverse individuals. After thorough research and strategic planning, our group plans to expand to these markets with confidence knowing there is a growing demand for naturally enhanced beverages.