Summary
Pepsi have purchased a successful Coconut Water brand in Brazil, but will probably have interest in launching it in the USA as the category grows in the USA.
Coca Cola and Dr Pepper Snapple will now have to closely look at the US players to see if this is an incubation opportunity they would want to undertake.
Overall a good move from Pepsi to bolster their international business, and give them options in the USA
Analysis
Coconut waters have been a staple beverage for a long time in many parts of the world: Southeast Asia, Central and South America and the Caribbean. In those areas they are a cheap and convenient refreshing drink. But it also turns out that they are a superfood that is low in sugar, but high in sought-after electrolytes.
It is only very recently that the product has been identified as having potential in the US market. for around two years coconut waters have been gaining presence in the mainstream US market.
Independent brands Zico, Vita Coco and ONE have all made solid progress in establishing the category in natural food channels and in leading metro markets. With no participation from any of the big beverage players, they had an open field to themselves.
It appears that Pepsi has decided to make a move into the area in order to position themselves better in Brazil, but also to give themselves access to knowledge, know-how and supply of coconut, And better to buy a brand with proven value rather than buy or invest in a local brand that may burnout quickly in the USA.
For Pepsi it shows that they are still interested in innovation, and are moving into a category before Coke.
For Coke and Dr Pepper Snapple, they will have to consider whether they want participate in the category - or leave Pepsi to compete with the independents. Maybe Coke, they may feel the need to throw a little of their venturing cash at the opportunity.
And for the independents, their future just became a little more complex: Now a big competitor is interested in the segment - and these independents now have fewer exit options. Should be interesting.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
