Marking Time with Mike: Kirban Says No Deals, for Now

Vita Coco's Kirban: “We’re not actively looking to sell the business.”

Compared to the number of times the questions get asked of Mike Kirban, the overall frequency is disproportionate, but the dimes get dropped to us a lot, nevertheless, so I decided to head down to Manhattan to ask him.

So, I said, as Kirban settled behind his desk — yes, in the corner office — are you selling Vita Coco to Dr Pepper/Snapple?

“I’ve got to tell you, it happened to me last week,” he agreed. “A retailer called me up and said, ‘I heard you sold the business.’”

That kind of rumor, he said, “isn’t fair to our suppliers, to our retailers, anyone.”

Yeah, sure, I said. We got a tip that you’re selling to DPSG. And to Budweiser. And to Monster. We also heard you’re going public. So what’s the deal?

“I talk to everybody,” Kirban said. “We’re not in any way looking to sell the business.”

Maybe not, but it does make for interesting party talk, and Kirban himself isn’t immune to it. He knows he’s got a very interesting beverage company, the biggest in what has been a very hot category, the talk of the industry, for the past few years.

“We’re not actively looking to sell the business,” Kirban said again. “But I’m not necessarily planning to pass the business on to my children, either.”

Kirban, Zico’s Mark Rampolla, and O.N.E.’s Rodrigo Veloso, the group of young entrepreneurs who launched the coconut water category, aren’t strangers to BevNET or to its readership. We’ve all enjoyed a front row seat for the category’s ascendance, observing the competitive dynamics of an evolving category, its battles for endorsers and investors mixing with the overall geniality of the folks who run the companies.

Kirban, for example, appeared as a speaker at three different BevNET Lives – first in 2009 as a representative young buck, grasping for notice in the struggle for shelf space, then mid-2010 as the face of a $20 million brand that was about to move from an independent DSD network into DPS houses, and finally in late 2011 as a “person of the year” with a national brand and a seemingly limitless future. Through it all, he has seemed to remain largely the same person – smiling yet cagey, impishly competitive, aware of the narrative forming around the product line — and enjoyably willing to examine where the narrative might lead.

Which is why he didn’t kick me out of his office when I brought out the pen and pad while we talked about the company’s speed, angle of ascent, and potential flight path.

Here’s what I got from our talk: Kirban (and his group of investors ranging from Madonna to Verlinvest, whom he describes – and who have repeatedly described themselves — as blissfully patient) is aware of the options for a brand that has grown like Vita Coco has. He believes an IPO as having great potential for realizing the value currently locked inside the company. He’s aware of the synergies that could come from a sale to, say, DPSG, Monster, Budweiser, or others. He also asserts that his company can remain independent, operate profitably and throw off strong dividends for shareholders while it grows. And, he acknowledges, all three options are kind of fun to chew over.

So we did.

We talked about going public in the context of the recent Annie’s Naturals deal; at about $150 million last year, his company’s revenues are stronger than that crackers and pasta outfit’s were at the time of its public offering, and Annie’s has 125 different products. Additionally, Vita Coco has a much broader multi-channel retail presence, including food service. If Annie’s was a successful IPO, Vita Coco, he believes, could be a blockbuster.

“Could you imagine,” he said, “Me and Madonna standing up there ringing the bell would be pretty cool.”

The company is also a juicy acquisition target, he admits; Vita Coco doesn’t have the same sales or broad appeal that, say, Vitaminwater carried into its Coke tie-up, but it has also spent much, much less in staying close to break-even. The margins presumably aren’t as high for Vita Coco as they were for Glaceau, but its supply lines run deep. Deep enough, in fact, that one part of the DPSG relationship that Kirban is not afraid to address is the assistance the larger company has given Vita Coco in optimizing its supply chain.

“They have a team that does nothing but analyze processes,” he said, shaking his head in mock amazement. “It’s given us the ability to analyze in detail things that I might have shied away from.”

So the company can also play well with strategics — something that was a major concern in the Glaceau deal.

What about the idea that the iron is hot now, but the company might eventually get so big that it could be hard for too many potential acquirers to digest? I asked that question a couple of weeks before Warren Buffet’s purchase of Heinz for $28 billion and as speculation continued that Coke might want to buy Monster. So size is relative.

But here’s the other thing we talked about – that there’s no rush to do any of it. Yes, there are whispers that the category is starting to slow, but if Kirban is concerned he didn’t show it, and the competition isn’t acting as if it is, either. Zico is heading out onto Coke trucks nationally later this year, and Pepsi seems to be moving closer to figuring out a strategy for O.N.E.

“It’s been so important for us to have our competitors as part of the category,” Kirban said.

To stay abreast of those competitors, there’s innovation in the pipeline — I saw some of it, but, discretion sometimes being the cost of access, I can’t tell you about it yet. There’s also fast-growing espresso-and-coconut water line Coco Cafe, bought by Vita Coco a year ago, that has Kirban feeling like he’s a new entrepreneur all over again.

And that’s why the do-nothing-but-do-business option is one that remains appealing, and could for quite some time to come.

“Our goal has never been to be profitable,” over growth, he said, although operating profitably these days is more in the game plan. “Just to break even and be able to see profitability. We’ve never burned a dime, we’ve never lost more than 5 percent in a given year.”

At the company’s scale now, margin efficiencies are a goal, international expansion, new domestic channels as well. There are challenges, sure, but there are options, and it’s a good place to be.

“This is just like any other business,” he said. “Just keep building it, and the financial success will be there in some form or other.”