The Vita Coco Company traces its roots back to a cold winter evening in 2003 when Mike Kirban and Ira Liran met two women from Brazil in a New York City bar. Liran later sold everything he had, married one of the women and moved to Brazil. It was there during a visit that Kirban found packaged coconut water as prevalent as bottled water on store shelves, and recognizing an untapped market back in the U.S., the friends worked to create the brand Vita Coco.
Nearly two decades later, the CPG known for its signature coconut water drink is fresh off its IPO valuing the company at $832 million and setting its sights on dominating the healthy beverage space.
"When my best friend [Ira Liran] and I started Vita Coco 17 years ago, we had a dream of bringing coconut water to Brooklyn, or maybe lower Manhattan. And that was pretty much the extent of the dream," co-CEO Kirban, said in an interview on Oct. 21, the day of the company's IPO. "We never dreamt of a moment like [going public]. ... What we're really excited about now is building what we think can be one of the largest and most impactful beverage companies in the world."
Since then, the company has become one of the fastest-growing players in the better-for-you beverage space as consumers keep a close watch on what they eat and drink, a trend that has accelerated during the ongoing pandemic.
Vita Coco posted net sales of $311 million in 2020, an increase of 9% from the same period a year earlier. Net income at the company, which has been profitable for a decade, increased nearly fourfold during the period to $33 million. Momentum continues to accelerate, with Vita Coco reporting net sales for the six months ending June 30 of $177 million, up 15% from the same period a year ago.
"We are coming out of COVID and consumers are starving for health and wellness and our brands are like the epitome of wellness," Kirban said. "They're healthy. They're functional. They're plant based. This is what's resonating with consumers."
Shares of Vita Coco, which were priced during its IPO at $15 each, below the previously expected range of $18 to $21, have struggled so far since their market debut. It closed Monday at $13.63.
The Vita Coco brand is by far the market leader in the coconut water space with a 46% market share, bigger than the next 10 biggest brands combined, according to IRI data cited by the company. The company is heavily dependent on the beverage, with coconut water responsible for 84% of its sales last year. Kirban said product volume for its Vita Coco beverage is growing 30% annually, with two-thirds of it coming from new customers entering the coconut water category.
"For now, the last thing I want to do is lessen our dependence. Vita Coco, the growth it is experiencing is astronomical," he said.
Still, The Vita Coco Company, which until recently was called All Market Brands, has been expanding into other better-for-you beverage categories in an effort to attract more consumers and increase the number of occasions for drinking its products.
Its Vita Coco brand added coconut milk to its lineup in 2017, and this year it rolled out a hydration drink mix and Choc-o-lot, a chocolate-flavored coconut water. It also leveraged its success in building coconut water by adding to its portfolio plant-based energy brand Runa in 2018, purified water Ever & Ever packaged in aluminum bottles a year later and protein-infused water Pwr Lift this past August.
Kirban said Vita Coco is in a strong position financially to innovate its existing portfolio and create new products while looking outside for brands it could acquire. He said executives are considering a range of beverage categories it could enter or add to, with energy and sports drinks two of the most prominent.
"M&A is a great opportunity for us," he said. "There's so many great brands out there. ... We can help them through our route to market and industry expertise."
It didn't take long after the Vita Coco brand was born to catch on with consumers, and soon the coconut water category caught the attention of beverage giants PepsiCo and Coca-Cola. PepsiCo invested in O.N.E. in 2009, before upping its investment in the company to a majority stake the following year. Coca-Cola first invested in Zico in 2009 before the beverage giant acquired the rest in 2013.
But both Coke and Pepsi have struggled to achieve the same level of success in the category as Vita Coco. O.N.E. is a small player in coconut water and generates a fraction of the revenue of PepsiCo's other billion dollar brands. And Coca-Cola announced in January it sold Zico back to a private equity firm started by the brand's creator in an effort to focus on faster-growing offerings and brands with the potential to be rolled out on a global scale.
As consumers gravitate toward better-for-you products, Kirban said Vita Coco's decision to focus solely on healthier beverages will help it attract new consumers and compete against the deeper-pocketed giants Coca-Cola and PepsiCo.
"People have underestimated me since I was five. And I think that created a little bit of a chip on my shoulder," Kirban said. "And when Coke and Pepsi came into the category that I was trying to build, it drove me to find new, creative, innovative ways to outmaneuver them.
"We can exploit their weaknesses, and that's our objective," he continued. "And I think we have the culture, the team and now the public market exposure and currency to be able to go out there and beat them in the area that they're not focused on, which is healthy, functional drinks."