Changes Roiling Functional Beverage Category

Shareholder concerns at O.N.E. Coconut Water and Celsius Holdings appear to have reached a boiling point as both companies ousted top executives this week.

As first reported in Beverage Business Insights, O.N. E. Coconut Water dismissed both Steve Coston, the president of the O.N.E., and Steve Vasquez, the vice president of sales. O.N.E. founder Rodrigo Veloso said that the moves were part of a general restructuring at the company, though he declined to explain the exact reasons behind Coston and Vasquez’ seemingly abrupt exit.

“We respect them and wish them well, but I don’t want to comment on [their departure] right now,” said Rodrigo Veloso, the founder of O.N.E.

Veloso said that O.N.E. was currently looking at replacements for Coston and Vasquez, but that the company had no made concrete decisions on who the company would hire. Veloso did say that O.N.E. would fill the positions by the end of the year.

Sales of O.N.E. products have lagged in the past year as compared to those of category leaders, Vita Coco and ZICO. Veloso blames weak returns on supply chain and sourcing issues, but claims that O.N.E. has moved past such problems and the company is focused on fully moving into the Pepsi system beginning in 2012. Veloso also noted that O.N.E. would finally debut a long-awaited organic SKU in the first quarter of the year.

At Celsius Holdings, founder Steven Haley was removed from his position as CEO and replaced by Gerry David, a longtime executive at a number of consumer products companies.  While Haley will stay on with Celsius as a consultant, his exit – which, according to Haley, had been discussed as early as June – appears to have been prompted by Carl DeSantis, Celsius’ main shareholder.

Haley explained that DeSantis owns $4 million worth of Celsius debt and was owed the full amount in September 2012. Had DeSantis’ debt stayed on the books, any new capital or investment over the next year would end up going directly to him – a daunting notion for an already struggling company.

“It would have put a stranglehold on the company,” Haley said. “There were really no other answers. [DeSantis] wanted more of his team at Celsius where he could take control of the company and do things his way. His heart and his pocketbook are in the right place, and he’s showing it.”

In addition to replacing Haley as CEO, DeSantis agreed to push back the loan payment for two years and increased his ownership stake in the company from 42 percent to 52 percent.

Haley noted that his exit was “very amicable” and that he “wants the best for Celsius.”

David, who was also named president of Celsius, was most recently the executive vice president of sales and marketing of consumer products at Oragenics, a biopharmaceutical company. David specializes in start-ups as well as turnaround and fast growth projects and joins Celsius at a time when the company faces declining sales and is attempting belt-tightening on sales and marketing expenses. Through the first three quarters of 2011, revenue at Celsius dropped by nearly 17 percent as compared to the same timeframe in 2010, though net loss – $1.2 million vs. $14 million the year before – was significantly lower.

In Celsius’ most recent earnings report, David said that the company has “done an outstanding job of getting the Celsius brand placed on the shelves of thousands of retail outlets… the focus now is driving consumers into the stores” via social/digital media campaigns, direct response TV and sampling programs at health and fitness clubs.