Coke And Coconut Water

I’M A JOURNALIST WHO sometimes follows rules that might be viewed as a tad old-fashioned. But can you blame me? My career goes back to the days of such venerable props as cut-and-paste, teletype machines, pneumatic tubes and copy editors scribbling “30” at the end of each story. The rules I still follow? Well, most of the time, I remember the one that says you’re supposed to double check the spelling of a person’s first name, not just their last. (Running into a guy named “Robbit” in my first job in a small town down South helped cement that concept.)

Here’s another one of these quaint rules: if a “hot scoop” I’ve just landed doesn’t really make sense to me, then I hold off on hitting the SEND button until I’ve filled in a few more blanks and the story at least approaches something that makes sense. Coke buying Pepsi because it loves the big “G” on the Gatorade bottles? Whoa, buddy! Better do some more fact checking on that one! (I like to adopt a jocular, yet firm, tone when talking to myself.)

Lately, though, in our topsy-turvy beverage world, I’ve been starting to abandon that antiquated notion – especially if the story’s “lede” sentence happens to include the word “Coke.”

To wit: Coke’s about to buy Glaceau, even though India’s Tata just paid a ridiculous price to garner control and swore its eternal fealty to the company and its distribution network? SEND!

Coke’s bringing a new ready-to-drink coffee called Illy to market without even a pretense of involvement by a Coke bottler? SEND!

Coke’s pouring a few million into a coconut water marketer that sells its weird brick packs into a total of six yoga parlors and three gyms divided between New York and LA? Dunno about that one … SEND!

The latter company is Zico, and of course for comic effect (what? you weren’t laughing?) I’ve exaggerated the minute scale of its business. It’s really seven yoga parlors and four gyms. Nevertheless, as so often happens these days, even though the Coke-invests-in-Zico story didn’t entirely make sense to me, I’m glad I stuck it in my newsletter because it actually turned out to be true. (Whew!)

This really is something. Here’s a category that’s barely in its fledgling stage, “dominated,” if that word really applies, by three minnows called Vita Coco, Zico and ONE Natural Experience. And now Coke is part of the game.

Don’t get me wrong: I love the product, I love the brands, and my colleagues think I’ve already written altogether too much about coconut water over the past several years. Nevertheless, I’m not the only one who’s interested. As astute a capital shop as Verlinvest (hello? they’re the ones who sold Glaceau to Tata) has been the core investor in Vita Coco for some time now.

Still, for Coke to buy in, even just a minority stake, at this stage shows you how much the world is changing. It shows you how even Coke execs no longer have faith in their ability to predict where the next winners will come from, so they’re taking off the blinders and letting their instincts, the buzz from obscure social currency channels and God knows what else guide them. What other explanation might there be? I don’t know the man, but I wouldn’t expect that the Zico investment occurred because Coke CEO Muhtar Kent took a fancy to the brand after guzzling some at his weekly bikram yoga session. Then again, these days, who knows?

But in making the investment now, Coke is laying aside some major preconceptions. For one, that nobody can successfully market a product to American adults that comes in an aseptic box, which in this country is associated exclusively with children’s and ethnic brands. Coke’s investment may also reflect a desire to hedge against an increasing reliance on products reinforced with obscure herbal enhancers in favor of a whole food-bet. After all, given its high levels of naturally occurring electrolytes, coconut water marketers are making a convincing claim as nature’s own sports drink. If some consumers start getting leery about what’s in those increasingly baroque iterations of Powerade, Zico could be a good safety net.

Maybe Coke got a further nudge from the fact that, while the segment is generally unknown by the general public in the U.S., it’s a well-established one in vast swaths of Latin America, Asia and other parts of the world. Surely, Americans will recognize that if a billion people around the globe appreciate coconut water, there must be something to it? (Well, maybe not. A handy one-word rebuttal to that line of reasoning is “soccer.”)

Let’s not forget also PepsiCo’s larger-ticket acquisition of Amacoco, the leading Brazilian purveyor of coconut water. To me, that carries less intrigue than Coke/Zico: it’s a logical indigenous ploy for the Brazilian business, and it doesn’t have any direct implications for the U.S. market. Together, though, the twin moves are a fascinating reminder of how fast new segments can show up on the radar, of how quickly the beverage giants will react these days, and for me, how much of a change that truly represents. Now excuse me while I make sure my “PRESS” card is still in my hatband.