Ilya Marritz covers business for WNYC.
New York, NY –
HOST: Over the last five years, coconut water has gained popularity among small stores. That's where new beverages made by small drink companies tend to first get shelf space. WNYC's Ilya Marritz has more.
REPORTER: You could compare coconut water to the soccer world cup. A huge deal in Latin America, Africa and Asia. In the U.S., not so much.
But that’s changing. Mike Kirban co-founded Vita Coco in 2004.
KIRBAN: What we’re trying to take the most popular beverage in the tropics and share it with everybody north of the tropics.
REPORTER: Last month, Merrill Lynch released its first ever analysis of the coconut water market. The paper noted that annual sales have grown from near zero five years ago to $30-35 million today.
Kirban says when he first tasted the juice of young coconuts, while on a vacation in Brazil, he didn’t think much of it.
KIRBAN: My first sip was, really, I was unsure of what it was. It's like water with a little bit of a taste and a little bit of a texture and a little bit of a sweetness.
REPORTER: And not particularly coconuty. A tough sell for American palates, Kirban admits. But when he learned that coconut water contains lots of electrolytes, like Gatorade, he and a partner decided to test the American market.
They chose New York, for its high concentration of fitness conscious people and immigrants from countries where coconut water is popular.
KIRBAN: And the week we launched the brand, Zico came out on the market at the exact same time.
REPORTER: Vita Coco’s rival for the past five years has been Zico, another coconut water. Both brands use Brazilian coconuts, and both come in tetra pack juice boxes. Now they’re battling for dominance in delis and supermarkets.
Zico founder Mark Rampolla says it’s actually good thing he had a competitor from day one.
RAMPOLLA: It helped both of us gain credibility with retailers, with distributors, with investors, with salespeople. Figuring hey if there are multiple brands that are being successful in a category then it must be legitimate.
REPORTER: One of the first to take a chance on coconut water was Brooklyn deli owner Ralph Jawad. For a while, it sold slowly, maybe a case a week.
JAWAD: Then all of a sudden we was doing like 10, 15 cases a week. And it sold good and every time people come in, they would ask for coconut water.
REPORTER: Now Jawad is constantly getting visits from coconut water distributors. He’s found he can cut deals with them, in exchange for valuable space on his refrigerator shelf.
JAWAD: Like the salesman will come in and he'll be like I'll give you a case next month on me.
REPORTER: Gerry Khermouch of Beverage Business Insights says these informal relationships between entrepreneurs, distributors, and store owners are the yeast that allows new drinks to develop. Before they hit hard-to-crack chains like 7-11.
JAWAD: It's kind of like a thriving little ecosystem. They spot these brands, they get them out there, and then soon enough they’re snatched away by a big company like coke or Pepsi.
REPORTER: Beverage entrepreneurs everywhere are chasing a dream from when the market was hot: Coca Cola’s 2007 purchase of Vitaminwater, for $4 billion.
Times have changed, but Coke and Pepsi are still looking for the next big thing. In August, Pepsi brought Brazil’s largest coconut water producer, Amacoco. Last week, Coca Cola took a minority stake in Zico, for $15 million.
For NPR News, I’m Ilya Marritz.