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Coconut Water
A growing new market in the UK
* From creativeorchestra.com
Creative Orchestra
(Advertising & Brand Marketing) report
www.creativeorchestra.com
Researched and written by Caryn Coley & Chris Arnold
with additional material from Vita Coco.
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Coconut water
We’re all aware of the sentiment behind ‘you are what
you eat’ but increasingly consumers are concerned with
the concept of ‘you are what you drink’.
With a growing awareness of health issues most of us
are thinking twice about what we put into our bodies, be
it food or drink, and that’s now big business.
Coconut water is one of the fastest growing beverage
categories in the US and UK (estimated to reach $1bn
soon) due to its natural hydrating qualities, great taste
and nutritional benefits, not to mention the large number
of celebrities drinking it. It is a great source of nutrients,
contains calcium and magnesium, and the same amount
of heart healthy potassium as a banana or a glass of
orange juice. And that’s just a few of its ‘superdrink’
claims. With a mass appeal to ethical and health
conscious consumers and those leading an activity
lifestyle, and some are predicting it could overtake the
sales of orange juice (as has already happened in Brazil)
it’s no wonder big brands like Pepsi & Coke are getting
in on the act.
There are now 250 companies that have a beverage with
some form of coconut water in it.
The UK coconut water category has exploded in the last
few years and is widely being tipped as the next big thing
in the drinks category and estimated to be worth £100m
by 2014 [The Grocer July ’11] and is already worth over
$350 in the US.
According to a 2012 report by New Nutrition Business the
number of coconut water beverage launches in Europe
quintupled from 2009 to 2011, ballooning from seven to
36 brands. Retail sales grew 100 percent in 2011 and
the current value of the European market is estimated to
be worth $65 million. (The report values the U.S. coconut
water market in 2011 as ranging between $110 and $200
million.)
There are now over 20 brands in the UK market (see chart
at end), many small but also some significant players too.
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The leading brand in the UK (and world) is Vita Coco,
launched here in 2010, with sales of £8.5m in 2011 and
96% of the market. Sales between 2011-2012 have
risen by 168%, and are rising still. It’s stocked in most
supermarkets and health food shops.
Vita Coco is the market leader (in US and UK) and was
originally founded in the US (it sources coconut water from
Brazil and Asia). It is credited with creating the market (in
the same fashion as what Red Bull did for energy drinks,
Snapple for cold tea and Innocent did for smoothies).
The recent explosion of the coconut water category
can be explained relatively simply; it meets growing
consumer demands for natural, healthy products.
There is a growing awareness of health & fitness issues,
even though obesity is on the rise across Europe and
the US – it is estimated that 45% of men and 33% of
women in the UK will be obese within the next few years.
While some people manage their weight, others “offset”.
Offsetting is really a token gesture, even if swapping a full
fat coke for a low calorie one is a step forward, it’ll take
more than a can of coconut water a day to stay healthy.
Back in 2010, there were only a handful of coconut
water brands gracing the shelves of specialist food
stores, but by 2012 there are over 20 coconut water
brands in the market, all vying for space within this
rapidly growing and seemingly lucrative category. In
terms of scalability, the coconut water market is huge.
‘We’re seeing compelling data across all channels
demonstrating the mainstream appeal of Vita Coco.
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In natural & health specialists, Vita Coco is their No.1
packaged drink of any non-alcoholic drinks including any
water or cola brand. One of the leading supermarkets
where Vita Coco 330ml pure is national distributed in all
stores, Vita Coco, whether absolute revenue, units, unit
or value rate of sale, is the No.2 branded Impulse line in
chilled Juice & Smoothies, ahead of all other branded
line apart from Tropicana orange Juice 330ml (last
year for 7 weeks was ahead of Tropicana orange juice
330ml!). 1 litre is enjoying equal success and we’ve just
seen two major supermarkets extend us from 200 stores
to over 650 stores.’ said Vita Coco Europe chief
executive Giles Brook.
With leading retailers such as Waitrose and Tesco
clamouring to stock coconut water, the market is set
to expand. The real battle though will be between the
brands for market share.
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Background
Whilst it’s entirely plausible to think of coconut water and
its inherent health benefits as recent discoveries, the
reality points to a much more established history. For the
Western world, dating as far back as WWII, coconut water
was widely used for emergency plasma transfusions.
However, coconut water has long been a staple for people
in the Tropics as a fresh and accessible source of hydration.
For places like Southeast Asia, the South Pacific, the
Caribbean and South America (Brazil is one of the main
suppliers), coconut water provides a sweet tasting and
readily available alternative to water or sugary soft drinks
and juices. The taste can vary due to its source.
Harvested from the young green coconut, the extracted
water is clear with a light flavour, unlike coconut milk
which is squeezed from the white pulp and is full of fat.
The coconut tree has often been referred to in some
cultures as the ‘Tree of Life’, due to its versatility; as
each element of the tree can be used in some facet;
whether it is the oil extracted from the coconut acting
as a natural skin and hair moisturiser to being a great
source of potassium, higher than that of the banana.
And now it is rapidly becoming a favourite go-to drink for
athletes, nutritionists and celebrities the world over as a
healthy alternative to glucose based sports and energy
drinks. Athletes and fitness fanatics are swopping
to coconut water for its high potassium and mineral
content and the promise of fast, natural hydration. Even
though many of the benefits of coconut water or many
sports drinks are insignificant unless undertaking a lot of
Amanda Russell, ZICO’s new signing
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exercise, health conscious individuals are looking for a
tasty alternative to water that has no preservatives, no
fat, no cholesterol and fewer calories than your average
flavoured waters, fruit juices or smoothies.
A key element that has contributed to the rise in coconut
water’s popularity is due to its perceived health benefits
and it being segmented in the ‘superfoods’ category. By
tagging certain food as superfoods, their marketability
(and in turn profitability) can often increase tenfold.
Superfoods (or superdrinks) are described as
foods (or drinks) containing a variety of high-level
essential nutrients and other important elements like
Omega 3. Essential nutrients are nutrients we need
but cannot produce ourselves. Superfoods provide
detoxifying agents and act as a great food supplement in
accordance with a healthy diet.
What is important to note is that outside of the EU the
term ‘superfood’ is unregulated, however, inside the EU
a ‘superfood’ such as coconut water, must be proven to
at least meet one specific health claim.
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Some of the claimed benefits include:
- High in potassium (more than bananas) – may help
prevent strokes, heart attacks, dehydration and
hangovers.
- Aids slimming, the high levels of potassium reduces
fluid retention.
- Low calorie, low in fats and carbohydrates.
- Contains antioxidants (which can help prevent
cancers and heart disease).
- Can help carry nutrients and oxygen to cells.
- Helps raise your metabolism.
- Boosts the immune system and reduces heartburn.
- Cleanses the digestive tract (also a laxative if drunk a lot).
- Can help to control diabetes.
- Treats kidney and urethral stones.
- Aids the body in fighting off virus’ that can cause flu,
herpes and AIDs.
- Can help prevent cellulite.
- Coconut water also contains compounds that seem
to protect cells against aging and cancer.
- Contains more electrolytes (potassium,
magnesium, calcium, sodium and phosphorous)
than most sports drinks (it contains the same five
electrolytes found in human blood).
- Contains high levels of lauric acid (present in
mother’s milk), which the body uses to make
monolaurin, a disease-fighting fatty acid derivative.
Lauric acid has anti-fungal, antibacterial and antiviral
properties that protect the body against various
infections and boost the immune system.
- Lowers blood pressure and boosts circulation.
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Though impressive, the majority of these health claims
have not yet been proven, so the extent to which the
claims have been featured in advertising or marketing
is very small, with most companies shying away from
the more ‘outlandish’ claims, in favour of highlighting its
hydration benefits and natural goodness. In the US there
has been a small backlash against some of the claims
but little if no effect upon sales. Theses health claims
are often secondary as most brands are using celebrity
endorsement, also, regulations on health claims restricts
many brands featuring them in ads or on packaging.
Its high potassium content is a key element in many of
the claims as is improved hydration – both of which can
be substantiated.
For these reasons coconut water can be categorised
in terms of hydration, nutrition and functionality; some
consumers may choose the hydration benefits of water
but with a more enhanced or different taste profile.
Others may opt for the nutritional benefits of chilled juice
or smoothies but they don’t want the calories or sugar.
And then there are those who prefer the functionality
normally associated with a sports drink but don’t want
the artificial or synthetic experience found with existing
sports drinks.
A study of post-exercise rehydration carried out by the
Universiti Sains Malaysia compared coconut water,
sports drinks and normal water. It found coconut water
was ‘significantly sweeter, caused less nausea, fullness
and no stomach upset’, concluding that it was the better
option for thirsty athletes than sugary sports drinks.
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The choice of the stars
Nothing seems to get the public following a trend faster
than celebrities adopting it. From fashion to food fads
and diets, eco cars (like the Prius) to technology, a
hungry press soon give the habits of the rich and famous
extensive coverage and rockets products and brands
into mass purchases.
Celebrities including Madonna, Teri Hatcher, Audrina
Partridge, Courteney Cox, Rihanna, Jessica
Simpson, Demi Moore, Chris Pine, Ed Westwick,
Karolina Kurkova, Anna Lynne McCord, Lady
GaGa, Stephen Moyer, Anna Paquin & Vampire
Bill (Vampire Diaries) have all been spotted drinking
coconut water (mainly Vita Coco) with the likes of
Madonna (who invested into Vita Coco in the US). Not to
mention many musicians, DJs, actors and sports stars.
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There are however, five distinct key consumer
groups, which are most likely to consume or purchase
coconut water:
Affluent, middle classed, health conscious
Westerners who can afford to buy fresh, organic
produce and superfoods.
- The energy drinks market; athletes who believe
that coconut water can increase metabolism,
rehydrate the body, replenish natural energy levels at
a much faster rate as well as help prevent cramping
after exercise.
- The health conscious who seek coconut water for
its zero fat, low cholesterol and low calorie benefits
and sweet taste.
- The ‘fad followers’; who will purchase coconut
water because it’s ‘the in thing’, however that is not
to say they are not a key cog in the consumer wheel
but their interest is often fleeting and should not be
overestimated. They see this product as a lifestyle
choice and accessory.
- Traditionalists; people from the Tropics or those
whose heritage originates from the Tropics. Coconut
water is an everyday part of their diet, while they may
be aware of some of the health benefits the coconut
may or may not contain this is not their primary
reason for consuming but is more of a by-product.
- Women are the main drinks, estimated to be up to
80%. 25-29 are the main age group.
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The next stage – ethical claims
As if there are not enough health claims, some brands
are now adding the ethical touch. ‘Organic’ and
‘Fairtrade’ coconut waters are the next spin. ‘Not from
concentrate’ is also appearing, as some brands like Zico
use concentrates. ‘No added sugar’, though few actually
do, but nothing beats claiming purity. Packaging is also
playing a part with various claims about recycling and
sourcing of materials, though it’s uncertain if this really
makes much of a difference to the majority of consumers
(consumers pay a lot more lip service to ethics than
actually acting on it). The leading brand that claims high
ethics is O.N.E.
Flavourings
There has also been a growth in diversity of favourings
with many brands now adding flavours such as lime,
pineapple, mango, guava, pomegranate and even
chocolate.
Soft drinks and health
With government pressure, directed at food & drink
producers, retailers and the general public increasing, it
is driving growth in healthy products across most food
and drink areas.
The drinks industry is also facing another problem –
rising sugar prices which are forcing many brands to
look at the option of artificial sweeteners meanings, we
are likely to see more ‘lite’ options in the marketplace.
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Added health
As if it’s not a superdrink enough, GNC have launched
PNENOM “with added vitamins & minerals”.
Trade
From a marketing point of view, the coconut cater
industry is carving out a totally new category. Brands
such as Vita Coco are trying to emulate what Redbull
and Innocent have done for the sports and energy, juice
and smoothies markets respectively, with a view to
replicate their success.
Further to that, the three main players; Vita Coco, Zico
and O.N.E have set up deals with major drinks brands or
endorsements with well-known celebrities. Their affiliation
with these brands coupled with the injection of capital and
access to greater distribution channels have garnered
rapid success for the coconut water category to date.
Functionality
Although the purchase of products like coconut
waters are driven by emotional reasons, consumers
will post rationalise and cite rational/functional reasons to
justify their purchase.
Take Vitaminwater for instance, its success can be
attributed to the pre-existing perceptions of water being
a healthy beverage then coupling that with increased
functionality through formulation, resulting in a best of
both worlds type scenario, vitamins and water.
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Marketing
Moving forward, the major players in the coconut water
industry will need to concentrate on consolidating
growth and defending their share of the market against
other brands entering the market and own label brands.
Rockstar energy drinks has already launched a coconut
water, it’s inevitable that other drinks brands will play off their
brand strengths and do so too. Maybe Innocent next?
Now the market is established we will more than likely
see a battle of the brands to own the biggest slice of
the market. Big drink brands like Coca-Cola see it as a
growth market so we can expect some big spends on
TV. PR, celebrity endorsements and social media can
only go so far but it is the might of TV that will secure
brand dominance and retail confidence.
Celebrity endorsements from the likes of Madonna,
Anthony Kiedis and Rihanna (above) have bought
Vita Coco to the forefront of youth demographic. Both
Madonna and Anthony Kiedis (Red Hot Chilli Peppers)
are investors in the Vita Coco brand with Rihanna
becoming the face and spokesperson in May 2011. A
national marketing campaign ran across print, television,
billboards and social media (Facebook) as well as being
featured on Rihanna’s website.
“I grew up in Barbados – so when Vita Coco
approached me to help develop a new flavour, I
thought we should combine the natural coconut
water with fresh tropical fruits – two of my favorite
things,” says Rihanna. “It tastes so delicious and
reminds me of home!”
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While celebrities certainly help sell, not everyone is using
film, TV and pop stars.
ZICO on the other hand is chasing the sports energy
market and uses celebrity athletes heavily in its
marketing and advertising, from NBA pro Kevin Garnett
to wrestler Jacob Clark and US Paralympics wheelchair
competitor Joshua George, Bryan Clay, reigning
decathlon gold medalist and “World’s Greatest Athlete”
title holder In the US. The NFL Players Association are
also working in partnership with ZICO to give them
status as ‘the official coconut water of professional
football players’.
Their latest ‘glamour’ signing is runner Amanda
Russell, who won ZICO’s ‘I am Natural’ campaign.
Russell is also an AFTA Certified Trainer, has won
triathlons and is creator of The AR Program, a holistic
mind and body system that focuses on intense dynamic
workouts and a healthy diet. She features in their
advertising, having been packaged up to model level,
and promotes workouts for ZICO online.
The ZICO website has an entire page dedicated to high
profile athletes that drink ZICO before, during and after
exercise. Their ‘No Lies’ print campaign also featured the
faces of athletes with the tag line, ‘Don’t Swallow a lie’
covering their mouths which encouraged consumers to
pick Zico’s natural sport drinks as opposed to lab made
energy drinks. However, unlike almost all other coconut
waters, ZICO is transported in a concentrated form and
rehydrated before sale and even though this probably
makes no difference to the product other brands have
tried to use this against the brand.
This tone of advertising (in America) is similar to that of
Vita Coco and Rihanna sentiments urging consumers
to “Hydrate naturally from a tree, not a lab,” which was
seen as poke at PepsiCo’s Gaterade (Pepsi bought
Amacoco in 2009, Brazil’s largest coconut water brand)
and Coke’s Powerade (ironic considering Coca-Cola
has an interest in ZICO).
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Foundations – top brands
The number one brand in the world is Vita Coco
(vita is latin for life) and was founded in 2004 by Michael
Kirban (then just 29) and his old school friend Ira Liran
(who married a Brazilian girl). Within 3 years sales had hit
over $4m in the US. Kirban says he was inspired by two
Brazilian girls they met in a NY bar saying one thing they
missed was coconut water. When his friend Ira fell in love
with one of the girls and moved to Brazil they started to
import and market it in New York.
In 2009 Kirban hit the headlines in the business press
when he turned down both Coca-Cola and PepsiCo
(the market was worth $30m in the US at that point).
It’s believed Coke offered him $15m. With big-name
investors, Madonna, Matthew McConaughey and Demi
Moore, Vita Coco now controls 60 % of America’s
$US350 million coconut water market and is on track
to more than double profits this year. It has signed a
distribution deal with the DrPepper Snapple group which
gives it massive potential and greater reach. It is now
available in over 20,000 stores globally.
Celebrities that support the brand include Madonna,
Matthew McConaughey, Demi Moore and Whitney Port.
In the UK it is number one and also comes in a variety
of flavours, including Peach & Mango, Passion Fruit,
Pineaple and Acai & Pom.
Recently they have launched a coconut coffee drink, Vita
Coco Café.
http://vitacoco.com/uk/
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ZICO was founded in 2004 by Mark Rampola after
falling in love with coconut water as a Peace Corps
volunteer in Central America. After spotting the trend
he saw an opportunity to target the sportsmarket. At
present (in the US) 80% of consumers are female, but in
the sports market it’s more balanced – the average age
of drinker is 25-39. They originally distributed via yoga
studios, but following a deal with distribution company
Big Geyser have dramatically increased distribution. In
2009 Coco-Cola’s Venturing and Emerging Brands
(VEB) business unit invested over $15m in ZICO.
The brand has a variety of flavours including Natural,
Pineapple, Mango, Pomberry, Passion Fruit and its most
recent addition, Chocolate.
http://uk.zico.com/
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O.N.E.’s story began in Sao Paulo, Brazil in 2005
when MBA students Rodrigo Veloso and Eric
Loudon developed a business plan to brand and
launch a line of healthy, natural beverages (coconut
water being the first) in the U.S. market. It has recently
been invested in by PepsiCo.
http://www.onedrinks.com/
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Other key brands in the market:
The Jax Coco story began in Asia after four coconut
water enthusiasts – Jane, Jason, Alex and Max – noticed
that while there were plenty of young coconuts (and
even more coconut water lovers), there didn’t seem
to be any coconut water products packaged for easy
consumption.
Envisioning a product that could make coconut water
more prevalent in an industry filled with sugary sodas and
artificial beverages, the four coconut water devotees, who
all incidentally had the letters J, A or X in their names,
formed the Jax Team – a group with the intention to
produce the freshest and best coconut water in Asia.
The brand was originally based in Hong Kong but
launched in the UK in 2012 with a 330ml Tetra Pak and
a 250ml designer bottle (mainly for Hotels & restaurants)
designed by Stella McCartney’s husband Alasdhair Willis.
Jax have developed our own range of cocktails in
conjunction with Pacha, Ibiza and is now on the cocktail
list of a growing numbers of clubs/bars in London. Titles
include: Jax Colada, Jaxito, Jax’tini and Jax Jubilee.
Celebrities that support the brand include Vanessa Raw,
GB triathlete and artist.
The business has strong ethics and runs a replanting
scheme and sells the husks of coconuts to create biofuels.
http://jaxcoco.com/
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CHI coconut water claims to be the number 2 brand
in the UK after Vita Coco. It now sells through over 200
stores and exports to 12 countries, including Australia
where it is number 1 brand. Sold in 330ml resealable
Tetra Paks, it launched in the UK in 2012.
It’s founders, Jonathan Newman and David Mendelsohn,
scoured the globe for the best raw material and found it
in a small plantation in Thailand.
CHI claims to have the lowest natural sugar content of
any brand on the market, 1.3 grams of natural sugar
compared to the average, which is 5 grams.
Celebrities that support the brand include Toni Collette,
Keeley Hawes and Ioan Gruffudd.
It has strong ethics and donates a portion of all sales to
orphanages across Thailand through a charity they set
up, “One Seed, One Life”.
www.chidrinks.co
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Europe
Germany
Founded in 2003 in Germany by Brazilian-born
pediatrician Dr. Antonio Martins, Green Coco (under
the Dr. Antonio Martins brand name) now distributes its
organic coconut water to 19 European countries, making
an estimated $43 million in retail sales in 2011.
The company has a patented process for extracting
coconut water, preserving it, and shipping it in bulk to
Europe without using artificial preservatives or ultra-high
pasteurization.
France
In 2010, Nestlé introduced ‘Nesfluid’, under the
Hydranutricion concept, as a functional drink in the
ambient department of soft drinks.
It was composed of 50% coconut water, whey and fruit
juices, plant extracts and micronutrients. A year later, the
drink died a death due to lack of popularity and sales.
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New markets
Australia
This is seen as another new market and already
Schweppes is behind the Kokomo brand (sourced
from the Philippines) which uses Fairtrade as part of its
USP. With almost 20 brands in the market, the number
one brand is CHI. Another big brand is Nudie (who
are an Australian version of Innocent), followed by a
bunch of smaller businesses including H2Coco and C
Coconut Water founded by Adam Abrams. Adam’s team
investigated various coconut sources, claim Mexico,
India and Indonesia’s were too salty whilst the Thai ones
were too sweet. But the coconuts from the Mindanao
island group in the Philippines were spot-on.
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The knock on effect
Another consideration would be the effect on trade for
the countries who produce the coconuts. Though places
like Brazil are developing nations, and large investments
from brands like PepsiCo and Coke will invariably create
jobs and boost trade, what happens when they cannot
keep up with demand or demand dries up as many a fad
has in the past?
Also, how much emphasises is being paid to the CSR of
these companies in countries where the law is not be as
stringent as in the West?
It’s inevitable that large brands want to buy more for
less and farmers and workers can easily become
exploited, which continues to cause concern for the
Fairtrade movement (there are a number of brands
claiming to be fair trade).
The effect upon local economies can be both positive
but also negative, so it needs careful management. Only
time will tell.
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SWOT analysis
Strengths
Coconut water is perceived as a superfood and exotic
and though many of the claims may not have been
proven many people are buying into the perception of it
as a healthy alternative to soft/sports/energy drinks.
It’s a cheap product to source and arguably cheaper labour.
Weakness
The ambiguity over what can be termed as natural,
organic and a superfood may affect how coconut water
is marketed and in turn interpreted to the market.
Coconut water has a varying prices scale from the lower
end Grace Coconut water which sells at around 79p
per 330ml tin to premium priced brands like Dr Antonio
Martin’s that sell for £3.49 (500ml). This confuses the
market place and cheaper brands could undermine
those brands that invest in marketing spend and need
to recoup their investment through a higher RRP.
Excessively over priced brands may be the first to fall as
the market develops a perceived price band.
Opportunities
Emerging coconut water/energy drinks market in the UK
has not been fully tapped into. With more advertising it
can grow significantly.
If lauric acid (found in mother’s milk) is in fact present in
coconut water then there could also be scope to market
coconut water to expectant mothers and new mothers
as a supplement to their diet.
Tapping further into the health market.
Diversification beyond just flavoured varieties.
The lunchbox, as a healthy alternative to sugary soft
drinks for kids and adults.
The possibility of using coconut water as a mixer –
example, Bacardi Rock Coconut– a coconut infused
rum. Its hydration properties also reduce hangovers.
Threats
The unsubstantiated health claims and benefits.
Discreditation.
Could coconut water and the superfood market simply
be a fad that will eventually lose momentum only to be
replaced by the next fad?
Too many brands fighting for a slice of the market.
Supermarkets – who they sell (not all brands can get a
listing) and how they position and retail coconut water
(poor pricing could put off consumers).
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Updatdes
This was last updated Nov 2012.
If you wish to be added to this report or wish to supply
additional information, please contact us.
Contact Chris
Arnold
+44 207 272 2297
www.creativeorchestra.com
contact@creativeorchestra.com
TRENDS & THINGS blog
http://trendsandthingsblog.wordpress.com/2012/06/09/hello-world/
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Researched and written by Caryn Coley & Chris Arnold.
Additional material from Vita Coco.
© Creative Orchestra 2012.
Creative Orchestra is a UK based Advertising & Brand
Marketing Agency
Chris Arnold is author of the book Ethical Marketing
& The New Consumer (available on Amazon, 5 star
rating), writes the ethical marketing blog on Brand
Republic, writes for many on and off line publications,
does TV, radio and lectures on all aspects or creativity,
advertising, branding and marketing.
He is also founder of Creative Orchestra.
The expanding coconut water market | 27
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