Espresso: Giles Brook How Vita Coco beat Innocent in the Coconut Wars?

0:00Espressos is sponsored by supply chain software gurus unleashed it talks to e-com and accounting software where it's helped islands cut admin time in half, get granular clarity on your margins, know where your stock is, don't miss availability. Brands like Candy Kittens, Tiny Rebel and Trip, all used Unleashed and so should you. That's probably the most exciting, challenging, scary time of my career. That kind of four-year period when we'd literally grown coconut water. We'd start the whole category in Europe. The guy's done a similar job in the US. And I'll talk more about the European piece because actually the US did exactly the same, but against a different competitive set and came through it equally well.

0:47But let me talk about the European bit because I think I'm better placed just to talk specifically about that. That's probably the most rewarding time of my whole career. If everybody says what you're most proud of, it's building the coconut water. And then, again, I want to be careful how I say this because it's not meant in an arrogant way, but wrong to say seeing off but but you can say that yeah temporarily temporarily or for the time being seeing off coke and pepsico and denone brands to the extent we did is probably my kind of you know my most proud moment and testimony to the kind of people in the team that were built at vitacoco there are a number of things when i look back how do how do we how why what made us so resilient one is we knew understand how we were going to market coconut water to the consumer so it's always about why coconut water and then why vitacoco is a brand of choice and we basically there's too many businesses will go right first start any sort of meeting strategic meeting going right okay how do we grow a household penetration how do we get that next set of consumer how do we do that our number one thing at vitacoco was that right let's talk about our existing consumers how do we make sure that they stay with us they are spending a large part of the disposal income on our drink we should never ever fatigue from being grateful for that and understanding what else we can do to thank that consumer that's what obsessed about and the scary thing is what people don't a lot of businesses don't realize this but i'd always say this is virtually the same in all consumer good businesses is that you know 20 of our consumers was 70 of our business so if you can get that 20 right and you can give them a thousand reasons to stay with you and why vaticoca cares about you as a consumer you've got a good chance of winning a battle right So that's one of the first things I say.

2:31Just on that, just quickly tease that out. One of the questions I asked Julian was, he goes, the only time on this with Pret, Itzu, and Metcalfs, the only time I've ever gone wrong and things have gone, it started with this and it's just this whole sort of cascading effect, things going beat-tongue, is when I took my eyes off of the product and the consumer, product-consumer. That's why I love linking all these different conversations together because you have this sort of interweb of different knowledge. yeah and so yeah so what when you were trying to do more for that consumer and this is almost this is almost like the first play of this in this coconut wars it's like what were you doing specifically so we were looking so we basically got to we knew what we obviously we had a lot of we had like the coconut newsletter that went out so we had a load of consumers we spoke to directly yeah we got in touch with them the whole time we gave them extra discounts do that new products coming in they got like our top x i can't know how many it was now but let's say our top 250 or top 500 customers when we launched pressed they got a gift box with that didn't have to pay for it it's got to say look you've been a really you know important consumer as part of our journey thank you we wanted to give you our new product before it comes in market so just all those touches we you know we you know we could find them we had different events going on they got invited to the vip area some of those consumers because look you've been with us you know for this long period of time you've always engaged with this come along and you know come and see us at this festival or this event so we we did that we went through that and we did that through both our direct data but also our retailers obviously a lot of the retailers have their loyalty cards and stuff and you can see who who's your highest spenders again we target them through our retailers and then through obviously it's called shopper marketing is so you know so you know we did that um the second thing we did was that and that's slightly associated that was we said and this is where actually this is where we got it wrong by the way so and you laugh about this but people will say, well, Jars seems to know what he's doing.

4:19But I always laugh because whenever I'm speaking to people in the industry, you have to remember probably somewhere between half to 70 % of the advice I give is based on mistakes I've made, not what I've got right, right? So this is one thing that, and we made this decision as a board, right? And we got our metric wrong. We talked earlier about key metrics in a business. So our number one thing when Innocent, Naked, and, you know, other brands all came into market, and there were a lot of them, was because the number one thing was protect our number one market share. That was the most important thing for us.

4:55We will always, no matter what, we will stay number one in market share. So one of the issues we had. And that was your goal. And that's right. Yeah. It was a mistake using that one. Let me explain the backdrop, right? Sure, yeah. So Innocent, seven years before coming into Coconut Water, had launched an orange juice, which they started off in a Tetra, failed dismally. Everybody in the business was going to kill it. But John Wright was like, no, we're sticking with this. It's going to work. We're sticking with it. It's going to work. We've just got to work out what we need to do because we have to go after orange juice because we can make, you know, we don't need to just be a smoothie brand.

5:29We can be a juice and smoothie brand. And I can remember some pretty heated conversations in the business about it. You know, John with his co-founders, et cetera. coke deal came in Innocent then relaunched the orange juice into what used to be the Minute Maid plastic carafe I don't know if you remember the PET carafe that created this identity all of a sudden you could see this beautiful orange juice sat in this packaging whereas you know Tropicana was hidden in this Tetra within three years if not four years Innocent had toppled Tropicana in Europe as I understand it virtually all of the Tropicana PepsiCo team lost their jobs on the back of it because they've got absolutely decimated it's links back to that you can just in in format is innovation exactly so the reason i mentioned that story is yeah given what innocent had just done with to kind of pepsico and tropicana they're then launching to coconut water so as a board so there was me there was mike kirban um i'm founders and also eric milieu who's from verlin best one of our main one of our main investors we sat there and we're going look they've just killed tropicana we have to really think very carefully what we're doing here so what we did was we said look whatever they do we're going to go toe for toe with them when you say they that's pepsico that's innocent and naked okay so the problem we had and this is where this is the problem we had was that we didn't realize and again i'm i don't if i had the same information today i'm not sure i'd do it any differently and maybe i'm probably back the brand a bit more but the bit we got wrong was is that the coke and innocent strategy and the pepsico strategy was come into a market we've got really deep pockets we're just going to literally discount discount discount so at one time i think there was something like nine nine of twelve weeks of buy on get one free or half price in a row right so just literally bludgeon the market drive as much trial and penetration as you can and then over time because obviously we'll then take all the market share away from the leaders and then over time we can build that back up so we were getting absolutely smashed on what you call average price and so back then we sold one litre except the one litre was the real price fight on here we were selling one litre at 349 clearly the retailers decided the pricing not us but the recommended was 349 and that typically what was in market our average price was about two pounds seventy two pounds well two I can tell you this is how Saturday I'm it's two pounds sixty two two pounds sixty two was our was our average right it went down as low as one ninety two and was hovering around the early two pounds while innocent and um naked were just bludgeoning promos because we were going toe for toe we were putting the same thing and all we did was we just crashed the market and actually we we kept that market share that was ruining your gross margin as well right it was killing our gross margin also the retailers were going hang on a minute there's loads of volume growth but actually suddenly what was my most successful category in juice and smoothies because they all loved us because coconut water was leading every growth so even today that one litre pure skew is the fourth biggest skew in the whole of that juice and smoothies fixture even today because any private label orange juice or anything like that it's the fourth biggest skew it's a power skew people don't realise but they were like guys whoa you know and of course retailers at one point do like obviously if they can give consumers more value or shoppers more value great but it was touched to such a point it was just devaluing the whole category so the bit we got wrong is that we actually realized we didn't need to go toe for toe so we then still gave the consumer amazing value but we put about 10 20 average price back on we just changed the mechanics on promotion stuff stopped doing half prices because that weren't creating any value for us or for that.

9:16Because the trouble is as well, if you're at half price, why is anybody going to buy? If you're at half price the whole time, why are people going to pay the money at full price? Why should I? I'd be the same as a, you know. Yeah, promo junkies. This is what makes me laugh sometimes. I sit there in meetings, I sit there where I hit people getting on a pedestal and start being principled as a founder or business owner. But if you ask them the same question as a consumer, they give you a different answer. As a consumer, I wouldn't buy that because it's been on this. You're saying something very different as a founder or business owner here, right?

9:42delicious nuance there Giles yeah yeah yeah so anyway so we we got so we it took us about two years I mean our share went down as one of 50 loads 51 percent I don't know exactly today but I think Tim's done a great job at getting the business I think market shares back up 70 75 percent in in in in in the UK and I think it's very similar in Europe because we've got very big markets in France and Germany now but we've slowly built the valley back into the category and actually coconut water is now still like i mean again juice has had a particularly turbulent time over the last you know decades particularly around commodity prices and obviously consume you know consumers dropping in and out they're looking for other functional drinks coconut water has been pretty resilient all the way through but you know the thing i got wrong and the bit i'm trying to say is that we didn't back our brand enough i still today we probably would have done the same thing because we were paranoid because we're always respectful right of competitors but we actually went going toe to toe was the wrong strategy we should have gone down to about 70 % of what they were doing because we just took too much value out of the category and it was a it was a really tough tough time but what was amazing for me was that and don't get me wrong there's a lot pressure on me and the senior team and the European team but at no point in time I think Mike is the founder or Eric who was the other main board because we're quite a small European board because we're also a group board at no point in time were any of the behaviors inappropriate or was there any pressure that was saying you know nor was a time where they were telling us you're wrong we're taking over here you're the right thing to do and you know surrounding yourself with people who you know take a collective and collaborative approach and it was our decision and we you know we came out of it really well but it took it took a it took a long while i think it's good to be competitive i'm competitive but you know decimating some of those big boys what else were you doing what else were you talking about the other big the other big things we did in the war bunker was that i don't know if you remember back then but literally the demand for coconut water was insane yeah um the biggest thing that we had the weapon we had in our armory was that we basically had built a supply chain that meant that around about 80 to 90 percent of global coconut water was basically owned by the vita cocoa production network right so but you know you know at one point in time we had we had strategic calls to make it as a business because we could effectively sell liquid to coke or pepsi and make good money on it because they couldn't get a hold of any but we were like do we sell it or do it interesting and actually we didn't we did we sold a bit but we matching then we we created more volume elsewhere we decided actually we would increase our demand plans elsewhere and we'd actually find more volume so you know in the u.s they do like run you know i don't know if you know but costco is massive in the u.s right and like an mvm i mean it's crazy like an mvm which is mvm mvm is it's the members value something yeah it's the costco promotion but like a three-week american costco promotion would do about a third to 40 % of the total volume I did in Europe in the whole year.

12:36I mean, that is just crazy. You have like 80 trucks loads going into one Costco thing. So we decided to utilize all the liquor we had by giving the consumers more deals and across more customers. And therefore we increased our revenue because we didn't obviously... Yeah, we didn't want obviously the water to go to waste. We obviously... obviously so i think i think um our supply chain was unrivaled that is that is the bottom line and i think the big thing is our supply chain when there was a period where demand exceeded supply that gave us a big competitive advantage that meant that we we came through that that war war war really well i think the other things we did as well which again to be clear as well this was about you know doing things in the right way we also created value add categories which make complete sense for us so we did as well as vitacoco obviously as in the beverage and liquid we did vitacoco oil right which was was used for cooking oil and skins whether that was launched so that was launched into all the cooking aisles that was the whole in with the lucy b j wicks exactly that i remember that vividly that was massive and that was like i mean that was like seven to nine well actually seven to twelve percent of european turnover about five to six percent of global turnover on coconut oil and again it was great for us because it was synergistic because clearly what you drink and what you eat, obviously using coconut oil in cooking, in health and beauty and stuff like that, and hydrating your skin etc worked with obviously hydrating in terms of the liquid that you were taking in, so strategically it worked really well for us, but what it also enabled us to do was a load of consumers came into the brand through skincare and stuff in the boots or in the cooking aisle we then managed to get those consumers then to come across and start drinking it as well within the beverage part Back to your point earlier of like innovating close to the core is that is that is that innovating close to the core for me it is because this is all very nuanced isn't it yeah because because the reason being right you know back then we decided we weren't just a beverage company we're a coconut company we were going to use the natural incredible you know nature's best kept secret which is the coconut has so many different qualities we were going to bring that to the consumer in the best way now we could have done it in so many different ways you know loads of bits but actually we just where we focus on we stay predominantly in beverages but we saw coconut oil as a big opportunity for us and therefore we just work with those now we could have gone into other categories as well we could have done an ice cream and stuff like we didn't this is the whole point of it this this this yeah that innovation thing is nuanced the pendulum does swing yeah as you say like as was um they showed me when i went to do the tour because it's like that that isn't the coconut oil is close to the thing but um is close to the core but then i think there's a whole there's like a smogs world of like cbd coconut oil and it's like that's going out a little bit let me give you another example similar that today it's like so i have a lovely business well i say lovely lovely founders um ed and jess on a brand called freya which is bone broth i don't know you've seen bone broth but bone broth's going absolutely mad it's this whole kind of collagen trend that's really gathering momentum it's honestly unbelievable i mean i can't if you see the um the predictions and the forecast of how big a bone broth is going to become is amazing but if you look at that, it's another great example where you're going to two categories of slightly, which are completely different, but actually it's hugely synergistic.

15:51It makes sense. So we have all the liquid bone broths where we either have the, you know, we've got the cartons where obviously people then add it into a stock or whatever it is. We also have the instant bone broths where it's like a sachet and you have it like as a hot drink and stuff. So if you go to America at the moment, what's really trending, you go into Starbucks in the US, people go, can I have a, you know, they'll have a kind of flat white or kind of a latte. I'm going to have a bone broth to go please so all the coffee shops in new york are now doing bone broths to go because that's that's your health kick right go inside it so but what we also have is we also have powdered bone broth because it's absolutely crammed with amino so bone broth is crammed with amino acids it's very high protein and it's obviously got collagen with it so you know a good a good slug you know like a third of the business is actually the powders alongside the liquids and people like but so if you think we've got the food division which is the liquids but then we've got the supplements division and actually if you look at something like perfect ted it's not not that different they've got obviously the the product and the energy drink in the can they then got the matcha powder and people are like using the powder to put it in a smoothie or you know or whatever you know taking it as a supplement and you're bringing in completely different consumer set but you know very similar need states but providing the product or the natural ingredient in the you know in a format that works for the consumer and that's working incredibly well so you know there There are times in a business where, yes, there are closer categories to go to because supplements versus food, you might argue, could be slightly further away than me going between, you know, I'm going to go into, like I gave you earlier, we've got a cereal and then we're going to cereal bars because they're obviously closer, but still are exactly the right thing to do.

17:26And Freya is a great example of that. Business is flying. Thank you so much for listening to That Espresso. I hope you enjoyed your morning coffee and are ready for the day. Let's be having you, boy. and please do subscribe, follow the podcast, share this espresso on WhatsApp if you liked it. And also there's a link to our newsletter in the show description. I spend 15 hours toiling and writing this bad boy. It's full of wonderful wisdom from the biggest names in food and drink. You're not going to get these in a business book. So please subscribe and thank you later.