After Mark Rampolla sold his coconut water brand Zico to The Coca-Cola Company in 2013, he wrote a book, “High Hanging Fruit,” which chronicled his journey from bootstrapping the brand and building the category up to its eventual sale to the country’s largest beverage company.
But the story is not done yet: over a decade later, Rampolla finds himself writing the next chapter in Zico’s history, having reacquired the brand from Coca-Cola via investment fund PowerPlant Ventures, of which he is a partner and co-founder.
“It’s surreal,” Rampolla told BevNET earlier this week. “Very few times in one’s life do you get a chance to do something again like this, so I’m viewing it as something I’m doing both for the brand and for my family. One of the things I might have missed out on, I now get to do again.”
At the time of Zico’s initial sale to Coke, the soda giant looked set to turn coconut water from a small but expanding category into an explosive growth driver that would help pivot the company into other natural, better-for-you refreshment drinks. To a certain extent, the partnership was a success, bringing Zico into new formats, flavors and retail channels as one of the leading brands in the coconut water category. But, amidst declining sales and the desire to trim a bloated portfolio of underperforming products, Zico was one of 200 global brands that were discontinued — along with Odwalla, Tab and others — as part of a mass culling at Coke in October.
Though Rampolla, who launched Zico in 2004, admits to thinking there was always the “crazy possibility” that he might one day reacquire the brand, he only began exploring the opportunity of buying the brand once Coke’s decision was made. Upon agreeing with partner Dan Gluck that it was worth considering, Rampolla said the fund completed the same rigorous underwriting and vetting process that it would any other potential investment. At the same time, Coca-Cola was running its own due diligence and considering offers from other suitors as well. When it came time to make a decision, Rampolla excused himself from the final vote to ensure the choice was driven by the business opportunity rather than emotion.
“Having gone through that whole process, what we concluded was that coconut water is still a large category,” he said. “Growth had been a little challenged recently, predominantly because Coke and Pepsi were not giving it the attention it needed. We felt like that could be corrected, and we found that consumers are still interested in coconut water.”
Reflecting on what might have arrested Zico’s expected growth under Coke, Rampolla noted that it struggled to stand out when compared to other high-revenue brands. In the years since acquiring Zico, the soda giant has also revamped its Venturing and Emerging Brands (VEB) division to focus on investing in larger, more mature companies rather than early-stage startups.
According to market research group SPINS, total U.S. coconut water dollar sales in MULO plus convenience and natural and enhanced channels was down 4.4% year-over-year through June.
“As best as we can tell, Coke did a good job of keeping the product integrity and the quality,” he said. “I think they struggled with execution. It’s hard in a system that big to get much attention when a brand is anything less than $500 million in revenue.”
Despite using a new name, Zico Rising, the product will essentially be the same one that consumers have grown familiar with during its time in the Coke portfolio. Having done a deal for only the brand assets and not the business itself, Rampolla said the company is working, with support from Coke, to reestablish its supply chain and re-engage with retailers and consumers ahead of hitting store shelves at some point in Q1, with production expected to begin “within days or weeks.”
“It will be exactly the same product, exactly the same brand, the same look and feel,” he said. “Everything will be the same.”
From that starting point, however, Zico Rising is set to take a different approach to product development from its time at Coke. Rampolla said the brand will be put through a “pretty brutal” SKU rationalization that will bring the focus back on the pure coconut water product, before rebuilding an innovation pipeline that “brings some energy, excitement and relevance” back to the category. To that end, he noted that 2021 will be a “learning year” for the company as it engages with consumers, retailers and commercial partners to frame how coconut water fits into the ever-expanding range of plant-based waters and natural hydration beverages, a space it helped pioneer over a decade ago.
Zico is also set to reignite its battle with another one of those pioneers — New York-based independent Vita Coco. The two brands were fierce competitors in building a market for coconut water back in the mid-2000s, though Vita Coco has since established itself as the top player in the space.
“I’ve missed competing with Mike (Kirban, CEO of Vita Coco) so it’s time to get back in the ring,” Rampolla said.
In an email comment to BevNET, Kirban wrote: “I am aware that my friend Mark Rampolla is buying back the Zico brand from Coke. AMI kicked the tires on Zico recently but decided against purchasing it because it would be easier for us to develop another coconut water brand than to try and salvage what was left of Zico and to bring it to profitability.
“Momentum is everything in this game and I know it’s difficult to revive any brand that’s lost sales momentum at the level Zico has,” Kirban continued. “I’m sure it’s even harder as the original founder to watch a brand that was your baby fail, after you sell it. But if anyone can bring Zico back it’s Mark. And I hope he succeeds.”
Even though Zico is back with its original founder, Rampolla emphasized that the company will be treated the same as any other brand in PowerPlant’s portfolio, with former Naked Juice CEO Tom Hicks running the company and building out the team. Rampolla will serve as the chairman of the company’s board of directors; he is also on the board of seven other PowerPlant portfolio ventures.
Having done so once already, though, Rampolla didn’t dismiss the idea of Zico potentially making a second exit to a large strategic, or other interested buyer, at some point in the future.
“It’s certainly possible that it ends up back in a strategic’s portfolio, but it’s also possible that it’s a standalone brand, or as part of a portfolio of a public company,” he said. “Our goal is to build an amazing brand and company and culture that can live forever; if we can do that, the rest will take care of itself. And I really mean that — there’s no specific objective here other than to have some fun, build something great and create some value for everyone that is associated with it.”
Despite the brand’s decline under Coke management, in hindsight, Rampolla said the decision to sell Zico in the first place was still the right choice at the time.
“My wife has a background in public health, and she always said she could never imagine a bigger public health coup than helping Coca-Cola sell something healthy around the world,” he said. “That was our vision, we stuck to it and we feel very fortunate to have made that happen.”