Company Overview
The Vita Coco Company, Inc. is a leading platform for brands in the functional beverage category, having pioneered packaged coconut water in 2004. With a mission to deliver great tasting, natural and nutritious products that are better for consumers and the world, the company has established itself as one of the largest brands globally in the coconut and other plant waters category.
Vita Coco's Storied History and Diversified Product Portfolio
The Vita Coco journey began in 2004 when founders Michael Kirban and Ira Liran introduced the flagship Vita Coco brand, which has since become the leader in the coconut water category in the United States. The company was formally incorporated in Delaware as All Market Inc. on January 17, 2007. Over the years, Vita Coco has successfully expanded its product portfolio and global presence. In 2009, the company established its wholly-owned subsidiary All Market Europe, Ltd. (AME) in the United Kingdom, marking the beginning of its international expansion. Between 2012 and 2015, Vita Coco set up four wholly-owned Asian subsidiaries, followed by four North American subsidiaries between 2012 and 2018, further solidifying its global footprint.
The company's product range now includes coconut oil, juice, and milk, as well as the Ever Ever sustainably packaged water and the PWR LIFT protein-infused fitness drink. In 2018, Vita Coco acquired certain assets and liabilities of Runa, a natural energy drink brand primarily marketed and distributed in the United States. However, the company ceased selling the Runa brand in December 2023.
Vita Coco's strategic focus on private label products has also been a key driver of its growth, with the company serving as a large supplier of private label coconut water to key retailers in both the coconut water and coconut oil categories. Additionally, Vita Coco generates revenue from bulk product sales to beverage and food companies.
As of September 30, 2024, Vita Coco sources its coconut water from a diversified global network of 15 factories across six countries, supported by thousands of coconut farmers. The company's primary markets are North America, the United Kingdom, and China, with its products distributed primarily through club, food, drug, mass, convenience, e-commerce, and food service channels.
Navigating Global Supply Chain Challenges
Like many consumer-facing businesses, Vita Coco has had to navigate the complexities of the global supply chain in recent years. During the third quarter of 2024, the company experienced temporary constraints in ocean container availability, which limited its ability to fully meet customer demand. This resulted in a slowdown in retail scan growth for both the Vita Coco brand and the company's private label products.
However, Vita Coco's management team was proactive in addressing these challenges. By the end of the third quarter, the company saw improved container availability, allowing it to rebuild inventory levels and recover shipment trends. Vita Coco's Chief Executive Officer, Martin Roper, expressed confidence in the company's ability to continue navigating the supply chain environment, stating, "Container availability has gotten much better and is much less of an issue already and becoming less and less of an issue for us."
Financials
Steady Financial Performance and Raised Guidance
Despite the temporary supply chain headwinds, Vita Coco has maintained a steady financial performance. For the nine months ended September 30, 2024, the company reported net sales of $388.72 million, compared to $387.47 million in the same period of the prior year. Gross profit for the nine-month period was $157.48 million, up from $140.93 million in the prior-year period, reflecting the company's strong brand positioning and operational efficiency.
For the most recent fiscal year (2023), Vita Coco reported revenue of $493.61 million, net income of $46.63 million, operating cash flow of $107.16 million, and free cash flow of $106.56 million. In the most recent quarter (Q3 2024), the company reported revenue of $132.91 million, net income of $19.25 million, operating cash flow of $9.33 million, and free cash flow of $8.89 million. Notably, while revenue decreased 4% year-over-year from $138.06 million in Q3 2023, net income increased 27% from $15.16 million in the same period. This was primarily driven by lower promotional spending and private label sales, partially offset by increases in Vita Coco Coconut Water sales.
Buoyed by its performance and confidence in the broader market trends, Vita Coco has raised its full-year 2024 guidance. The company now expects net sales between $505 million and $515 million, with expected gross margins of 37% to 39%, and adjusted EBITDA of $80 million to $84 million. This guidance reflects the company's current assumptions on marketplace trends and global supply chain performance, and assumes a continued improvement in inventory through the balance of the year. However, Vita Coco expects ocean freight costs to have an approximately $14 million negative impact on transportation costs in the second half of the year.
Leveraging Healthy Category Trends and Innovative Product Launches
The coconut water category has demonstrated robust growth in recent years, with Vita Coco's retail scans in the United States and the United Kingdom growing 8% and 19%, respectively, on a year-to-date basis through the end of September 2024. The company's management team believes this category growth, driven by increasing consumer awareness and demand for healthier, natural beverage options, provides a solid foundation for Vita Coco's long-term growth strategy.
To capitalize on these favorable market dynamics, Vita Coco has been proactive in launching innovative products and expanding its distribution channels. The company's Vita Coco Juice offering, for example, has gained significant share at retail, growing 39% year-to-date. Additionally, the introduction of the Vita Coco Coconut one-liter pack into a key convenience store chain has been highly successful, with the product becoming one of the highest-performing items in the retailer's juice set.
Vita Coco's newest innovation, Vita Coco Treats, a coconut milk-based beverage, has also produced promising results in initial pilot programs, despite some early supply chain challenges. Encouraged by the strong performance, the company has decided to broaden the availability of Vita Coco Treats to more retailers in 2025, signaling its confidence in the product's potential.
International Expansion and Strengthening Brand Position
Alongside its domestic growth initiatives, Vita Coco has also been strategically expanding its international presence, particularly in key markets such as the United Kingdom and Germany. In Germany, the company has become the leading branded coconut water, with the category growing over 50% in the past year, according to Nielsen data.
Vita Coco's success in international markets underscores the growing global awareness and demand for coconut-based products. The company's Chief Executive Officer, Martin Roper, highlighted the opportunity, stating, "We see the opportunity for this category to be quite significant in all of these global markets, and we believe we're the ones that have the opportunity to build that business and build the category."
Navigating Macroeconomic Uncertainties and Maintaining Flexibility
Like many consumer-facing businesses, Vita Coco has had to navigate the broader macroeconomic uncertainties stemming from geopolitical tensions, high inflation, and volatile foreign exchange rates. These factors have impacted the company's supply chain and transportation costs, with ocean freight rates remaining elevated compared to historical averages.
To mitigate the impact of these external pressures, Vita Coco has been proactive in exploring various strategies, including securing additional capacity commitments at floating rates and maintaining flexibility in its pricing and promotional strategies. The company has also emphasized the importance of building a resilient supply chain, with plans to add production capacity for 2025 and 2026 to provide greater flexibility than it had in 2024.
Despite the ongoing challenges, Vita Coco remains confident in its ability to navigate the current environment and continue driving growth. The company's strong brand positioning, diversified product portfolio, and strategic focus on international expansion position it well to capitalize on the growing consumer demand for healthier, natural beverage options.
Operating Segments and Product Categories
Vita Coco operates through two reportable segments: Americas and International. The Americas segment, primarily comprising the U.S. and Canada, focuses on marketing and distributing various coconut water and non-coconut water products, including coconut oil and milk. This segment also exclusively markets the Ever Ever aluminum bottle canned water brand and the PWR LIFT protein-infused fitness drink. The International segment, covering Europe, Middle East, and Asia Pacific, includes the company's procurement arm and focuses on marketing and distributing coconut water and non-coconut water products in these regions.
For the three months ended September 30, 2024, the Americas segment reported net sales of $112.25 million and gross profit of $43.56 million, while the International segment reported net sales of $20.66 million and gross profit of $8.00 million. For the nine months ended September 30, 2024, the Americas segment had net sales of $332.84 million and gross profit of $136.64 million, while the International segment had net sales of $55.88 million and gross profit of $20.83 million.
Vita Coco's key product categories include:
1. Vita Coco Coconut Water: This category encompasses all branded coconut water products under the Vita Coco labels, where coconut water is the majority ingredient.
2. Private Label: This category includes all private label product offerings, including coconut water and oil.
3. Other: This category comprises all other products, including the discontinued Runa brand, Ever Ever and PWR LIFT product offerings, Vita Coco product extensions beyond coconut water and coconut milk products, and other revenue transactions such as bulk product sales.
Liquidity
Vita Coco maintains a solid liquidity position to support its operations and growth initiatives. As of December 31, 2023, the company had $132.54 million in cash and cash equivalents. Additionally, Vita Coco has a $60 million revolving credit facility with Wells Fargo, which was entirely undrawn as of December 31, 2023, providing further financial flexibility.
The company's debt-to-equity ratio stood at a conservative 0.006 as of December 31, 2023, with total debt of $1.22 million and stockholders' equity of $202.44 million. Vita Coco's current ratio and quick ratio as of the same date were 3.28 and 2.64, respectively, indicating a strong short-term liquidity position.
Industry Trends and Future Outlook
The coconut water category has been experiencing significant growth, with a double-digit CAGR in North America over the past five years. Vita Coco's management believes that the category is still in its infancy, with substantial room for further expansion. This trend aligns well with the company's strategic focus on innovation and international expansion.
As Vita Coco continues to navigate the evolving market landscape and global supply chain challenges, it remains well-positioned to capitalize on the growing consumer demand for healthier, natural beverage options. The company's raised guidance for 2024, along with its strong brand positioning and diversified product portfolio, suggest a positive outlook for the future.
Conclusion
The Vita Coco Company, Inc. has firmly established itself as a pioneer and leading player in the rapidly growing coconut water and plant-based beverage category. With a strong brand, diversified product offerings, and a strategic focus on both domestic and international expansion, the company is well-positioned to continue delivering value to its shareholders. While navigating the complexities of the current macroeconomic landscape, Vita Coco has demonstrated its agility and resilience, raising its guidance and positioning itself for continued success in the years ahead.