Strolling around New York this past summer, I found it impossible to escape the giant, redheaded visage of Rihanna—often staring out at me from the side of a bus barreling through a crowded intersection. The singer had temporarily eschewed her punk warrior aesthetic in favor of a frilly white frock and a tropical beach idyll. In her hand: a Tetra Pak full of Vita Coco coconut water. “Hydrate naturally, from a tree, not a lab,” the ad copy implored.
I’d always thought of coconut water as a treat only encountered when traveling. Sold from a roadside cement-block hut in Vietnam. Sipped from a wrinkled plastic bag pierced with a straw. But the product (which is simply the juice of a young, hacked-open coconut) has suddenly flooded the U.S. market. It’s ubiquitous in Manhattan bodegas, shoving aside the 24 oz. aluminum cans of Modelo. Category leader Vita Coco reports 2009 sales volume of $20 million, 2010 sales of $40 million, and expected 2011 sales of $100 million. Competitors boast similar growth rates. What’s driving this specialty beverage boomlet? And how long can it last?
The most important trend in the refreshment business—going on for more than a decade—is the flight away from sugary, carbonated soft drinks like Coke and Fanta (CSDs in industry parlance) and toward drinks perceived as healthier, more natural choices. The decline of the soda stems in part from the aging of our population; 60-year-old baby boomers are less likely than they once might have been to guzzle down a fizzy Mountain Dew. But there is also a general movement toward something the trend spotters call “wellness.” Achieving wellness, as best I understand it, involves cultivating a keen awareness of nutritional concepts, meditative techniques, and which brand of yoga pants make your butt look awesome.
In fact, the successful arrival of coconut water on these shores has more to do with yoga than you might think. The wellness trend has inspired several profitable beverage launches—inspiring massive bottled water brands like Dasani and Aquafina, alternative sports drink concoctions like Vitamin Water, and single-ingredient juices like Pom Wonderful. Both Vita Coco and close competitor Zico were launched in 2004, near the dawn of the current yoga craze, and their early success was built on the (supple, flexible) backs of yoga-loving women
In South America and Southeast Asia, coconut water is an anytime drink for all sorts of occasions. Vita was born when its founders chatted up a pair of Brazilian women in a Lower East Side bar, getting an earful about how much the gals missed the coconut water that was a daily staple for them back home. Zico came to be when CEO Mark Rampolla, upon returning home from his job as an executive for International Paper in Latin America, found he and his wife couldn’t live without the stuff. But the key to getting the beverage off the ground in the United States turned out to be yoga and pilates fiends who became the brands’ early adopters and first American evangelists.
“We couldn’t afford a $100 million marketing campaign to reach everyone,” says Rampolla, “so we needed to start small, with a targeted audience. We found out that yoga practitioners were fans of coconut water. They understood electrolytes but thought Gatorade was the antichrist.” Especially keen for the product were members of the burgeoning Bikram, hot yoga, community. “These were women who sweated a lot, who tended to travel and to be open to new tastes, and who didn’t like the DayGlo colors and all the added ingredients of the mainstream sports drinks.” As a result, the initial positioning for coconut water focused on hydration and the importance of replenishing electrolytes like potassium when exercising. Jet-setting yoga hippie chicks were also powerless to resist coconut water’s culturally progressive, world beat vibe.
Soon enough, the target demo expanded to endurance sport athletes like cyclists and runners—who are very conscientious about nutrition and hydration and thus always on the lookout for new products that might give them an edge. Now, even pro athletes in the major sports leagues have caught coconut fever. A-Rod shills for Vita Coco, and Zico has signed basketballer Kevin Garnett as an endorser. Rampolla says several NFL teams purchase a steady supply of Zico to keep on hand for players. For most of us, drinking plain old tap water is probably an adequate way to hydrate after exercise. But coconut water, like regular sports drinks, does pack in potassium and other electrolytes that legitimately aid exercise recovery.
Despite triple-digit growth in the category for the last few years running, coconut water has still managed only 3 percent household penetration in the United States, according to Rampolla. To become more than a niche product, it will need to move beyond sports. To this end, Vita Coco has associated itself with a raft of nonathlete celebrities—including Madonna, who has become an investor and has brought onboard other Hollywood types like Demi Moore and Matthew McConaughey. Zico’s packaging suggests some not-so-jocky uses for the drink, including as a remedy “after a rough night out.” (Rampolla swears by coconut water’s efficacy as a hangover cure.) There’s precedent for this sort of evolution: Vitamin Water has already made the multistep transition from a specialty beverage for health nuts and celebrities to a general, mass-market sports drink, to something office workers quaff during their sedentary lunch breaks.
Making that leap requires not just great marketing but also great distribution. Coconut water has already made the move from the counter at the yoga studio to the shelf at the natural foods shop to the aisle at the Whole Foods. The key at this stage is to become a major seller at a big supermarket chain like Safeway or Publix.
Beverage distribution remains a convoluted business. The big fellas like Coke and Pepsi can mostly get their way. But smaller brands are forced to cobble together a network of independent distributors to get their beverages in front of buyers. Distributors have limited bandwidth—they will bet on brands they think have promise, and then drop those brands if they don’t sell. In the New York area, Zico has partnered with the legendary distributor Big Geyser, known for establishing previous fledgling beverage brands such as Vitamin Water, Muscle Milk, and Honest Tea. In other markets, Zico will team up with food distributors, or even sometimes with Coke, to win proper store placement.
Rampolla says he’s studied two other single-ingredient beverage fads to see what clues they might offer for Zico. The first is Pom Wonderful, the pure pomegranate drink, which was rolled out with an expensive marketing campaign and soon became a bit of a sensation. Rampolla says Pom benefited from excellent distribution but is ultimately limited in the scale that it can achieve with its intense flavor. The second is soy milk, which could once be found only in hippie health food stores and now resides in the beverage aisle at my local Target. “It’s grown into a category that’s well over $1 billion,” says Rampolla, “but it’s all at-home use. It’s got no potential as a grab-and-go beverage. Coconut water can be both.”
Will we really see moms in Dubuque stocking their fridges with 64-ounce jugs of Vita Coco, pouring it for the kids at breakfast? I suppose it’s possible. But there are some stumbling blocks. Chief among them: I find coconut water to be … an acquired taste. Which may explain why I’m seeing so many other flavors added to it. (Vita makes a coconut water with acai and pomegranate—a faddish ingredient three-fer!) Besides, part of what makes coconut water so popular in Asia and South America is that it’s already there, cheap and abundant, literally growing on trees. Once you expend the energy to ship it here, package it in Tetra Paks or aseptic bottles, and plaster every bus in sight with Rihanna’s face, you lose a measure of that simple appeal.
My guess is that America’s infatuation with coconut water will eventually cool. We’ll push it to the periphery, over with those long-unsold bottles of pear juice and apple cider. And we’ll move on to some other, as yet unexploited natural ingredient—patiently awaiting its moment in the sun and on the supermarket shelves.