Vita Coco IPO: what you need to know

By Duncan Ferris

Oct 19, 2021

Coconut water maker Vita Coco has scheduled its initial public offering for 19 October.

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Coconut water maker Vita Coco has scheduled its initial public offering for 19 October. The New York-based company, which will join the NASDAQ under the ticker COCO, is aiming to raise $224m through the sale of 11.5 million shares, which are expected to price in a range of $18 to $21.

The underwriters for the deal are Goldman Sachs, BofA Securities, Credit Suisse, Evercore ISI, Wells Fargo Securities, Guggenheim Securities, Piper Sandler, and William Blairare.

What is Vita Coco

Michael Kirban and Ira Liran founded the beverage company in 2004. Vita Coco’s mission statement is to reimagine what is possible when brands deliver great tasting, natural, and nutritious products that are better for consumers and better for the world.

As such, the company sells coconut water and other plant-based beverages. Having been in the business for more than fifteen years, the Vita Coco was an early beneficiary of the increasing consumer interest in healthy beverages and energy drinks.

Additionally, the company runs projects which aim to benefit its coconut farming community. Vita Coco says it seeks to do this through the introduction of innovative farming practices, improving education resources, and scaling its business to promote economic prosperity. The company claims this project has allowed it to “positively impact the lives of over one million people”.

How does Vita Coco make money?

As well as its flagship coconut water brand, Vita Coco also owns plant-based energy drink Runa, sustainably packaged water Ever & Ever and protein-infused water PWR LIFT. It is currently the leading player in the American coconut water segment, possessing a 46% market share in the US.

Vita Coco products are sold in 24 countries. It has a market share of 70% in the UK and a growing footprint in Asia. Additionally, the company considers itself to have established “solid foundations” in China, France, Spain, the Nordic Region and the Middle East.

The company generated gross profit of $105m in 2020, representing a 13% increase from $93m the year before. For the first six months of 2021, the beverage maker generated gross profit of $53m. This was relatively flat against the $53m gross profit from the same period in 2020.

It also registered sales of $311m for the year ending 31 December 2020, up from $284m in the year before. More recently, Vita Coco reported net sales of $177m for the six months ended 30 June 2021. This represented a 15% increase from $154m for the same period in 2020. Vita Coco said this was primarily driven by a 29% increase in net sales of Vita Coco Coconut Water.

Potential for growth

The company sees opportunities for growth through greater household penetration, distribution gains and innovation. Significant expansion in the US is a major facet of Vita Coco’s plan. Given its strong position with young and multicultural consumers, the beverage maker sees shifting demographics in the US as means of organic growth. Additionally, it intends to target gains in the Midwest, which it sees as an under-penetrated region.

Vita Coco is also targeting further international expansion, building on the base it already has in place. The company intends to prioritize regions where it identifies attractive opportunities based on product fit with consumer demographics and interest in health, wellness and purpose, and market opportunity. It is currently focussed on Western Europe and China. Vita Coco said interest in health and wellness is growing in these regions. These markets are also sizable and expected to grow significantly.

The company has also highlighted its readiness to acquire new businesses or develop new brands. Vita Coco acquired the Runa brand in 2018 and appears to be on the hunt for further acquisitions which have meaningful growth potential.

Should you invest in Vita Coco?

Investment in Vita Coco seems like an attractive prospect. Healthy beverages are increasingly popular and the company has registered impressive sales growth in recent times. It is also worth noting that it maintained its dominant position in the coconut water segment despite attempts by Coca Cola and PepsiCo to muscle in during the late 2000s.

However, another charge by these beverage behemoths could spell trouble for Vita Coco. Additionally, it is worth noting that the company is reliant on third parties for manufacturing and packaging. Vita Coco is equally dependent on access to coconut crops and other natural products.

A nice plus point is that Vita Coco seems like a company that is a force for positive change. The company’s initiatives have led to the construction of almost 30 schools and the creation of new scholarships. Couple that with the sustainability of the product and Vita Coco seems, so far, to be a guilt-free investment.

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Important Notice And Disclaimer

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.