Coke And Pepsi Get (coco)nutty

In a month-long give-and-take that has considerably ramped up buzz around the future of coconut water as a mainstream product, both Coca-Cola and PepsiCo recently announced investments in the category.

First, PepsiCo announced its intention to buy the Brazilian coconut water giant Amacoco – the largest coconut water supplier in the world. While the three main U.S. coconut water producers were still chewing over the news, the Coca-Cola Co., through its Venture and Emerging Brands (VEB) unit, took a more direct approach, announcing the purchase of a minority share of ZICO LLC. Finally, a few weeks later, Pepsi Bottling Group – which is about to be gobbled up by PepsiCo – announced that it, too, would be investing in and distributing ZICO competitor O.N.E.

The investment in ZICO developed as part of a $15 million round of financing that also included individual investors as well as brand-builders Suite 850. Despite the multi-million dollar stake, ZICO founder and CEO Mark Rampolla said Coke is playing hands-off for the present. ZICO won’t alter its immediate plans, he said, sticking to its DSD network (which includes Polar, Big Geyser and Haralambos), continuing to target coastal markets through “influencers,” and steering clear of traditional advertising.

In the long term, he said, the company could consider distribution through Coke bottlers, but the brand isn’t yet ready for that kind of move. In the short term, the pair of big business investments leaves Rampolla, who sources coconut water from Amacoco, in the unique position of using cash from Coca-Cola to buy supply from a firm owned by PepsiCo.

Asked about the Amococo deal, Rampolla called the situation “interesting,” but said it shouldn’t create a long-term strain on the brand. ZICO, he said, has a contract with Amacoco that is secure enough that Coca-Cola felt comfortable with its investment, and ZICO already had plans to diversify its sourcing.

Nevertheless, things got really “interesting” with the investment in O.N.E., which also sources through Amococo. For its part, along with making an investment alongside private equity group Catterton Partners, PBG announced that it would be distributing O.N.E. in Southern California and South Florida – a pair of geographic areas that are strong bases for coconut water’s growth. And with the eventual supplier advantages that the Amococo-PepsiCo connection could afford O.N.E., down the road, things could eventually get hairier than a full-grown coconut.

Until then, however, interest in the category continues to reach new heights. O.N.E. co-founder Rodrigo Veloso welcomed Coca-Cola as a competitor, and Vita Coco co-founder Mike Kirban said he hoped Rampolla would invest his Coke funds in marketing, which would to grow the category and indirectly help all three companies.

But that touchy-feely rising tide can only last so long. It looks like what had been a small, peaceable niche market has become the latest weapon in the cola wars.