William Blair initiated research coverage of The Vita Coco Company, Inc. (COCO $13.67), a fast-growing plant-based functional hydration platform, which pioneered packaged coconut water in 2004 and has begun extending into other healthy hydration categories.

Analyst Jon Andersen estimated the company to grow sales and EBITDA at compound annual rates of 14% and 20%, respectively, from 2021 to 2023. He forecast sales of $369.0 million in 2021 and $420.8 million in 2022.

“Vita Coco participates in the large non-alcoholic beverage market,” Andersen said, “estimated to be $199 billion at retail in the United States. More specific, it targets the natural beverage segment, which is projected to be $13 billion at retail and is growing at twice the rate of the conventional beverage market. Sixty-five percent of all consumers have had a beverage with functional benefits in the past three months. And younger consumers support brands, like Vita Coco, that make a positive social impact. Perhaps not surprisingly, consumers are trading over to coconut water. Fifty-four percent of coconut water growth is estimated to be from shoppers shifting from other beverage categories.”

Andersen continued, “Vita Coco has achieved strong consumption growth of 15% over the past 12 months including accelerating consumption growth of 25% during the first half of 2021. Still, household penetration is below 10%, offering ample room for growth via velocity and distribution. Vita Coco over-indexes to multicultural consumers, which represent 60% of franchise users and are the fastest-growing demographic in the United States. Separately, the brand is favored by Generation Z and millennials, younger cohorts that should account for the majority of industry growth over the next decade.”

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