Identica Insight 09 Coconutty About Water

IDENTICAINSIGHT

Guest Edition Issue 9COCONUTTY ABOUT WATER

Michael Nash, Associate Creative Director

COCONUTTY ABOUT WATER

Issue 9


In the last half century we have seen a substantial shift in our diets and the food and drink we consume. We exercise less, we eat convenience foods and the number of people with obesity has more than trebled.

As a reaction to this, consumers are becoming more product savvy and critical of what they put in their bodies. This shift to healthier consumption is part of a ever growing ‘health and wellbeing’ consumer trend. It could be argued that this trend influenced McDonald’s to serve salads and introduced us to the ‘Superfood’ concept.

In the last five years the beverage industry has seen the largest shift towards healthy consumption for almost a decade and a new category has emerged.

This category is coconut water.

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Coconut water brand launches grew in the UK and US from

between 2009 to 2011

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THE CATEGORY

We can probably quite confidently say coconut water is more than a splash in the ocean. It is currently the biggest movement in the beverage category since Innocent gave us the smoothie and no other FMCG product is growing as rapidly in the UK or the US.

Coconut water isn’t new. It has long been consumed in South America, Asia and the Pacific. For those of you that have visited any of these regions, you will have fond memories of street vendors carving the top off a green coconut and offering the cool refreshing liquid in its nature-made cup garnished with a straw.

The category as we know it was born in 2009 in the US and 2010 in the UK where there were only a few brands available from specialist natural food stores. By the beginning of 2012 the amount of brands available had increased to 36 in the UK and US combined. As demand grew so did distribution and availability with many supermarket chains and high street retailers stocking products.

7 to 36


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MARKET LEADERS

Vita Coco is the brand credited with creating the category, much the same way Red Bull created the energy drink category. They were and still are the market leader in the UK and US. Vita Coco must have hit the nail on the head in quenching the consumer’s thirst for something new and healthy because by the end of 2011 they had 96% market share. Last year, Vita Coco reported an impressive 168% increase in UK sales.

Over the last year or two the category has quite literally exploded with the UK market tipped to being worth £100m by 2014 [The Grocer] and the US market already valued at $350m at the end of 2011. European ($65m value 2011) retail sales increased by 100% in 2011-12 and the prediction for 2012-13 is even higher. With this rapid growth, comes saturation. Many new brands have joined the game with larger competitors such as Coca Cola’s Zico and PepsiCo’s O.N.E. muscling in for a go at the coconut shy.

£100MUK coconut industry worth by 2014

1. Ira Liran and Michael Kirban, creators of the Vita Coco brand and coconut water category.

2. Coca Cola’s, Zico

3. PepsiCo’s, O.N.E.

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WHO’S DRINKING IT?

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80% of coconut water is consumed by females. The biggest group being women that are 25 to 30 years of age.

Affluent, middle classed, health conscious Westerners who can afford to buy fresh, organic produce and superfoods.

Athletes and sports persons who want to increase their metabolism, rehydrate after exercise and replenish natural energy levels.

The health conscious who drink coconut water for its zero fat levels, low cholesterol and low calorie benefits.

Twenty-something trend setters that are looking for ‘the in thing’.

People from the Tropics or those whose heritage originates from the Tropics. They may be aware of some of the health benefits that coconut water has but generally from nostalgia.


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WHY HAS IT BECOME SO POPULAR?

It’s healthy. Coconut water has natural hydrating qualities, great nutritional benefits and it also tastes pretty good. It is a great source of nutrients, calcium and magnesium, and it has the same amount of heart healthy potassium as a banana or a glass of orange juice.

Across the more developed markets, for the last 10 years there has been a growing consumer trend for products that are natural and organic. So adoption from consumers can be explained simply by their demand for products that are healthier.

As populations age rapidly with the echo-boomers (the largest consumer segment) moving into their forties there is ever growing awareness of health, fitness and a balanced life style. It is estimated that 45% of men and 33% of women in the UK will be clinically obese within the next few years, this data is also reflected across Europe and more prevalently in the US.


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Another reason for coconut water’s popularity could be attributed to celebrity endorsements. Nothing seems to reassure consumers that something is good, than their favorite A-listers from the glossy pages of Hello being caught on camera slugging a Tetra-Pak of the product.

Celebrities tie-ups are common place throughout the category with the leading brands dishing out large sums of cash to sign up the likes of Rihanna to an advertising and social media deal. Celebrities are also showing an interest in coconut water as an investment opportunity, for example, Madonna is rumoured to have invested $5m into Vita Coco in the US.

And last but by no means least. It’s exotic. Consumers buy into the natural health benefits of coconut water but, at the same time, they also acquire a little piece of magic with it.

WHY HAS IT BECOME SO POPULAR?

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1. Pop superstar Rihanna is Vita Coco’s primary embassador


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THE VISUAL CODES

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In design terms the category is still very young. Category colour codes are emerging, sky blues, vibrant and natural greens, white and brown are common throughout the category’s packaging. Most brands have a tropical feel and use design cues that express optimism and vitality.

Many brands are trying to find distinction through their pack format by using unique shapes or substrates. The majority adopt either a can, plastic bottle or tetra-pak. Very few offer their product in a glass bottle, probably because of the negative environmental perceptions of glass.

Because the category’s visual codes are only just emerging we are yet to see a brand break the rules, although it probably won’t be long before we see a brand in a black pack!


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GLOBAL IMPACT

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With ever increasing consumption of coconut water in the developed world comes more concern about the environmental impact of the product.

Coconuts don’t naturally grow in the UK, Europe and North America, which are the markets in which the product is rapidly becoming more popular.

Can the world sustain the environmental cost of transporting coconut water across the globe and are the people who farm coconuts being paid fairly?

The coconut water boom promises little in the way of improved livelihoods for the farmers, many of whom grow and harvest their own coconuts on small to medium smallholder plantations.


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THE FUTURE

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So what does the future hold? Well, we will hang our hat on saying the market will grow. Over the next few years we’ll see an influx of more brands into the category, some will be niche and some brought to us from the larger manufacturers. The biggest challenge will be for brands to define their point of difference.

Consumers buy the product for its natural qualities so why not offer them that little bit more? Fairtrade and organic brands do already exist in the category but they are still very niche.

We predict there will be even more focus on education within the category. Much the same way we, as consumers, were informed of the superior quality of non-concentrated juice. Vita Coco quite proudly place a ‘never from concentrate’ line on the front of their packaging, probably as a reaction to the aggressive marketing and rapid growth of Coca Cola’s Zico, which is manufactured from a concentrate.


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There will be even more flavours. Consumers want innovation and will look to their trusted brands to offer them choice. Coconut water has an acquired taste and not everyone will like it. Flavours can be used to mask the taste of the water and make the product even more accessible.

We believe truly natural sports hydration brands will start to appear. We know that professional athletes are consuming coconut water and there are scientific studies that suggest coconut water is better than the sugary isotonic drinks on the market at the moment. A brand of coconut water could potentially take on Gatorade and Lucozade.

Coconut water could become more occasion orientated. Premium products could replace bottled water at the dining table in restaurants and cafés. We may even see a carbonated version of the product sit along side the still version.

And we are likely to see new smoothie and milkshake brands that replace the base liquid of juice or milk with coconut water.

THE FUTURE

THANK YOU

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TO FIND OUT MORE: Call +44 (0)20 3451 9700, or email Leah Williams [email protected]

Identica Insight 09 Coconutty About Water

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