Two decades after its founding, Vita Coco is still fighting to silence skeptics

Throughout Vita Coco’s 20-year history, co-founder Mike Kirban has been on a quest to silence doubters — many of whom questioned the future of his business. Those skeptics predicted the company’s coconut water would go from the next big thing to the next big afterthought.

“I’m not a crazy type of competitive guy but I Iove proving people who bet against me wrong,” Kirban said during an hour-long interview from his New York City office. “A lot of it does come from my childhood. It’s a chip on my shoulder.”

Kirban grew up in Connecticut. Being dyslexic, he struggled in school, often getting shuttled back and forth between regular school and special education. Teachers asked what Kirban was going to do in life because he struggled to read and write. The negative feedback only “drove me to want to do more,” he recalled.

Today, Kirban, the executive chairman of The Vita Coco Company, continues to be fueled by cynics who question how much room the $674 million coconut water category, as defined through measured channels, has left to grow. The doubt comes even after Kirban has built a profitable, growing business from the ground up — managing to withstand changes in consumer behavior and competition from deep-pocked beverage giants Coca-Cola and PepsiCo in the process.  

“They still doubt,” he said. “I get this question all the time. ‘Is it a fad? How big could it really be?’ We’ve been getting that question for 20 years.” 

Sitting in his office in New York City, Kirban is immersed in coconuts.

A framed picture on his wall contains an image of a coconut drawn by his daughter. The table next to his couch has a chess board with coconut-themed pieces. And the front of his desk proudly displays several of Vita Coco’s products, while nearby he has a green and white skateboard propped up against the wall that is adorned with the company’s logo.

Kirban fondly recalls how his company’s first office was seen at the time as all the space the upstart and its eight employees would ever need. Now, its New York office, with 100 employees, is quickly running out of space.

“Twenty years ago, nobody knew what coconut water was. We’d have to explain that it’s the actual liquid from inside the coconut,” Kirban said. “Today, it’s nowhere near where it could be and where we think it will be one day.”

‘Mistakes to be made’

Vita Coco traces its roots back to 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 later sold everything he had, married one of the women and moved to Brazil.

During that initial visit, Kirban and Liran found packaged coconut water as prevalent as bottled water on store shelves, and recognized an untapped market back in the U.S., the friends created the Vita Coco brand in 2004.

Initially, Vita Coco established a thriving business in grocery stores and later convenience and wholesale outlets.

In recent years, the company has marketed its coconut products aggressively to bars, restaurants and coffee shops to increase usage occasions and drive consumer awareness of the versatility of its offerings. Early last year, it launched a line of premium canned cocktails crafted with Captain Morgan rum and Vita Coco coconut water with Diageo.

Unlike once trendy drinks, such as kombucha that target improved gut health, Vita Coco promotes a diverse range of uses for its coconut water. The liquid can be added to smoothies, mixed drinks, cold brews, for hydration, following exercise or even as a way to nurse a hangover.

In a research note published in October, analysts at Goldman Sachs said Vita Coco is “a unique investment opportunity within non-alcoholic (and alcoholic) beverages.” The research firm said it sees “significant long-term) growth potential for COCO  through a combination of increased household penetration for its branded business, distribution gains, price increases and a strong pipeline of innovation.”  

Daniel McCarthy, an assistant marketing professor at Emory University, said while Vita Coco’s decision to bring its coconut products into other categories is a shrewd move, it’s unlikely to be as lucrative for the business as its prior endeavors.

“The challenge to me is, they’ve been so successful in kind of the core markets,” McCarthy said. “It’s mathematically difficult for them to put up the same sort of growth numbers there. And so the question becomes, just how much growth will they be able to squeeze out of markets like serving bars?””

Still, he praised the current management team for turning Vita Coca into a profitable, growing company with a strong balance sheet — enviable characteristics in today’s environment. “They’ve built a good business, so it’s kind of hard to bet against that.”

While Vita Coca is thriving now, it has weathered its share of challenges.

In 2004, Vita Coco’s first shipment to the U.S. had to be diverted to the Bahamas after Kirban found he needed FDA approval for the products to enter the country. Then, in 2014, the company landed a deal to sell coconut oil in Whole Foods — “a massive opportunity” for Vita Coco, he recalled — but the deal for coconut oil was scrapped after product in the 12-ounce jars started oozing out the top.

Other disruptions at Vita Coco have been outside its control. In 2009, Coca-Cola took a stake in competitor Zico for $15 million before the beverage giant acquired the rest in 2013. Kirban said he was “in shock” after hearing Coca-Cola partnered with Zico, fearing the increased distribution would batter Vita Coco and tarnish the five years he toiled building his company.

Further challenges came in 2018 and early 2019 when, after years of rapid expansion, the coconut water category slowed as some consumers turned to trendier options such as hard seltzers, and retailers changed how they displayed offerings for the beverage. The slowdown only served to further embolden critics.

“We continue to do the right things, chip away,” Kirban said. “There’s always mistakes to be made [and for us] to learn from our mistakes.”

Surviving moments of doubt

Vita Coco has managed to withstand these disruptions and is arguably in the strongest position of its two-decade-long history.

The company, which went public in October 2021, is one of the top 10 best-performing IPOs and the second-best-performing consumer IPO since 2021, according to data provided by Vita Coco.

The coconut water segment has returned to growth. Category sales have surged 56% to nearly $680 million in grocery, club, mass, drug and convenience channels compared to 2019), Vita Coco noted, citing data from Circana. It is outperforming major beverage categories such as energy, carbonated soft drinks, sports drinks and bottled water in dollar growth rates. For its part, Vita Coco has been able to increase volume while simultaneously raising prices.

Net sales for coconut water at Vita Coco during the first nine months of the year have risen 15% to $387 million, with volume increasing 13%. It currently has a 51% share of the coconut water market — more if you include its private label business — compared to 42% in 2020, according to the company.

The company also managed to outlast its deeper-pocked competitors in the U.S.

ln 2021, Coca-Cola sold its Zico coconut water back to its founder as the beverage giant prioritized brands that were growing and had the potential to achieve a large scale. PepsiCo’s offering in the category, O.N.E., was divested in 2021 as part of the Tropicana sale. Both brands remain very small players in coconut water, each with less than 1% share, according to IRI data provided by Vita Coco.

Kirban confessed that “there were probably moments” when he had doubts that coconut water would become as big of a market in the U.S. as it has.  

He persevered anyway, noting how it had already become ingrained in cultures for many generations in places such as the Philippines, Indonesia and India. It was just a matter of explaining to people in America and other parts of the world about the benefits of coconut water and building the supply chain to get it to them.

While Vita Coco, which gets more than 95% of its net sales from its coconut water and oil products, remains committed to its core business, it is looking to grow or acquire other beverages.

PWR LIFT, its protein-infused water, is currently in two test markets across the U.S., with plans to launch it in New York City this month through a distribution deal with Keurig Dr Pepper.

With Vita Coco growing already, carrying no debt and nearly $100 million in cash, it can afford to be patient until it finds the right company and valuation. Kirban said the company has no imminent plans for an acquisition.

Vita Coca also is scouring the market for smaller brands with strong margins and favorable consumer acceptance rates that it could acquire to help accelerate the growth of these upstart companies.

“We’re in a very unique position,” said Kirban, who added that he is in conversations regularly with entrepreneurs. “When the moment is right, we’ll do something.”