Coo coo for coconut water
Niche category heats up as Coca-Cola and PepsiCo make investments
(FoodBusinessNews.net, September 15, 2009)
by Eric Schroeder
Reprinted With Permission From Food Business News Magazine
KANSAS CITY - Coconut water, the clear liquid inside young coconuts that is naturally rich in nutrients such as potassium, is capturing the attention of some of the nation's largest beverage companies.
It's been nearly five years since New York-based Vita Coco and Los Angeles-based One World Enterprises, L.L.C. introduced their respective natural coconut water products. Since that time, the companies - and the category - have grown primarily by marketing to specific consumer niches.
According to Beverage Marketing Corp., wholesale coconut water sales in 2008 were approximately $20 million, a figure that is expected to grow to around $35 million in 2009.
"It's a fast growing, but small category that has begun to gain some traction with consumers looking for healthier refreshment," said Gary Hemphill, senior vice-president of information services at B.M.C.
That traction now is extending beyond consumers to include the world's two largest beverage companies. Many of the electrolytes in coconut water are seen as critical ingredients in commercial sports drinks and other hydration beverages, a fact that has not gone unnoticed by The Coca-Cola Co., Atlanta, and PepsiCo, Inc., Purchase, N.Y., companies who have dominated the sports drink category through their Powerade and Gatorade brands, respectively.
On Sept. 1, Coca-Cola Co. became one of several investors to acquire a stake in Hermosa Beach, Calif.-based Zico Beverages, L.L.C., makers of Zico Pure Premium Coconut Water. While Coca-Cola's stake was less than 20%, it was part of a larger $15 million investment led by Coca-Cola North America's Venturing and Emerging Brands (V.E.B.) business unit.
"This support from such an exciting and influential consortium of investors certainly validates the broad potential we've known Zico had from the outset," said Mark Rampolla, founder and chief executive officer of Zico. "Building on our established momentum and powered by this new investment, we plan to introduce the Zico brand and its natural health benefits to a much larger mainstream audience, which has always been our mission."
For its part, Coca-Cola said it sees Zico has a "burgeoning brand" that has the potential to change the way consumers look at beverages.
Coca-Cola's entrance into the coconut water market came just a few weeks after PepsiCo acquired Amacoco Nordeste Ltda., Brazil's largest coconut water company. Amacoco makes and sells the coconut water brands, Kero Coco and Trop Coco, which are regarded by consumers as healthy hydration drinks. Together they account for the bulk of packaged coconut water sales in Brazil.
"We're delighted to welcome Amacoco into the PepsiCo family," Massimo d'Amore, chief executive officer of PepsiCo Americas Beverages, said at the time the acquisition was announced. "Amacoco is an outstanding company that I have known and admired for a long time. Amacoco will complement our current business and enhance our growth prospects throughout Latin America and beyond. Even in the nascent U.S. market, coconut water sales are enjoying extraordinary growth."
The agreement includes two manufacturing facilities as well as exclusive contracts to ensure the supply of coconut water from partners with expertise in coconut planting and harvesting.
Kero Coco and Trop Coco are currently distributed by a network of independent distributors. PepsiCo said it will build on the existing network and utilize the strength of its local distribution system to expand sales across Brazil, as well as to other markets worldwide.
Coconut water: more than a beverage
While much of the recent news on coconut water has revolved around its use as a stand alone beverage, it also is finding value as an ingredient. In mid-August, iTi Tropicals, Lawrenceville, N.J., launched coconut water concentrate (C.W.C.) for the juice industry.
The C.W.C. may be used in conjunction with sweeteners such as stevia extracts to accomplish a higher juice content and a lower calorie count within the finished product. The C.W.C. will blend easily because of a gentle flavor and translucent color, according to iTi Tropicals, and it has a low caloric load.
McCormick & Company, Inc., Sparks, Md., mentions several potential uses for coconut water on its web site, including as an ingredient in soup, sorbets and even to add flavor to certain fish dishes.
Another company offering uses for coconut water is Sabinsa Corp., Piscataway, N.J. This past October, Sabinsa received Generally Recognized as Safe (GRAS) status for its branded ingredient Cococin - coconut water solids. A standardized composition of freeze-dried coconut water solids, Cococin may be used as a nutrient in a variety of foods and beverages such as non-alcoholic and alcoholic beverages, frozen dairy, dairy product analogs, milk products, snack foods, imitation dairy products, chewing gum, instant tea and coffee, and soups.
This article can also be found in the digital edition of Food Business News, September 15, 2009, starting on Page 30.