Vita Coco Company, Inc. (COCO) June 2026 Conference Transcript

All right. We're going to go ahead and get started. Good morning, everybody. I'm John Anderson. I'm the sell-side equity research at William Blair that covers consumer packaged goods. And I want to welcome everybody to William Blair's 46th annual growth stock conference. So we're here to help you have a great time, productive time. If there's anything we can do, please reach out. We have an awesome opening act here with Vitacoco, and really happy to have the company's chief executive officer, Martin Roper, to my direct right, and chief financial officer, Corey Baker. Vitacoco pioneered packaged coconut water in the U.S., and is the clear market share leader both in the U.S. and in key international markets such as the U.K. and Germany. Coconut water is one of the fastest growing categories in the beverage aisle. As more households seek out natural hydration alternatives and consumers choose coconut water for more occasions. As the market leader, Vitacoco is driving growth by expanding its product range and availability through the rollout of multi-packs, an organic line, juices in cans, as well as coconut milk-based products such as its treats line. Despite all the company's success, we think the company has ample runway ahead, both on household penetration and use case expansion. Before handing it over to management, a couple of quick housekeeping items. Immediately following the presentation, There will be a breakout session in the Jenny A room, so please join us for that. And last, I just want to inform you that a complete list of research disclosures and potential contraflex of interest can be found on the William Blair website. So with that, I'll turn it over to Martin to get started.

Thanks, William Blair, for inviting us, a pleasure to be here. Before starting, a quick word from our lawyers who would want me to assure you that it covers all the relevant aspects of what we're going to cover as forward-looking statements etc etc i'm martin roper ceo vitacoco i have over 30 years of beverage experience 24 with boston beer and now seven with vitacoco i am joined by cory baker our cfo who has also 20 years experience in beverage primarily with pepsi and we're delighted to be here to talk to you about Vitacoco and share our story. We're a very special beverage company with a vision to be a leading platform for natural beverages to consumers, helping them eat a little better, drink a little better, live a better life. We're obviously a natural beverage in coconut water, but our mission stems through to our supply communities. We're a public benefit corporation, we'll be certified and we have a charitable foundation that focuses on raising our farming communities sort of raising their economic standards their educational standards and also their own agricultural capabilities so we're a very unique sort of business with a very long supply chain reaching into the tropics um currently as a public company I think we're also pretty unique we're as a public company beverage we're having very strong current performance top-line growth in the 20s which is very unusual in beverage today particularly sort of mature beverage categories coconut water was launched over 20 years ago in the US you could describe us as mature we still think we're a little bit of a toddler running around and bumping into things and we still have a long long way to grow the category is we believe in early stages of its growth and has significant upside easily potential to double in the US and as a business to get Europe to where the US is today it has a very attractive consumer profile educated health oriented young and still growing and we've benefited as we'll talk about from growth in households and velocity households we're the category leader in our major markets so we have a very strong brand position that which we'll talk about and a clear path for growth and for doubling the business the business is also asset light so we have a very strong balance sheet and a very experienced team with a lot of tenure and stickiness so we think we're in a very unique place as a public company and very excited about the future i think it starts with a consistently delivering what we said we're going to deliver over the five years since we've been public We've delivered 14% top line CAGA going to the midpoint of our guidance this year, and at 30% adjusted EBITDA CAGA going again to the midpoint of our guidance this year. Pretty consistent delivery of what we said, certainly some lumpiness with ocean freight around COVID, but otherwise a very strong, strong profile. we also have a very strong balance sheet 202 million in cash the end of q1 no debt and very strong ROIC and we think this is a very unique profile in the public market space and obviously one that we intend to maintain and Corey will talk about a long-term financial metrics so you know coconut water is a natural beverages of fruit juice coconuts of fruit obviously on trees coconut water is right now in the center of a whole bunch of interesting consumer tailwinds from clean ingredients to functional benefits to you know positive impact on society through a public benefit corporation and we also benefit from a very diverse consumer consumer group with over indexing to key ethnic groups like hispanics african americans asians and so all of this is a very strong tailwind from us for us as as a brand um and uh we believe is you know a grounding for why this growth is going to continue and we'll touch a little bit on this in the next few slides coconut water is also quite an interesting beverage because it can be used in a multiple of day parts you can use it at breakfast as a smoothie or even as a milk replacement over fruit or in cereal gets used widely as a hydration post-workout which is really where it started because of the electrolyte properties uh it can be used as a cocktail mixer it's actually a great mixer with uh with scotch instead of ice cubes make your ice cubes with vitacoco please um you'll you'll find it gives the scotch in a very unique flavor um and then when you've done all that and you wake up the following morning it's got this nice benefit of recovery which you know frankly is an entry point for a lot of our young adult consumers is when they discover coconut water is Sunday mornings after Saturday night or on Saturday mornings after Friday night or indeed on any morning after any night that it really does help them rehydrate in a very in a very positive way so it has three times the electrolytes of the major sports drinks it's high in potassium so it's also benefiting a a little bit from some of the current consumer interest in looks maxing and de-bloating that's going on. And here's some of the guys laughing, maybe some of the young ladies are laughing about what the guys are laughing about. But there is something going on in diet and health with young male adults who really want a chiseled look, much like John Anderson here. And the potassium content in the coconut water is part of that. And that is also part of what is going on. so we have a natural beverage from a tree that is fulfilling real functional needs and it's increasingly aligned with what's going on with consumers today and that is driving very very healthy growth um where do we source from um we we talk about sourcing primarily right i use the word primarily because obviously we're a beverage we source from all beverages but primarily from flavored waters uh juices and sports drinks so a little bit more functional on a global basis that's about 125 billion category that's obviously a subset of the total beverage um and i think we estimate that coconut water is order of magnitude three four billion in that on a global basis and again obviously global numbers are you know pretty hard to deal with and they're all estimates so please take that for what it may but that's the category we're playing in and we have opportunities to gain share from that category and so there is real upside we're a very small player in that in in that in that sort of sector and again we're part of the total beverage sector which is obviously much much bigger so huge opportunities for future growth as we continue to educate people about the benefits of coconut water why why you should use it how you use it increasing occasions uh and uh basically you know spreading the word um so lots of upside the us is our most mature market um as said we launched in the us in 2004 really saw consistent growth for the last 22 years we sort of looked at it as we were going public and decided it was about high single digits low double digits volumetric every year there were some changes to that and we saw that growth continue in the early 2020s starting in 2024 second half we saw an acceleration and we started to see growth in the mid-teens volumetrically and that continued in uh in 25 where there was a fair amount of pricing taken which took the numbers up but actually has accelerated in the first quarter um and is now above that um first quarter of the growth or year-to-date growth is 30 and i think this is through uh may 24th so it's the most updated Sikana data we use Sikana plus which includes all the club stores and particularly Costco that is not included necessarily in Nielsen which Nielsen uses a representative sample of some description so these are the numbers we're looking at and there has been a definite acceleration that started in 24 and then has accelerated late 25 early 26. Our growth historically has come from increasing households half the growth has come from increasing households and half has come from increased velocity per household which to me has always been indicative of a very strong category uh as the category is accelerated we've seen a little bit more of the growth coming from from uh household growth but the velocity has still maintained um and and it's still and is still growing so the acceleration we think is an acceleration of households which is coming about because of some of the sort of health and beauty uh sort of waves that i talked about um but then also potentially from our own marketing investment in in these in these markets and interestingly enough we've seen this acceleration not just in the us but also internationally and so some of what we're seeing we think is actually spreading globally maybe less surprising because a lot of the marketing and investment we do is social media which has global reach there was a social media item that we did that got over 200 million views in the first quarter and about half of those appeared to be international and so it does look like with the current ability to market using social media that you're getting international coverage from some of our investments so from a consumer point of view we over index to young uh and uh gen z millennials at multicultural over index relatively speaking um under index to people my age and john's age unfortunately but we're working on it um so from a consumer profile we think that the future is very good because these consumers basically adopt coconut water as part of their diet as part of their lifestyle and then we'll grow with the brand and we still so we think we're still a young brand this is why we talk about the category being you know in its early in its early stages the recent growth is being generated by Gen Z shoppers and families with kids aged 13 to 17 again we think that that plays into what we're talking about it maybe as the lux maxing and the and the gut debloating elements of diet that are currently sweeping through this community is driving some of this consumption uh and certainly if you're looking for potassium you should pick up a coconut water not a banana right so um coconut water is better for you so this is again we think a very healthy uh tailwind behind our business the other thing going on which helps this is that retailers are leaning in um to particularly in the u.s these are u.s representations of what is going on over the last two, three years, we've seen retailers moving from, you know, placing coconut water on bottom shelves, not that visible to greater visibility to now blocking the most impactful for that was the Walmart reset that took place in November. If you are in a large modern Walmart, you'll go in, you might see eight feet of space dedicated to coconut water and some other beverages, which is up from maybe three SKUs a year ago. to us so this was a very significant move and we hope other retailers will follow and you know part of this is about getting visibility in the store and reminding people that they should buy coconut water and part of it is also about getting shelf space to hold inventory um because as the velocity is increased then you know with a single sku or facing um you know providing inventory is is very challenging so this is going on in the us we're very excited about it um in international it's much earlier the market we talk about international but the development of the market is significantly lower so we're at much earlier stages but this probably has another two three years to play out in the us with people following what walmart has done um in walmart we doubled more than doubled our skus uh we more than doubled uh um our space uh from a visibility and availability and inventory uh perspective and walmart is now gaining share of coconut water within the coconut water category which is which is good for them and obviously good for us because we're the largest brand in their set we have a very strong position in the u.s with 42 share uh currently um the next largest share point is private label um and these are sakana data so it includes uh you know club stores and other things and so the private label share is a little overstated um because one not all retailers have private label two some retailers only carry private label and so private label sharing those those channels is 100 but that's the next biggest sort of category and then if you actually just think purely about brands you get down to harmless harvest which is owned by danone and it's a cold product only we are center of the shelf warm and you get down to goya which is canned a product typically in a ethnic aisle and so not necessarily next to us so we are 5x the size of the next brand um our mission is to grow the category and benefit from being the leaders lead brand as part of that thinking we also supply some private label customers and Corey will talk a little bit about that but we're trying to grow the category and benefit from that growth of the category through our share of of brand and private label means we get the majority of the of the growth that we generate we have a national coverage national distribution coverage some of it through DSD with our primary partner being KDP and independent distributors but some of it also direct to warehouse so we combine an interesting combination of dsd to those retailers that need dsd and they're best serviced by dsd with direct to work to warehouse for those retailers that don't and then broad line distribution for food service and and other classes of trade and we have a on a measured basis retail a very strong acv at 86 percent there's still opportunities right there are always opportunities most of the opportunities at the tail of convenience store um so the smaller convenience store chains that's the chains with you know maybe four uh beverage doors where they don't want coconut water yet but it's going to come there so we'll get there but that's where a lot of our distribution opportunities are um and then also in food service is a major opportunity for us because our food service business is in the low single digits of our total business and it probably should be in the low in the low teens. So we estimate that Sakana covers about 85% of America's branded case equivalents for those who follow along in retail tracking and try and back in to what the numbers are. We have, as I sort of said, we have significant room to grow coconut water represents less than 1% of total US beverage. And for all the reasons I've sort of touched upon, we think there's an opportunity to double our US business. The health and appearance initiatives on the from the consumer side we still are under indexed in large parts of the country mainly what i would call the middle web the midwest we've got we're strong on the coast in the south and we're under developed in the midwest so that that those regions actually are growing the fastest of any regions and that's just upside it's also how the brand was built the brand was built on on the coasts and you might expect i suppose from some of the health initiatives and experiencing it after workouts that's where the brand would be built but we do have the middle of the country that we are working hard to try and try and and solve we look at flavor innovation and pack innovation to bring new people in once they come in people tend to to migrate towards the core product um so that's how we think about innovation um so opportunity to double the us um outside of the us there's an opportunity for international to be the size of the us today if not larger um many countries are are behind the U.S. in per capita consumption. So this is a presentation of an index relative to the U.S. per capita consumption. The U.S. per capita consumption is only like $4.70, so it's per population head, that's not that much. Lots of opportunity in the U.S., but when you look at other countries, significantly behind. Canada is the closest behind the U.S. Australia actually is ahead of the U.S., so Australia is more developed. So it's actually higher and actually indicates where the u.s could get to a little bit but our goal is to try and get uh europe primarily to where the the u.s is and you'll see the uk is at 45 percent of uh penetration uh household consumption ahead uh uk i think in the first quarter grew 37 percent germany is at 16 percent of the u.s uh germany grew as a category over 100 and the brand glue grew close to 200 in germany so So our goal is to get Europe to the size of the US in a five to seven year timeframe if we can. And that's how we think about our business of growing the business. So if you look ahead five to seven years, we think international will be a larger part of our business. That's important to note a little bit because the gross margins in international are a little lower than they are in the US. But that's how we see the business evolving. We certainly believe the business could double and based on the growth of Europe. And with that said, I'll pass it over to Corey.

Good morning. We wanted to go a little bit deeper into our supply chain, so I get to play the role of Chief Operating Officer for a bit. And the supply chain is really a competitive advantage and one of the unique aspects of this business. And so for over 20 years, the team started in Brazil and quickly realized it needed a model that could scale and scale efficiently. And so it's built on a few key pillars. First, long-term partnerships. So Mike, Jonathan, Ira went out to the largest food grade manufacturers of coconuts and said, we will take this byproduct you have of water. We'll help you package it. We'll help you build the capacity. And we'll sign long-term agreements, ideally exclusive, to bring that coconut water back to the market. They went all across LTCager in Brazil and built a globally diverse network. and then built it in a manner that could be repeated over and over across factories, helping the factories become more efficient. And as you saw from our return on capital, they did it in a very asset-light way. This is a very productive operation for the factories to invest to packages coconut water. We support that, but they generally make the investments. I want to play a quick video to give a bit more of a color of what it looks like in the factories.

We source coconuts from our network of thousands of small family farms across the tropics. Around 9 to 11 months after growing on the tree, the coconuts are ready to be harvested. Each and every coconut is handpicked by a skilled laborer and de-husked on the farm. We are on track to crack about 1.5 billion coconuts this year, which is over 4 million coconuts a day. From there, the coconuts are loaded onto trucks to be brought to our factories. One of the most waste-free crops in the world, coconuts and the trees they grow on can be used for everything from renewable energy to textiles, building homes, and state-of-the-art water filters. Not to mention all of the food products that come from coconuts like coconut chips, milk, oil, and more. These versatile fruits find their way into cuisines across every continent and culture. Once the coconuts have arrived in our factories, they are sorted for the right quality. Then, the coconut water is extracted by drilling holes. In some of our factories, about 40,000 to 50,000 coconuts are processed per hour, which can account for up to a whopping 4,000 gallons of coconut water. After being drained, the coconut water goes into small collection tanks. Once the tank is full, it's tested for many of our quality parameters. bricks, pH, acidity, and taste to name a few. After the coconut water passes these tests, we process it to make sure it's safe to drink. The coconut water is then filled, sealed, and capped in tetra packs and loaded onto pallets for shipping.

That's how we lock in Vitacoco's freshness, flavor, and nutritional value, and ultimately how we get the best tasting, highest quality coconut water to as many people as possible so this is a network and you saw kind of the day-to-day operations built currently across 18 factories in six countries and you can see every coconut five million a day touched one one by one we like to to manage this network at 80% capacity that gives us flexibility to avoid any disruptions currently with the growth you're seeing to start the year that Martin showed. We're running well above that, but we have lots of coconuts out there to go get, and the constraint is really to build packaging capability and have those lines ready to manage within that buffer. But with inventory and the capacity we try to run, we can support the growth we're currently seeing. And these communities are super important to us. We work extensively within the communities through the Vitacoco project. One of the biggest initiatives is to plant new trees. As the trees get older, they get less productive and get senile. So helping to support up to 10 million trees is a key initiative for us that we're investing in. We've built approaching 40 classrooms and hospitals in these factories. And we spend a lot of time with farmers, helping them make their land more productive. As you saw, many of these are small family holder farms. So helping them plant other crops that can increase their income in addition to the coconuts is where the team works with partners on the ground to get that done. And then from a margin perspective, the supply chain, despite some of the volatility we had through COVID, has been relatively stable. We do see some short-term spikes in ocean freight, as we're seeing now with some fuel surcharges but with a combination of pricing supply chain consistency we've held our margins and are able to manage our margins in our targeted range over the high 30s and ocean freight has kind of become a much smaller perspective as our mix as it's become more more stable and as we said as we're running the network a little bit less efficiently than we would like with the volume growth it's not a bad problem to have you know we do see some inefficiencies as as we do that. And Martin touched on private label is a component of the supply chain that we think has some real value for us. It has become a much smaller percentage of our mix as the brand has grown much faster and as we've effectively managed, but it's become more diversified with more customers in more countries. And when we can manage the margins to the right place, it brings scale to the supply chain. It makes us a better partner for our retailers, makes us a better partner for the factories. So it fits very nicely within our overall strategy. We provided guidance at Q1 earnings, and we were expecting a very, very strong year. Net sales, 18 to 20 percent. Gross margins, again, in that high 30 range at 38 percent. Adjusted EBITDA, 132 to 138. This is built on a few key things. the u.s category growing about 20 as you saw it's currently growing about 30 so we are off to a very very good start uh to the year the vitacoco brand mid to high teens globally some unique things in our prior year and then some expected launches of private label in the market but tracking pretty close to the category we are investing for growth in our supply chain in our marketing. So SG&A growing high single digits. And then we are picking up private label share. We're launching new private label with large customers, large U.S. customer. And that's driving private label growth in the U.S. of 35 to 40 percent. And with this growth, this continues to keep us on track with our long-term objectives. We've laid out two key objectives. One, to grow Brandon at sales in the mid-teens and if we look back over our five-year category we're doing exactly that at 15 at the midpoint this year and adjusted EBITDA margins in the high teens we're approaching the high end of that at 19% at our midpoint this year so very very strong performance that we feel really excited about and as you heard we've got a category that's in its very early stages the consumers have a real a generation of tailwinds for us we're dominating the category and leading the category in almost every market we're playing in this gives us a really clear path for growth and financially strong margins asset light great team we we're really excited about the future thank you i got back on track you used up my time i did apologize and that i think john will move to the