Coconut water, a natural refreshment full of electrolytes and minerals, has been winning the hearts of many healthy lifestyle enthusiasts in recent years. That's why the time is right to introduce you to one company that clearly dominates this sector and holds almost half of the market in its hands. At first glance, this product and beverage sector may seem boring, however, upon closer inspection, you will find that it is probably an interesting growth company with future potential.

The story of coconut water began in Brazil, where it has become part of everyday life. A refreshing drink that people drink on hot days, it soon found its way to the Western world, where it charmed not only its consumers but also celebrities. Companies that have focused on this unique delicacy have not only brought innovative products to the market, but have also contributed to promoting sustainability and fair trade. This golden drink made from tropical palm trees has thus become not only part of a healthy diet, but also a symbol of modern business, which has both consumer health and environmental protection in mind.

Company introduction

Vita Coco Company is a global leader in coconut water and tropical beverages. Founded in 2004, this American company focuses on producing healthy and natural beverages that bring refreshment and support a healthy lifestyle. Its flagship product, Vita Coco coconut water, has quickly become a worldwide favourite due to its authentic taste, high natural electrolyte content and low calorie content.

Vita Coco is mainly engaged in the production and distribution of coconut drinks. Its most famous product is 100% natural coconut water, which is known for its hydrating properties. Coconut water contains important minerals such as potassium, magnesium and sodium, making it ideal not only for athletes but also for people looking for a healthy alternative to sweetened drinks. But Vita Coco doesn't just stop at coconut water - its product portfolio also includes coconut smoothies, coconut milk and has recently added plant-based products that serve as a dairy substitute.

Vita Coco started out in New York, but today has a presence in more than 30 countries. Its largest markets include the US, Canada, the UK, Australia and several European countries. The company is constantly expanding, whether it is geographical expansion or broadening its product range. The brand can be seen not only in supermarkets and health food stores, but also in gyms, fitness centres and online stores.

The Vita Coco story began quite subtly in 2003 when the company's founders, Michael Kirban and Ira Liran, learned about coconut water and its popularity in Brazil during a meeting with Brazilian women. The women told them how people in their country drank coconut water every day for refreshment and hydration. This story inspired the founders to come up with the idea of bringing coconut water to the market in the United States. A year later, in 2004, Vita Coco was formed and launched its first product in New York City.

The big breakthrough for Vita Coco came when it gained the support of major celebrities. Madonna, Matthew McConaughey and Rihanna, for example, became ambassadorsbut also investors in the company. This move helped Vita Coco to raise awareness of coconut water as a healthy alternative to sugary sodas and energy drinks. As a result, coconut water has become a healthy lifestyle trend and has gradually made its way to the general public.

The year 2021 marked a significant milestone for Vita Coco when it decided to list on NASDAQ. This step provided it with capital for further expansion and broadening of its product portfolio. Vita Coco has not only strengthened its position in the coconut water market, but has also begun to penetrate other segments of the beverage industry, particularly in the area of plant-based products and healthy snacks.

Vita Coco is also focusing more on digital marketing and expanding its online channels to make its products easily accessible to consumers around the world. Partnerships with e-commerce platforms are a key part of this strategy and enable the company to respond to the growing demand for healthy and natural products.

What makes the company interesting?

Vita Coco is the market leader in coconut water, with a market share of over 45% (some say up to 50%), which is more than the next 10 largest brands combined, according to IRI data the company reported during its IPO.

Vita Coco's rise in the market is characterised by the company's remarkable strategic moves. These include its expansion beyond coconut water into products such as coconut oil and canned smoothies. This latest move was made in partnership with Diageo, a renowned player in the production, marketing and sale of alcoholic beverages. Diageo is known for its extensive portfolio, which includes major brands such as Johnnie Walker, Guinness and Smirnoff.

Vita Coco's strategic insight has been further demonstrated by the successful implementation of its initial public offering This made the company the best performing consumer IPO in 2021, despite a subsequent decline in profits in 2022. Despite this, Vita Coco has managed to maintain a significant market share and controls more than half of the coconut water market.

Market challenges and adaptation

The brand's journey has not been without challenges. Vita Coco initially faced logistical problems and competition from beverage giants such as Coca-Cola a PepsiCo. Market trends such as the rise in popularity of hard seltzer and evolving strategies of the retail sectorhave tested the company's adaptability. Despite these challenges, Vita Coco's resilience and strategic agility have enabled it to maintain its growth trajectory.

Strategic ambition: Vita Coco's future outlook

Vita Coco's strategy for future growth includes considering mergers and acquisitions, focusing primarily on smaller brands with solid margins and positive consumer acceptance. The aim of this approach is to accelerate growth and expand Vita Coco's product range. The company's partnership with Diageo, which led to the launch of Vita Coco with Captain Morgan, is an example of its intention to extend market reach and diversify consumer engagement points. In addition, Vita Coco's marketing strategies have evolved to suit its diverse consumer base by leveraging digital channels such as TikTok and YouTube.

Great returns

Return on invested capital = earnings before interest and tax (EBIT) ÷ (total assets - current liabilities) 👇

Vita Coco has a ROCE of 34%. That's a fantastic return and not only that, it beats the average of 16% earned by companies in the industry. The data shows that the ROE has increased significantly over the last four years to 34%. Essentially, the business is earning more for every dollar of capital invested and in addition, 100% more capital is now being utilized as well.

Vita Coco, like many great adventures, began in a bar

The $1.61 billion Vita Coco brand now holds 50% of the U.S. coconut water market, according to Food Divewith net sales up 13% last year to $427.8 million and its stock up 90%+ since its IPO in 2021.

The company now hopes to follow Ocean Spray's playbook and lean on its potential as a cocktail mixer to expand its presence in bars, restaurants, clubs and - through its partnership with Captain Morgan in cans - liquor aisles.

Vita Coco is already achieving strong growth statistics:

- The company says it is already in 11% of U.S. households.

- Relative interest in coconut water in Google searches is approaching all-time highs.

- The brand has almost as many followers on TikTok as Coca-Cola - with even more likes.

How was the last quarter?

For the second quarter of 2024, Vita Coco's total revenue was $144 million, up 3% year-over-year. Vita Coco coconut water was the main driver of growth, with sales up 4%. Net income increased to $19 million, up $1 million from the same period last year. Non-GAAP adjusted EBITDA was $32 million, a significant increase of $8 million. Year-over-year, earnings per share increased to $0.32.

Profit margin increased significantly from 37% to 41%, supported by lower shipping costs and higher Vita Coco coconut water prices. The company also faced a small decline in private label coconut oil sales, but this was offset by growth in coconut water sales.

For this year, Vita Coco reaffirmed its guidance, expecting total sales in the range of $500 million to $510 million and adjusted EBITDA between $76 million and $82 million. Despite logistics challenges, the company is focused on strengthening its inventory and preparing for a strong 2025.

In the United States, Vita Coco coconut water retail sales grew 14%, indicating healthy growth in the category. The company also continues to innovate in marketing and improve its operational efficiency, which is reflected in better overall financial results.

Results over the past few years

Vita Coco has shown significant growth in its financial results in recent years. Over the last 12 months (TTM), its total revenue has reached $500.022 millionwhich represents a slight increase over $493.612 million in the previous year. This trend is mirrored in previous years, with the company posting better and better numbers each year in terms of revenue.

Cost of goods sold for the last 12 months was $298.134 milliona decrease from $312.883 million This decrease in costs has contributed to a significant improvement in gross profit, which now stands at $201.888 millionwhich is a significant increase from $180.729 million in the previous year.

However, despite the company's growth, operating expenses have remained flat over the past 12 months as they did in 2023. In terms of net profit, over the past 12 months it has reached $55.268 millionwhich is again an improvement over $46.629 million in the previous year. It should be noted that back in 2022, net profit was only $7.814 millionwhich indicates that there has been a significant improvement in the company's financial situation in recent years.

Analysts' expectations

Based on 7 Wall Street analysts offering 12-month price targets for Vita Coco Company over the last 3 months. The average target price is $30.00 with a high prediction of $33.00 and a low prediction of $28.00.

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