Coconut Water to Threaten Energy Drink Industry?

Could the Coconut Water craze cut into the Energy Drink business? With Americans finally consuming more water than soda, the health trends we have seen in recent years are here to stay.   The Coconut water industry has a experienced a rapid rise, with nearly $800 Million in US sales in 2015.   Sales are expected increase 150% over the next two years – making it $2 Billion dollar industry by 2019.

The Energy Drink industry is considered a $10 Billion business and still growing. Monster Energy (NYSE:MNST) has been best performing stocks the last 10 years with a 1080% return. The company continues to grow at a healthy rate; it has seen double-digit growth in its last 7 quarters. MNST reported strong Q2 earnings early august, with a net sales increase of 19.3 Y/Y to $827M. Gross profit also grew 31% Y/Y. Energy drinks involvement in the action sports environment has been an important outlet for marketing and brand awareness for Red bull, Monster, and Rockstar Brands.

A new Coconut Water brand is altering energy drinks ties to action sports however, and may cut into the energy drink market at the same time. The New Brand called Villager, is attempting to change the landscape of action sports. Many top action sports athletes have either left their current contracts, or refrained from signing with energy drink companies to sign with the Villager. This is partly to due the fact that the athletes want to endorse products they actually consume, and the desire to promote a healthier product. As health and wellness continues to gain traction, the company is capitalizing on the trends momentum.

Professional Surfer Coco Ho said “I never rode for an energy drink simply because I don’t drink them. It would be false advertising.” Several endorsers from Monster, Rockstar, and Redbull have left their contracts to sign with the Villager for similar reasons. The brand is founded from the same founder of craft beer company Saint Archer, which got purchased by Miller-Coors(Joint Parntership between Molson-Coors(TAP) and SABmiller(SBMRY) last year for a reported $35M.

coco ho

While the Villager says it is not taking direct aim at the Energy Drink Industry, its endorsers have spoken out about the dangers of promoting energy drinks. The company has secured over 26 action sports endorsers before its launch.

“It’s easy to get stuck in the status quo. I’m happy to step aside and be a part of a meaningful brand that makes healthy products. It’s a much better representation of what I actually buy and consume.” Said Professional Snowboarder, Pat Moore.

Right now it appears that both industry’s can grow alongside each other with Americans opting for healthier alternatives for drinks. Even several energy drinks fall into the non-carbonated category. What we do know however is that the carbonated soft drink industry is in trouble and set for its third straight year of declines.