Vita Coco, which went public in October 2021, grew net sales 28% year-over-year to $96m in Q1 2022.
According to the company, the Vita Coco brand now commands 50% value share of the coconut water category in tracked channels*, up from 43% compared to a year ago. Household penetration hit 11% for the quarter, up approximately 170 basis points compared to a year ago, the equivalent of approximately 2.4 million additional households buying Vita Coco vs. last year, according to data from Numerator.
*IRI Total US MULO+C 52-Weeks Ending 3/27/22. Numerator data as of 52-Weeks Ending 3/31/2022.
Significant untapped market opportunity ahead
"The overall coconut water category continues to show robust growth and according to IRI is growing at a rate of 13% in US measured, tracked channels. This rate of growth often leaves me to getting asked the question, why over the past couple of years, has Vita Coco been growing so fast? " said Kirban -- who transitioned from his title of co-CEO to executive chairman earlier this month, with Martin Roper transitioning from co-CEO to CEO-- on the company's earnings call.
"For starters, coconut beverages are part of the changing tastes of America, driven in large part by demand for multicultural and specifically Hispanic and Asian American consumers. We believe these consumer groups have demonstrated a preference for natural and functional beverages and in many cases an affinity for the coconut."
Kirban said the total addressable opportunity for coconut water and coconut as an ingredient in better-for-you beverages is still enormous and that Vita Coco has only scratched the surface.
"To provide a sense of scale of the popularity of the coconut as an ingredient in beverages, it is a segment of $2.8bn in size in America, which is bigger than oat and almond combined, and has been outgrowing the total beverage segment by 200 basis points according to SPINS."
Vita Coco is in a unique position within the beverage category, added Kirban, who said that the company has been able to source volume from adjacent categories such as the $11bn juice category and $10bn isotonic category while also growing organically with a new consumer base through new product innovation.
"As an example, since we launched The Vita Coco Pressed line three years ago, we have grown that innovation to 69% ACV, while delivering 17% of our total branded volume and adding an entirely new consumer to our base. As a matter of fact, 16% of our consumers only buy Vita Coco Pressed," he said.
"As a beverage pioneer, we plan to continue to take a leading role in driving innovation in the coconut water and coconut water adjacent categories."
Supply chain, pricing, and inflation: 'The worst may be behind us'
To position itself for further long-term growth, Roper commented on the resiliency of its supply chain, which relies on international shipments across the Pacific Ocean.
"One of our key competitive advantages that underpins our strong top line performance is our supply chain. It has continued to perform well with the unprecedented supply chain challenges the world is facing, particularly the unpredictability of ocean shipping containers and rates and challenges at ports with detention and demurrage. While we are short on certain SKUs in certain locations, we are happy with the overall flow of our product given the conditions," said Roper.
Still, the company is dealing with significantly elevated and volatile ocean freight costs and rising domestic transportation and warehousing costs, which it has had to counter with increased pricing.
"Last year, we chose to pursue market share volume growth, increased distribution and shelf space rather than take price as we believe the elevated costs and disruptions will be more transitory than they have proven. Given the duration and magnitude of the cost pressures and based on our commercial performance, including strong brand trends and expected increased shelf presence, we now believe that we are well positioned to implement frontline price increases in the second quarter, with further increases planned before the end of the year," noted Roper.
Despite having to take company-wide measures such as additional pricing planned for Q2 2022, Roper said the company believes transportation and logistics will eventually normalize.
"We believe the worst may be behind us from a margin deterioration perspective, and that we would expect our gross margins to return back closer to historical levels as our pricing take effect, or if the cost pressures subside."