The founders of Sunboy, a spiked sparkling coconut water, initially got together slanging fresh coconuts at events and parties in New York. The two hosted parties on the Brooklyn Bridge selling coconuts from a bicycle, eventually growing the enterprise to offer the experience at food and corporate events. But when the pandemic put those events and that hustle to a stop, Luke McKenna and Yair Tygiel were forced to come up with another product: a hard coconut water.
Launched in 2021, Sunboy is not the only hard coconut water or ready-to-drink coconut water cocktail on the market; brands like Osena, CocoVodka/CocoRum, and 100 Coconuts have launched different versions in the past couple of years. And now, the leading coconut water maker, Vita Coco, is coming to shelves in 2023 with Vita Coco Spiked, a collaboration with Diageo that will feature Captain Morgan Rum. With former major competitors Zico and O.N.E fading into the background, independent coconut water producers see the spiked version as an opportunity to revive the category and find a canned cocktail niche beyond hard seltzer.
It helps to be attached to a category ripe for innovation: While there was a slight decline in the U.S. coconut water market leading up to 2020, the market is expected to grow at a compound annual growth rate of approximately 22% from 2021 to 2025, according to market research firm Technavio. To compete with other hydration beverages, Vita Coco and others have released new flavors, paving the way for coconut water’s status as a mixer in the U.S., a practice not uncommon among bartenders in Caribbean countries. Other categories are hopping on the trend as well: A new generation of premium spirits like Coconut Cartel and Montauk Rumrummers offer premium rums cut with coconut water or flavored with coconut.
That momentum, combined with a shift towards premiumization and better-for-you beverages within beverage alcohol, has created strong tailwinds for Sunboy, which uses fermented sugar cane juice as its alcohol base (5% ABV) and is available in four flavors in 12 oz. cans. Having entered Whole Foods Market in New York shortly after being launched, the company now ships to 33 states and is in talks with a distributor to enter stores in other regions.
While alcohol marketers are required to tame any health benefit claims, McKenna said Sunboy is being positioned to tap into coconut water’s reputation as a hydrating, healthy drink.
“When you’re working with alcohol, you need to be really careful about making any kind of health claims. But I think consumers already understand coconut water to be healthy, hydrating, low sugar, low calorie, all that kind of stuff. And so we don’t actually need to say any of it,” he said.
For the creators of spiked cocktail line Osena, the idea to craft a coconut RTD was inspired by their experiences working in the apex of the hard seltzer boom. Co-founder Vicente Surraco was an intern at Anheuser-Busch InBev’s ZX Ventures accelerator and saw room for a drink that could expand on hard seltzer’s success and also tap into consumer demand for better-for-you drinks. The 5% ABV line, available in four tropical flavors, uses an alcohol base of naturally fermented coconut water and has zero added sugars.
After fast growth in 2020, hard seltzer is leveling with a focus on premiumization and value over volume, according to drinks data company IWSR. Those indicators, plus the rise of spirit based RTDs, create an opportunity for a spiked coconut water to check multiple boxes for distributors, said Surraco and his partner Chris Allen.
“The base liquid of spiked coconut water is premium by nature,” said Allen. “Consumers are trained to spend $2.50 plus per 12 ounces for coconut water because of these ultra premium natural properties of the liquid.”
Meanwhile, CocoVodka/Rum has taken a spirits-based RTD approach. CEO Mark Convery modeled his canned cocktail, from retail placement all the way down to the front-and-center coconut branding, after Mike’s Hard Lemonade. The 12 oz. cans also hit at 5% ABV thanks to the vodka or rum base, which are evenly split in sales. The product caught the eye of Tom Cole, senior advisor to the board of Republic National CEO, while in a gas station, and is now carried by the distributor almost nationwide, with some presence in Canada.
While Convery initially projected younger health conscious consumers as the target market, his customer base is skewing slightly older too. The company is steering its marketing presence into music-focused communities and has an impending partnership announcement with a popular DJ.
All three companies are on the precipice of expansion. CocoVodka completed a $2.1 million debt equity raise two years ago and is planning a $3-4 million raise in the near future to keep up with projected sales. Sunboy raised funds from family and friends to expand this year and launch into new states next year, and McKenna said he is now being approached by investors.
Elsewhere, Osena is in the midst of a raise to step up promotion and has recruited several industry veterans, including Adam Lambert of Craft-Union and Liz Einhorn of Experience Three Growth Consulting, as advisors.
Meanwhile, the brands are soon to be joined by at least one major player, which may not be a bad thing, according to the founders of Osena.
“[Vita Coco Spiked] validates the points that we have been making around spiked functional beverages as a valuable proposition for consumers, but also a place that wholesalers and retailers might want to place their bets,” said Allen. “And for us, I think that begins the process of really carving out what we think is going to be a dominant subcategory of spiked seltzer.”
McKenna agrees, arguing that the marketing dollars behind a larger brand will create an overall draw to the category.
“With these larger brands I think they’re going to spend a lot of money driving people to our category, and we’ll be waiting to welcome them all with open arms and high quality drinks,” he said.