Beverage Companies Cuckoo for Coconuts

Sales of coconut water have nearly doubled in revenue each year since 2005, reaching $400 million in U.S. sales last year.

February 14, 2012

NEW YORK - Beverage companies are increasingly turning to coconut-infused drinks to grow sales, The Wall Street Journal reports.

According to industry estimates, coconut water sales reached $400 million last year, a small fraction of the country€™s $100 billion a year non-alcoholic beverages industry, but a category that has roughly doubled its revenue each year since 2005.

Vita Coco, the number one selling U.S. coconut water brand, generated nearly $100 million in sales last year, more than double its output from the previous year. It expects to be in about 55,000 stores nationwide by April, more than double its reach from just two months ago, as it expands into Walgreens, CVS, and 7-Eleven.

Vita Coco€™s number one spot will not come without stiff competition. Coca-Cola is expected to exercise an option to acquire a majority stake in Zico, the country€™s number two coconut water brand. Zico€™s sales grew fivefold last year, according to Deryck van Rensburg, head of Coke€™s new ventures unit.

"We don't know for sure if this will be the next blockbuster, but so far so good,'' he said.

PepsiCo is not sitting by idly. It will launch a nationwide distribution of the number three coconut water brand, O.N.E. later this year. At the same time, its Naked line of juices claims the number four spot for coconut water sales.

As U.S. soda sales have declined for the past several years, Coke and PepsiCo have looked for new categories and emerging brands.

One fallout of coconut water€™s popularity is a shortage of coconuts. Historically, U.S. importers relied nearly exclusively on Brazil, but it has suffered a severe shortage as demand grew. O.N.E. ran out of coconuts last year and is looking to Indonesia and the Philippines for supplies. And Vita Coco expects to source roughly half of its coconut water outside of Brazil this year, relying on Indonesia and Thailand.

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