Double-digit volume growth for its flagship coconut water line propelled The Vita Coco Company’s Q1 2023 net sales +14% year-over-year to around $110 million, according to the company’s earnings report this week.
The company’s coconut water business increased volumes by 15% in Q1, while net sales of the products were up by 17%. Gross profit was $34 million, a 31% margin, up from a 20% margin in Q1 2022. Broken down by region, overall net sales in the Americas was up 14%, while international sales grew 10%.
“With gross margins and profitability now recovering we’re well positioned to build a better beverage platform with a portfolio of complementary brands and I believe that our long term financial goals of mid-teens net sales growth and mid-to-high teens adjusted EBITDA margin remain achievable,” said co-founder and executive chairman Mike Kirban on an earnings call.
Kirban credited last year’s pricing increases with helping to support the growth, while overall growth of the coconut water category has provided a strong tailwind for the company. Citing Numerator, Kirban said household penetration of Vita Coco rose to 10.8% in the 52-weeks ending March 31, 2023, up about 60 basis points over the last year. Overall coconut water category household penetration is currently around 22% compared to cranberry juice at 55% and over 80% for orange juice.
“We believe that there is significant opportunity for increased coconut water consumption occasions and for improved availability of our products as there remains significant distribution opportunities for our Vita Coco brand in c-store, foodservice and on-premise,” he added.
Kirban said the company will continue to focus on innovations built around the coconut beverage format, including its milk alternatives and canned coconut juices. The latter, he added, will be a focus in convenience with a strong multimedia marketing campaign planned for this summer.
While Kirban said it is too early to read repeat purchase rates for its alcoholic Vita Coco Spiked line, which launched in Q1 and is produced in partnership with Diageo, he suggested early sales are encouraging and on track with expectations.
The company is also continuing to build out its protein-infused isotonic drink line PWR LFT, which launched into the Southern Texas market. Kirban said there are dedicated product development teams working to expand the line in tandem with Vita Coco’s DSD partner Keurig Dr Pepper (KDP).
In an analysis of the earnings, Goldman Sachs Equity Research said the “healthy” volume growth was a strong positive indicator for the brand and praised its work improving its ocean freight and shipping economics.
“We continue to see a positive risk reward for [Vita Coco] and believe margins have significant room to improve from here with good visibility on key headwinds abating (e.g., ocean freight),” the report stated. “Ultimately, we expect growth to remain healthy over the next few years driven by increased household penetration, distribution gains, price increases and a strong pipeline of innovation.”