Talk about a whirlwind courtship.
It took just four months from organic espresso /coconut water blend Coco Café to go from independent, entrepreneurial beverage company to a strategic piece in the coconut water chess game. The company, which had its first production run in September, had bids from two different potential investors by the end of December and moved into the Vita Coco offices by the end of January.
The two companies announced the deal today, with Vita Coco taking what CEO Michael Kirban called a “significant majority” of the Coco Café business for an undisclosed amount of money.
Brian McCaslin and Elan Eifer, the founders of Coco Café, called the deal “the best of both worlds,” citing the strength and depth of Vita Coco’s production lines and its ability to cater to influencers and create word of mouth buzz.
“We’ve always admired Vita Coco from afar, and the opportunity to work with Mike was appealing,” Eifer said. “We also see how crowded the coconut water category is getting, and we think that, after time, the company with the best production – Vita Coco – will last.”
Kirban said he felt the need to act swiftly after meeting McCaslin and Eifer at December’s BevNET Live, (an offer from another potential investor, First Beverage Group, was also on the table) and said his company had acquired Coco Café for several reasons: it provides a double-edged sword when it comes to retail placement, it offers a chance to broaden his company’s category footprint without diluting the Vita Coco name, and the economies of scale that Vita Coco brings to the smaller brand mean that it can quickly increase its profit margin while adding new routes to market with little sweat for the larger company. The fact that it gives Vita Coco some cover when dealing with the emerging Zico Chocolate SKU doesn’t hurt, either.
“I want to take this head-to-head with the Starbucks Frappuccino,” Kirban said. “It absolutely gives us an entree into indulgence, but it brings in a functional aspect that lets us play in a whole new part of the store.”
As part of the acquisition, Coco Café’s headquarters have shifted from Santa Monica, where its founders began by selling the product on the beach, to New York, where they now have space — the “Coco Café Corner” — in the Vita Coco offices.
Coco Café will retain its own branding and look distinct from Vita Coco, he added, but will have the opportunity to be merchandised with coconut water and RTD coffees like Coke’s IllyCaffe brand and the category-killing “Frap.” Additionally, the coffee in Coco Café will remain organic and Fair Trade and with new two new SKUs in planning – with a possible debut at the Natural Products Expo West show in March – the initial play for the brand will be to build in the specialty/natural category and introduce one or two markets for DSD.
Kirban said he wants McCaslin and Eifer to run Coco Café as an independent entity, albeit one that is using Vita Coco coconut water (there will be a “made with Vita Coco” badge featured somewhere on the package) for supply and is using the sales — and eventually, the distribution — resources of the larger company to get the brand into circulation.
The result, according to Kirban, could be fast and impressive growth. While Vita Coco had taken four years to hit $5 million in revenue, he said, he believes that Coco Café might hit that number this year due to the maturation of the category and the new distribution advantages the company will have. The interest in the company was apparent when both First Beverage and Vita Coco were trying to invest.
“This is much more of a mainstream play than even Vita Coco was when (co-founder) Ira Liran and I started,” Kirban said. “It’s much more of a mainstream flavor and taste.”