Vita Coco Company, Inc. SEC 10-K Report

The Vita Coco Company, Inc., a leading producer of coconut water and other coconut-based products, has released its annual Form 10-K report for the fiscal year ending December 31, 2024. The report highlights the company's robust financial performance, strategic initiatives, and the challenges it faces in the competitive beverage industry. Vita Coco continues to expand its market presence and product offerings while maintaining a strong financial position.

Financial Highlights

• Net Sales: $516.0 million, reflecting a 4.5% increase from the previous year driven by higher coconut water volumes and improved pricing.
• Gross Profit: $198.8 million, representing a 10.0% increase due to volume growth and pricing improvements, despite elevated transportation costs.
• Income from Operations: $73.8 million, a 30.7% increase, attributed to higher gross profit and controlled operating expenses.
• Net Income: $55.9 million, a 20.0% increase, supported by strong operational performance and higher interest income.
• Net Income Per Common Share - Basic: $0.99, reflecting improved profitability and operational efficiency.
• Net Income Per Common Share - Diluted: $0.94, indicating a strong financial performance with effective cost management.

Business Highlights

• Revenue Segments: The Vita Coco Company operates in two main segments: the Americas and International. The Americas segment includes operations in the U.S. and Canada, while the International segment covers Europe, the Middle East, Africa, and the Asia Pacific regions. The Vita Coco Coconut Water product line is the primary revenue driver, with significant contributions from private label products and other offerings like PWR LIFT and Ever & Ever.
• Geographical Performance: The Vita Coco brand holds a leading market position in the U.S. with over 40% market share and in the U.K. with 82% market share. The company has seen growth in the International segment, particularly in Europe, the Middle East, and Africa, driven by increased volume and pricing actions.
• Sales Units: The company reported a 5.8% increase in Vita Coco Coconut Water volume, with the Americas segment experiencing a 4.7% increase and the International segment a 12.2% increase. Private label products saw a slight overall volume increase of 0.7%, with notable growth in the International segment.
• New Product Launches: In 2024, the company introduced Vita Coco Treats, a coconutmilk-based drink aimed at consumers seeking an indulgent treat. The company plans to expand distribution of this product to select retailers nationwide in 2025.
• Supply Chain and Production: The company operates a fixed asset-light supply chain model, sourcing coconut water from 17 factories across seven countries. This model allows for flexibility in responding to market changes and consumer preferences. The company also works with co-packers in four countries to support local packaging needs.
• Future Outlook: The company plans to continue expanding its product offerings and market presence, with a focus on increasing distribution and consumer education for its coconut water products. The company is also redesigning its approach to the protein drink category with PWR LIFT and evaluating the future of its Ever & Ever brand.

Strategic Initiatives

• Product Expansion: The Vita Coco Company has focused on expanding its product offerings and improving operational efficiency. In 2024, the company introduced Vita Coco Treats, a new coconutmilk-based drink, and plans to expand its distribution in 2025. The company is also enhancing its e-commerce capabilities and direct-to-consumer business to adapt to changing consumer behaviors.
• Capital Management: The company maintained a strong cash position with $164.7 million in cash and cash equivalents as of December 31, 2024. It has a revolving credit facility with Wells Fargo Bank, providing for committed borrowings of $60 million, which was extended to February 2030. The company repurchased $12 million of its own shares in 2024 and has been actively managing its treasury stock. Additionally, the company has been investing in technology and equipment to support its operations.
• Future Outlook: The Vita Coco Company plans to continue its asset-light operating model, which allows for flexibility and scalability in response to market changes. The company is monitoring macroeconomic conditions and geopolitical factors that may impact its supply chain and costs. It aims to maintain a balanced approach to investment in retail and e-commerce channels, and is exploring opportunities for further product innovation and market expansion.

Challenges and Risks

• Market Dependence: The company faces significant risks related to its heavy reliance on coconut water products, which account for 96% of its revenue. Any reduction in demand for coconut water or a decrease in consumer interest could adversely affect financial performance.
• Supply Chain Vulnerabilities: The company is vulnerable to supply chain disruptions, as it relies on third-party partners for manufacturing and distribution. Geopolitical tensions, such as those affecting ocean freight routes, have already led to increased costs and inventory challenges.
• Customer Concentration: The company is exposed to risks from its dependence on a few large customers, with the largest distributor and retail customer accounting for 48% of total net sales. Any negative changes in these relationships could significantly impact revenue.
• Competitive Pressures: The company faces competition from both large multinational corporations and private label products, which could lead to reduced market share and increased pricing pressures.
• Operational Risks: Potential disruptions due to natural disasters, political instability, and pandemics could affect the supply of raw materials and the ability to meet consumer demand. The company also faces challenges in managing inventory levels to align with demand, which is complicated by long lead times and the need for accurate forecasting.
• Regulatory Risks: The company is subject to various international laws and regulations, including those related to food safety, labeling, and environmental standards. Non-compliance could result in recalls, fines, and damage to the company's reputation. The company also faces potential liabilities from changes in privacy and data protection laws, which could increase compliance costs and litigation risks.
• Management Strategies: Management has identified the need to diversify its product offerings and reduce reliance on coconut water to mitigate risks associated with demand fluctuations. The company is exploring new product development and strategic partnerships to expand its market presence. Additionally, management is focused on enhancing supply chain resilience by diversifying sourcing regions and strengthening relationships with existing partners.
• Market Risks: The company is exposed to foreign currency exchange rate fluctuations, which may adversely affect its financial results. The volatility in global oil markets and geopolitical tensions further exacerbate these risks, impacting shipping costs and overall profitability. Management is actively monitoring these risks and considering hedging strategies to mitigate potential adverse effects.

SEC Filing: Vita Coco Company, Inc. [ COCO ] - 10-K - Feb. 26, 2025