Fresh out of college in 1991, Mark Rampolla ventured to Latin America as a Peace Corps. volunteer in Costa Rica. He also spent time in Mexico, Central America, the Caribbean and Brazil. During his travels, Rampolla was enlightened by many things within the Latin American culture, including a popular regional drink: coconut water.

“It’s very much a part of the culture in that part of the world,” he says.

After working as a supplier to the beverage industry with packaging businesses in Latin America, Rampolla embarked on a new career path in 2004 when he founded Hermosa Beach, Calif.-based ZICO Beverages LLC. Rampolla, the company’s chief executive officer, founded the coconut water company after he saw enhanced waters becoming more popular, but noted that the market was missing a targeted functional beverage option: a natural sports drink.

“Here’s this trend toward natural food [and] beverages that are meeting all sorts of needs except not really working for the true athlete [who’s] looking for electrolytes and replenishment,” he says. “… Having lived in Latin America, I was familiar with coconut water, drank it all the time, and thought there was an opportunity to take this natural, great source of replenishment, a beverage known throughout the tropical world, and fit it into a place for natural athletes.”

To appeal to the natural athlete, ZICO’s coconut waters contain five naturally occurring electrolytes, more potassium than a banana, and are lower in calories, carbohydrates and acidity compared to typical sports drinks, Rampolla says, “You really get all the benefits and not all the calories and sugars, and from a natural source.”

In order to deliver on that perfect balance of electrolytes and great taste, the company sources its coconut water from young coconuts in Brazil, Thailand and Indonesia, Rampolla says. Young coconuts are used because once coconuts have matured, there’s less water and more meat, he explains.

The right niche

With competition throughout the beverage industry, ZICO Beverages found that its core demographic of natural athletes has been beneficial for the emerging brand.

“The [coconut water] category right now is about 80 percent female, but ZICO appeals to a wider range of athletes. We’ve got a higher percentage of males than other brands,” says Bill Lange, vice president of marketing for ZICO Beverages. “The natural athletes tend to be 25 to 39 [in age] range, but there’s definitely appeal outside of that, and that’s really the core right now because it does tend to be a higher-cost product.

“[Coconut water] tends to be a taste profile that is more positive among people who have traveled the world and experienced different tastes. They probably shop a lot in Whole Foods and the natural channel and they are higher income, higher education, so they’re more in tune with what they’re putting in their body,” he continues. “That’s kind of the category message, and ZICO definitely skews to the upper end of that echelon in terms of education [and] income.”

At its start, ZICO Beverages focused on a core market — New York City — and a core audience — “yogis,” meaning those active in yoga, Rampolla says. The company’s early distribution began with yoga studios. Since then, the company has greatly expanded its distribution channels beginning with Big Geyser in Maspeth, N.Y.

“Big Geyser took an interest in the brand and very early on, in early 2005, we moved from self-distribution … to the Big Geyser system, and they, frankly, have taught us the ropes of what it takes to build a brand,” Rampolla says. “[They] have been an excellent partner for building [ZICO] from a distribution standpoint. As brand owners, we do the marketing and most of the brand building, but a key part of that has been distribution, which we simply could not have done without them, so it’s been a very deep partnership.”

Rampolla adds that the working relationship between ZICO Beverages and Big Geyser has seen the business increase from 500 cases a month to more than 50,000 cases a month.

“They were early investors in the company and we have also made major investments in their market, helping them to expand their reach, their capabilities and their distribution footprint with ZICO,” he says. “We’ve invested a lot of our marketing dollars [and] human resources into the [New York City] market [with] full-time ZICO employees that can help [Big Geyser’s] selling and merchandising efforts to help build the brand.”

ZICO now has direct store distribution in New York and along the eastern seaboard, as well as Philadelphia, Miami, Chicago, Texas and the West Coast, in addition to national distribution through natural food channels and large retail chains including Whole Foods Markets, Target, Costco, Safeway and others.

Fostering growth

In conjunction with its growing distribution, the company has seen its products embraced among general natural food consumers and endurance athletes, such as runners, cyclists and tri-athletes, and beyond that, a broader base of athletes, including surfers, volleyball players, snowboarders and skiers. Rampolla also notes that the company has seen response from the ethnic market, such as Hispanic, Southeast Asian and Indian consumers who are familiar with coconut water, are in the middle- to upper-income range and can afford to pay for a pure, natural source of coconut water.

Although ZICO Beverages has seen the brand’s demographic appeal expand, its mainstream growth has been more tied to the company being approached by athletes than the other way around.

“A lot of mainstream professional athletes sought us out,” Lange says. “It started with this core group that was, maybe, more in tune with natural products, but now it’s gone out to people looking for a natural source of performance, and that’s where we’re seeing a big uptick in the NFL, the NBA, and we’ve got some NHL teams that are purchasing ZICO. So even though we’ve expanded our target and continue to evolve, it’s really caught on with a much more mainstream audience than even 12 or 18 months ago.”

With increased expansion and a growing consumer base, ZICO Beverages caught the attention of The Coca-Cola Co.’s Venturing and Emerging Brands (VEB) business unit, which invested in the company in 2009.

“VEB seeks out burgeoning brands that have the potential to change the way consumers look at beverages,” The Coca-Cola Co. says. “We saw — and continue to see — ZICO as a brand with significant potential in the U.S. and even global potential.”

The investment has allowed ZICO to benefit from The Coca-Cola Co.’s distribution system in three select markets, Rampolla says. He adds that the companies are in the process of evaluating the results in those markets to plan the next stage of expansion.

The companies also developed a strategic partnership. ZICO and its management continue to run the brand on a daily basis, but ZICO Beverages has been able to leverage the knowledge and experience of The Coca-Cola Co. and other investors and partners to grow the brand, The Coca-Cola Co. says. The two parties are in continuous contact regarding customer and marketing opportunities, according to The Coca-Cola Co.

ZICO Beverages first enlisted a lot of grassroots campaign efforts to market the brand, including event demonstrations and product giveaways. This year as the company looked to evolve its marketing efforts, ZICO Beverages actively sampled to consumers at what ZICO calls “The Point of Hydration,” when consumers are most receptive to learning about ZICO’s all-natural benefits of replenishment, Lange says. Therefore, the ZICO team was present at many marathons, half marathons and triathlons sampling the product, but also educating the participants about the benefits of coconut water.

“When consumers run across a finish line at a half marathon or they complete a triathlon, if you talk to them about ZICO’s benefits, but also let them drink it and feel the benefits, that’s when we really have found the best adoption,” Lange says. “… Next year, as we grow, we’re going to continue to sample — we think that’s an important focus — but it’s also more about awareness tactics. You’ll see much more on the media side and much more on the social and digital space, so we’ll start to engage consumers. Education is still going to be key.”

Lange adds that only 3 percent of households in the United States buy coconut water, so there is much more opportunity ahead to educate consumers about coconut water. 

Although ZICO Beverages sees potential to expand beyond that 3 percent, the company remains committed to targeting the natural foods consumer and focusing on multiple usage occasions throughout the day.

“In the beginning, we did have a 360-degree approach, the idea being: how do we take our target consumer and reach them in multiple points in their day and create multiple reference points?” Rampolla says.

For example, if the company is targeting female consumers who are runners in New York City, reference points include being present at running events, informing trainers at gyms about ZICO and why they should recommend it, finding a presence in health and wellness and lifestyle magazines, as well as sampling demonstrations at natural foods retailers, he says. “The belief is that it really takes three, four, five interactions with a brand, particularly something new like ZICO, for them to understand it, experience it and adopt it into their daily lives,” Rampolla says.

Lange adds: “I think our approach is not ‘We need to be everything to everybody; it’s defining clearly who we’re going after and then really focusing all of our efforts. We don’t need to appear huge to the broader public, but we want to appear huge to that target audience that we’re trying to [appeal to], and that’s the 360-degree approach.”

Expanding opportunities

As coconut water continues to gain more attention from consumers, Rampolla and the ZICO team have seen coconut water associated with many categories, including enhanced water, juice and natural specialty beverages. But ZICO’s founder sees coconut water expanding beyond the standard categories.

“I believe it’s its own category, I really do,” Rampolla says. “I believe that within the next few years, Nielsen and other major sources will be tracking it as such because the reality is people use it for multiple reasons. It technically has much of the classification of what you would call a juice. It is being used in a much wider usage found in retail places that are closer to water than enhanced waters, so I really think it’s its own category and will be measured stand-alone some day.”

Lange adds that in progressive grocery markets, aisle signs already include coconut water on its list of segments as opposed to being a sub-segment of that aisle.

With the prospect of coconut water becoming its own category, ZICO has continued to innovate the brand through flavor options as well as packaging to appeal to a broader audience.

“We know that consumers like choice and that coconut water can be an acquired taste, so the flavored varieties give us an opportunity to reach more consumers that have an interest in different tastes. And for those that like the benefits, but aren’t wild about the taste of coconut water, it gives them a chance to gain the benefits and enter the category in a more palatable way,” Rampolla says.

ZICO’s varieties include Natural, Pineapple, Mango, Pomberry, Passion Fruit and its most recent addition, Chocolate.

“I think it started with what blended well, what flavors matched well with the tropical taste profile of coconut water,” Lange says. “I think our latest learning on Chocolate is taste is very important, so we should think beyond just what immediately is a good fit with coconut water to ‘What are consumers looking for?’”

Natural remains the brand’s best seller, but within its first year on the market, Chocolate has become ZICO Beverages’ No. 2 seller, Rampolla says.

Venturing outside of the fruit-flavored family, the concept for the Chocolate variety came from a number of different sources, Rampolla says. The company received requests from consumers, distributors and distribution partners for a chocolate coconut water option.

“I’m a chocoholic, so I was very interested in it and we were also very curious about the non-acidic, non-tropical side of flavors,” Rampolla says. “So [we were] just playing around with new ideas and at the end of this, very quickly, I think we realized it was possible to make something that just tastes absolutely delicious. The other benefit is chocolate is getting more and more popular and recognized for both its antioxidant benefits and as part of post-workout recovery. So we thought there was an ideal solution to deliver a great-tasting ZICO that also offered benefits to athletes.”

The original thought for Chocolate was to introduce a different usage occasion for coconut water, Lange says, such as a sweet treat or meal accompaniment. But the company has found that athletes are requesting Chocolate at triathlons and other race events where ZICO’s field teams are present. It also has helped the brand enter the children’s market.

“I think Chocolate has been a first initial foray into the children’s [market],” Lange says. “… We’ve found that Chocolate is a great entrance because it’s 60 percent less sugar and calories than the leading chocolate milk. Because it does have electrolyte properties and kids are very active, moms are looking for an alternative to other sports drinks to give their kids, so it’s been a great start.

“I think we can go further in terms of the packaging that’s friendly for kids [and] the pack sizes that are friendly for mom,” he continues. “You’ll see some innovation from ZICO in 2012 that will help address that, but really we feel that this is an audience that we’re uniquely positioned to own, in part because our core consumer right now is a little bit more upscale, maybe a little bit more educated than the average coconut water consumer. We also are the brand that has the highest incidence of kids in the household, so fitness moms are looking for something for themselves [and] naturally they’re also looking for healthy alternatives for their kids, so we want to make sure we’re providing them with both solutions.”

But kid-friendly packaging is not the only innovation the company had on its mind. In addition to its carton packaging, the company released a 14-ounce HDPE bottle. The bottle was designed to cater to athletes and their on-the-go lifestyles with its resealable cap. Although the new functional container addressed consumer requests, some prefer the taste profile of the cartons, which is why the company is sure to provide both solutions, Lange says.

“We want to position the brand so that we offer a variety of consumers options and choice according to what they’re shopping [for], where they’re shopping and how they plan to use ZICO,” Rampolla says.

The selection of HDPE for the bottle was to cater to the sensitivity of coconut water, Rampolla adds.

“In order to keep coconut water in its inherent low-acid state and do the best to keep the nutritional profile and taste profile, the only way to [be] shelf-stable is low-acid aseptic,” he says. “Once you go in low-acid aseptic you basically have to use HDPE, that’s the most effective way for product integrity, to avoid light degradation and just to ensure that we get the best taste profile and nutritional profile over the whole shelf life.”

ZICO’s continuous advancements in packaging and flavor options have helped the brand expand its growth potential, according to Coca-Cola. “Two years after our investment, ZICO has the tremendous, best momentum in the coconut water category and remains at the forefront of appealing to what consumers want, such as innovative packaging and a new Chocolate flavor,” it says.

With only 3 percent of households in the United States purchasing coconut water, ZICO’s primary strategy in 2012 is to go deeper in existing markets and secondarily to expand into four to six additional markets, which are yet to be determined, Rampolla says. In addition to its expansion plan in the United States, the company is in the process of developing and refining ZICO’s international rollout.

The brand has been distributing successfully in Canada for about 18 months, recently launched in the U.K. and is in the process of launching in Spain and France, Lange says.

“I’m certain ZICO will be a global brand, but similar to our disciplined, methodical rollout in the U.S., I expect we’ll take the same approach internationally,” Rampolla says. “It’s choosing the most obvious markets, [which] are probably the ones that are like the U.S. today, that are not familiar with coconut water. The bigger challenge is going to be markets that are familiar with coconut water. It’s a little bit like selling ice to Eskimos, but I’m confident that the brand can work there, too.”

As ZICO embarks on its international rollout, the company expects to evaluate the best route-to-market process including possibly extending its relationship with investor The Coca-Cola Co. “We will look to make the best decision for the brand in each market,” Rampolla says. “That being said, with [The Coca-Cola Co.] as our partner, I suspect we’ll go through that process with them.”

The Coca-Cola Co. also sees great things in store for ZICO overseas. “We definitely believe in the global potential of ZICO and are exploring markets where we would participate in; our current investment includes their international roll out,” it says.

Overall, Lange says, “We definitely consider ourselves the brand leader in the category and I think with that comes the responsibility of innovation and we’ve pushed it with the bottle and we’ve pushed it with Chocolate, and you’ll definitely continue to see that coming out of ZICO in 2012.” BI