The Vita Coco Company, Inc. Common Stock 2026 Q3 Earnings Call

Please go ahead. Thank you, and welcome to The Vita Coco Company third quarter 2026 earnings results conference call.

Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman, Martin Roper, Chief Executive Officer, and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's third quarter earnings release issued earlier today. This information is available on the investor relations section of The Vita Coco Company's website at investors.thevitacococompany.com. Accompanying the press release is a presentation covering our commercial and financial performance results, also available on the website. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During the call, we will reference certain non-GAAP financial measures as we describe our business performance.

Our SEC filings, as well as the earnings press release and supplementary earnings presentation, provide reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well. With that, it is my pleasure to now turn the call over to Mike Kirban, our Co-Founder and Executive Chairman.

Thanks, John. Good morning, everyone. Thank you for joining us today to discuss our third quarter financial results. We had another very strong quarter with the demand acceleration we saw in the first half continuing through the third quarter across all of our major markets. What is most encouraging is the strength we are seeing across both the coconut water category and the Vita Coco brand. Consumer demand remains strong, and our teams have done a great job executing in what continues to be a dynamic supply environment. The coconut water category remains incredibly healthy and continues to be one of the fastest-growing categories in the beverage aisle. According to our retail scan data, year to date category retail dollar sales grew 28% in the U.S. and 66% in our measured European markets.

Vita Coco coconut water, excluding coconut milk-based products like Treats, also grew 27% year to date in retail dollars in the U.S. and 54% in our measured European markets. These results reinforce our belief that coconut water is still in the early stages of achieving mainstream appeal. Household penetration remains meaningfully below mainstream juices, sport drinks, and other functional beverage categories across our major markets, which we believe provides a long runway for our growth. Our strategy is straightforward: grow the coconut water category while expanding our share through strong brand performance and strategic private label relationships. We are focused on recruiting new households, increasing consumption occasions, and reinforcing coconut water's functional benefits. We believe the growth we are seeing today is evidence that this strategy is working.

As we think beyond this quarter and continue to plan for what we believe will be many years of continued growth, we are very focused on enhancing and expanding our supply chain, which we believe is one of our greatest competitive advantages. We are investing in our long-term supply capabilities, adding new factory partnerships, and supporting existing partners as they expand capacity. While it is too early to provide financial guidance for 2027, based on the capacity we have today and the additional capacity we expect to bring online in the near term, we expect our supply will be able to support a continuation of current volume growth trends into next year and beyond. As we discussed in July, the Copra acquisition gives us a meaningful position in the super premium Thai Nam Hom segment of coconut water, an attractive part of the category where we previously didn't play.

We estimate the super premium chilled segment represents approximately 13% of U.S. coconut water sales and is growing faster than the overall category year to date, with retail price points nearly double those of shelf-stable coconut water. The Copra business has operated smoothly since closing in late July, and our progress on integration has exceeded our expectations. I want to thank everyone involved for the work they have done to bring the two businesses together as one high-performing coconut water company. As we look to 2027, we plan to continue using innovation to create new occasions, reach new customers, and expand where and how coconut water is consumed. Over the next couple of months in the U.S., we will be launching Vita Coco in what we are calling our sports-inspired flavors, including lemon lime, blue raspberry, and fruit punch.

It's the coconut water consumers already know and love from Vita Coco with flavors designed to appeal to the growing number of younger consumers looking for alternatives to traditional sport drinks. We'll also be launching Vita Coco Kids, a six-pack, 8-ounce Vita Coco pure coconut water designed specifically for younger children and families. Additionally, we're planning the introduction of a new 310-milliliter slim can primarily targeted toward food service accounts, giving us another format to expand into new channels and new occasions. We're continuing to build out the Vita Coco Treats lineup with a new Piña Colada flavor. Taken together, Copra and these innovations are great examples of how we're thinking about the opportunity ahead of us, playing more fully across the coconut water category, bringing new consumers into it, and creating more occasions and channels for them to enjoy our products.

We've spent years building this category, our brand, and our supply chain. I believe coconut water will become a major global beverage category over time, and that Vita Coco is well-positioned to be the leading brand. I'll turn the call over to our Chief Executive Officer, Martin Roper.

Thanks, Mike. Good morning, everyone. I'm pleased to share details on Vita Coco's robust third quarter performance. Our net sales in the quarter were up 34%, driven by the strong growth of Vita Coco coconut water of 15% and private label growth of 152%. The coconut water category and our brand trends are very strong across all our major markets. I am particularly encouraged by the exceptional growth rates being delivered by our European teams. In the U.S., as we analyze the source of our accelerated demand, we estimate that just over half of our U.S. Vita Coco branded business growth year to date is attributable to increased household penetration, with the remaining coming from velocity growth per household, a pattern that signals strong brand momentum and potential.

Our private label shipment growth for the quarter reflects the addition of the Copra private label business since late July, multiple private label distribution gains, and the underlying category growth. With respect to service levels, demand year to date for both brand and private label product continued to exceed our projections. Within the quarter, our supply chain became tighter, resulting in reduced service levels and our shipments lagged our continued strong retail scan growth. Additionally, in the most recent weeks, we have seen instances of retail out of stocks slightly depressing our scan growth. While production levels are sufficient to meet demand, container availability during the quarter was challenging, with inventory building at suppliers. In October, we made progress, and we expect our service levels to improve during the fourth quarter.

We expect to see strong shipment growth through year end, rebuilding inventory throughout the system and preparing for another strong year in 2027. As we think about inflation and pricing moving forward, we are seeing higher ocean freight costs, elevated domestic transportation costs and inefficiencies, and increases in packaging costs. As we communicated last quarter, we chose to apply our tariff refunds against our cost increases rather than taking pricing this year in order to support our consumers and retail partners while we assessed which affects our long-term structural cost increases. Starting in May, we saw ocean freight spike. While our contracts provided a degree of protection in negotiations with carriers, many of the increases were positioned as fuel or demand surcharges on top of contract rates.