Coconut Water Takes On The World

Coconut water takes on the world
By Samantha Pearson

Published: November 4 2009

From cosmetics to rope and car seat covers, the diverse uses of coconut and its husk have made the fruit an indispensable commodity in the tropics.

But it was only this year, when Madonna was rumoured to be knocking back coconut water on tour, that the world suddenly woke up to the fruit’s investment potential.

Marketed as a healthy sports drink, coconut water has found an enthusiastic customer base in the US – and plenty of celebrities willing to endorse it.

Technological advances have also made it possible to transport the water large distances without having to add preservatives.

Pepsi made the first move in August when it bought Amacoco, Brazil’s largest maker of packaged coconut water drinks. Coca-Cola then bought a minority stake in Zico, the Californian coconut water producer, in September, followed three weeks later by Pepsi Bottling Group’s investment in One Natural Experience, a company set up by a Brazilian entrepreneur in the US.

Beverage Marketing, a New York-based research and consulting firm, expects coconut water sales to almost double to $35m this year, while revenue from other drinks such as bottled water continues to fall.

Bumping along the dirt track to his coconut farm near Rio de Janeiro, dodging turkeys and roaming dogs, Fábio Lewin says he has received supply enquiries mainly from Portugal, Germany and the US.

But his company, Coco Legal, is struggling to meet demand given that it employs only 14 people.

“Maybe our website is the problem; it makes us look bigger than we are,” he says, laughing.

Brazil’s coconut water producers have been used to living in the shadow of Amacoco, which dominates the sector, but they have now become potential targets of multinational drinks companies.

Fábio was in his early 20s in 2002 when he founded Coco Legal. ‘When I told my dad I was dropping out [of university], he almost had a heart attack,’ says Fábio. But his father soon quit his engineer job with the government and joined the company. Production has almost doubled every year since and is expected to exceed 20m litres a month by the end of 2009.

One’s chief executive, Rodrigo Veloso, says he is convinced coconut water will become a multi-billion dollar global industry in the next 10 years and some analysts think it could match sales of niche drinks such as cranberry juice, which Ocean Spray estimates at about $2.3bn.

“It hits a couple of sweet spots in terms of US consumer trends,” explains John Sicher, editor of Beverage Digest in the US. “It’s natural, relatively low in calories and provides hydration.”

Others are more sceptical and dismiss international interest in coconut water as a celebrity-inspired fad. Harry Balzer, vice-president of the NPD research group, says: “We love trying new things. But I’ve been down this path before. Lots of ‘healthy’ things have come on the market only to disappear again.”

Dr Lilian Cheung, from the Harvard School of Public Health, also questions the medical benefits.

The claims that coconut water could lower cancer risks and boost the immune system are “quantum leaps from solid scientific evidence”, she says, as there has been no research.

Back in Brazil, where One says sales of coconut water have now exceeded those of orange juice, Fábio is still confident he will have to hire more people from the nearby village, even if Madonna does find something else to keep up her energy levels on the dance floor.
.Copyright The Financial Times Limited 2009. You may share using our article tools.