China Consumer

Healthy buy

Why Red Bull tycoon has invested in coconut water

Kerr arrives at the 2014 Vanity Fair Oscars Party in West Hollywood

Kerr figures coconuts work

Coconut – in every shape and form – has been touted as the new superfood for a while (it contains the type of saturated fat that is actually good for you, which goes directly to the liver, where it is converted into energy and helps to stimulate your body’s metabolism).

That puts coconut oil high on the list of the health-obsessed, with former Victoria’s Secret model Miranda Kerr one of a number of celebrities to credit its miraculous effects (a spoonful of oil a day maintains her slender figure, she says).

Coconut water has also soared in popularity over recent years. The beverage, which has jumped from nearly no sales 10 years ago to an expected $1 billion this year, is considered a healthier replacement to fizzier, more sugary drinks. That’s because it is low in calories but rich in potassium, which helps in rehydration and preventing muscle cramping.

Small wonder, then, that beverage giants like Coca-Cola and Pepsi want to offer their own coconut water brands. The two firms both started discussions with Vita Coco, the best-selling coconut water in the US, as early as 2009. But Michael Kirban, the company’s founder, turned them down because neither offered the “right deal”, he told The New York Post.

After the rebuff, Coke made a $15 million investment in Vita Coco’s main rival Zico, while Pepsi snapped up the Brazilian brand Amacoco, as well as O.N.E, another coconut water label in the US, for an undisclosed sum in 2010.

“The big players are advertising and marketing juggernauts, but they’re not organic brand builders,” Kirban told The Post five years ago. “We connect with consumers one-on-one, and with merchants one-on-one, and this is what’s created unbreakable consumer and retailer brand loyalty.”

But after five years of holding out, Vita Coco seems to have found the right suitor. This week it was announced that Asia’s Reignwood Group will invest $165 million for a 25% stake in the company. Reignwood will also distribute Vita Coco in China, where it already owns the exclusive rights to sell Red Bull energy drinks.

Longstanding WiC readers might remember that we first wrote about Reignwood as early as issue 55. The company’s colourful founder Yan Bin – who also goes by his Thai name Chanchai Ruayrungruang – founded the firm in 1984 and it is now a multinational spanning sectors as diverse as consumer goods, sports and financial services.

Red Bull is easily the group’s key asset in China, however. Revenues from the energy drink are said to have grown to more than $2.5 billion a year.

Vita Coco is now in a major growth spurt of its own, although it already claims to control 40% share of the coconut water market.

“We immediately recognised the potential for the Vita Coco brand in China,” Ruayrungruang said in a statement. “We are confident health-minded Chinese consumers will quickly embrace and remain loyal to the Vita Coco brand.”

“Vita Coco’s growth in the US has been well documented, less so the brand’s exponential growth in Europe and more recently, Japan. We expect China to follow suit,” Vita Coco’s boss Kirban told media.

Commercialised coconut water, typically pasteurised and sold in cartons, is rarely available in the Chinese market at the moment, says the Wall Street Journal. Moreover, consumers there already tend to prefer fruit-flavoured products to sodas because they are deemed as healthier choices.

Reignwood says it plans to distribute Vita Coco in major Chinese cities in the coming quarter, focusing on gyms and high-end supermarkets. It will expand its sales network once China’s consumers start to show a taste for the latest superfood, it said.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.