A Tough Nut—Cracked

14 Aug

Here’s a good creation myth.

A hung-over Peace Corps volunteer discovers the beneficial effects of coconut water’s amazing hydrating properties on a sun-drenched beach in Costa Rica.

He also falls in love with Latin America.

Fast forward a few years, our ex-volunteer now has an MBA from Duke and is managing a beverage packing plant in El Salvador.

By now Mark Rampolla is married with a couple of kids and he’s had enough of the corporate grind.

It’s time to move back to the States and start his own business.

After kicking around a load of ideas, he remembers coconut water.

He spends a year planning and finds a supplier in Brazil who can provide him the quality he wants.

He calls his company Zico and starts selling the beverage out of his New York City garage in 2004.

They’re not the first company to package coconut water.

It’s been available in cans from Asian grocery shops for years.

But the cans also contain sugar and preservatives.

Zico’s Tetra Pak contains no additives, just 100% coconut water.

It’s positioned as the natural sports drink and the timing couldn’t be better.

Unlike established sports drinks it isn’t loaded with sugar and sodium and food dyes.

It has no fat, no cholesterol and is a good source of potassium.

Zico is initially distributed through yoga studios and catches the curve of the yoga explosion.

Its fresh clean taste and excellent hydration encapsulate the zeitgeist perfectly.

And sales takeoff—exponentially.

In 2009, Mark Rampolla sells a 15% stake to Coca Cola for a reported $15 million and he sells them a majority stake in 2012.

This is all well documented, but there’s a bit more to it.

Turning a commodity into a brand is an established FMGC strategy.

Think Evian, Lay’s, Tropicana, or Orville Redenbacher’s.

And lots of gringos were guzzling coconut water all over Latin America but they didn’t connect the dots.

They certainly didn’t create a successful brand.

And actually Mark Rampolla didn’t create a successful brand.

He created something more substantial.

And he did in it in a really brutal marketplace where shelf space is fought over inch by inch, margins are thin and distribution, dominated by multi-national giants, is hard to come by.

He created a category.

And it’s quite the A list category.

The other major players are Vita Coco distributed by the Dr. Pepper Snapple Group and O.N.E distributed by PepsiCo.

Rihanna endorses Vita Coco and according to the Daily Mail, UK sales skyrocketed by 168% after Madonna invested in the same brand.

In keeping with their sporty roots Zico have recruited Olympic skier Julia Mancuso for their marketing.

So it’s Divas vs. Athletes as battle lines are drawn and campaigns developed.

The Wall Street Journal reports 2011 sales at $400 million and given the category’s 100% plus growth rate, 2013 sales should be well north of $1 billion.

Looks like the coconut water wars are just beginning.

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