How A Company Still Controlled By Its Founders Beat Coca Cola
From yoga studios and convenient stores to the country’s top grocery chains, today coconut water can be found nearly everywhere in the U.S. stacked tightly in aisles and packed full in fridges. At the top of the billion dollar industry is Vita Coco, a best-selling brand that owns over 40% of the coconut water market. But it was only a little over a decade ago that Vita Coco and its competitor Zico decided to enter the highly competitive beverage industry. Within only a week or two apart, both Vita Coco and Zico began selling nearly identical brands in the Manhattan neighborhood of New York – resulting in what would later be called the “coconut wars.” The victory eventually went to Vita Coco, but it was by no means an accident.
In the beginning, both Vita Coco and Zico employed guerilla marketing tactics to win shelf space in New York City. They attracted consumer attention by bringing their products directly to their audience – Vita Coco gave out free samples from a blue truck as women hula hooped on the streets, while Zico had college students rolling coolers of coconut water. They also focused on independent stores instead of national chains, which are harder to pursue and require several grand in placement fees. Mike Kirbin, co-founder of Vita Coco, visited 40 different grocery stores a day to convince owners to sell his coconut water, while Zico founder Mark Rampolla got all four locations of Bikram Yoga NYC to carry his product. It appeared to be a draw between the two competing companies until the world’s largest nonalcoholic beverage company entered the playing field.
Coca Cola, who owns over 40% of the soft drink market, paid $8 million for a 20% stake in Zico (they eventually bought the remaining stakes in Zico in 2013). At first, it seemed like a major setback for Vita Coco, but in turn it pushed them to step up their game. They raised an additional $5 million by selling a 10% stake to celebrities like Madonna, Demi Moore, and Rihanna and sold a 20% stake to investment firm Verlinvest, whose portfolio include Vitaminwater and Leblon Cachaça. Eventually, Vita Coco signed with Dr Pepper Snapple Group, the country’s 3rd largest beverage distributor. This turned out to be a game changer for the brand. Because Dr Pepper Snapple had a small portfolio, it was able to make Vita Coco a priority – whereas, for Coca Cola, it struggled to manage a brand as small as Zico. This became an advantage for Vita Coco, who was able to gain more shares of the billion dollar market than any other coconut water company, earning them $420 million in global sales by the end of 2014.
It goes to show how a wildly popular and common commodity like coconut water can be transformed into a successful and marketable product in the U.S.
