How Vita Coco Built a $700M Business in a Market That Didn’t Exist | Built Different

Most entrepreneurs spend their careers competing inside existing markets. My guest did something much harder. He created one. When Mike Kurban launched Vita Coco, most Americans never tasted coconut [music] water. Retailers didn't understand it. Consumers weren't asking for it. And the beverage industry certainly wasn't waiting for it. Today, coconut water is a multi-billion dollar category, and Vita Coco helped lead that transformation. But this conversation isn't really about coconut water. [music] It's about conviction. It's about recognizing an opportunity before the market does. [music] And it's about what it takes to build belief when almost nobody else sees what you see. I'm Ian Schwarzman and this is built different. Vita Coco Vita Coco. You said it doesn't matter so long as people enjoy it and get it. Yeah. Buy it. >> Yes. Yeah. >> Okay. >> You can say it however you want. >> However you want. Okay. So, Vita Coco in my head begins with you, your friend Ira, two beautiful Brazilian women at a bar, and a realization. >> Mhm. >> Here's the realization >> that we like beautiful Brazilian women. No. >> Yes. There's [laughter] not many people that don't like beautiful Brazilian women. >> That being said, you're sitting there going, "Look how amazing my night is going with Ira. This looks like we may be able to get this across the finish line with these two beautiful Brazilian women. And then one of the Brazilian women says, "Oh, the only thing I miss is just having coconut water. That would make my night perfect." And you go bing. Light goes on. If coconut water is setting up my night like this, then think about what it could do for every other man in the world. And that's when you're like, we're creating a coconut water brand. Vita Coco is born. >> Yeah, that's that's the that's it. That's >> Did you Did you guys seal the deal that night? >> Um, seal which deal? >> Well, we know you started the coconut water. >> He did. There were two girls. He loved one of the girls. I We had a great time that night. >> Wingman or >> I was I was more wingmanning that night. >> He went on to marry that woman. >> He did. He fell in love with her. >> Congratulations. Congratulations. >> Yeah, >> that's a beautiful start to a story of what turned into uh one of the biggest coconut water brands in the world. >> Yeah, it's an amazing amazing start to the story and the story continues and it's just so much fun. >> Creating a marketplace feels impossible. >> Category that didn't exist. Yeah, >> a category doesn't exist. What makes you and Ira believe this is something you could even tackle? >> I think it starts with the level of expectation, right? So we were not expecting to create what we've created to to date or what we think we have the ability to create over the next 5 10 20 years. >> Okay. >> Um this was 22 years ago. Uh coconut water did not exist in the US at all. Um you can get it like in a can with sugar and water like like a Goya type of thing in a in a >> um like Latin grocery store, Latino grocery store, whatever it might be. There was no um coconut water marketed for all the health benefits of coconut water and no pure coconut water in the market. So it was really an idea to create a category, but we didn't have these massive expectations. We had this idea that we could create a little side business, something people might like and make a bit of money. And our idea was let's make enough money to throw a killer party every quarter. Like that was our idea. We were really raising party money by creating a business. >> I want to introduce a word speed. Yep. Okay. I have a very strong belief in being first to market with anything. You were first to mass market. You were first to say, "We're going to brand this >> um and put this in stores as many as we can, go doortodoor," which I respect, by the way. >> What does speed and being first to market mean to you because I want to see if I share a common thread with you. >> Okay. So, I'll give you an example. So, we started around the same time as this other company called Ziko. The guy who started Ziko was working on his business plan for two years. >> Did you know of this before you launched? >> No idea until the week we launched. They they launched the same exact week. >> So they waited for you to go. >> They he was working on his business plan, trying to perfect it, perfecting everything, perfecting the packaging, perfecting every little thing and he launched the same time we did. We had the idea 3 to four months earlier. So it's not for me it's more about speed and it's more about doing things and accomplishing things than perfection. >> And if this guy had launched his product three or four months after he he had the idea, he would have been a year and a half ahead of me. >> And had you delayed it all, Ziko owns 51% of the American coconut water market, not% >> Vita Coco today. >> That's exactly right. Um, no. So it's never for me, I'm just not a perfectionist, >> right? >> I'm about getting things done. I like to accomplish things and move and continue to grow and build and build. I'm not a perfectionist. It doesn't have to be perfect. >> Does that does that inter does that disrupt people now that you have an enormous um organization with Vita Coco, right? It's a multi-billion dollar organization. You guys are distributed all over the world, which is incredible. Um how does that make people feel in a public company that you're a speedster? >> Mhm. that your brain moves faster than maybe the infrastructure can keep up with and or understand. >> Um, legal and HR don't love it. >> How many calls a month do you get from HR? >> A few. Um, but >> would you care to replay how one sounds? >> Um, >> hold on. Bring bring up. >> It's Yeah, it's Mike. >> Mike, it's Ian from HR. Once again, we're hearing that the teams are saying that you're moving forward on something that we don't have the clearances for or the permits for. Can you please slow down so you don't cause us problems? >> Yeah. Yeah, I'll think about it later. Mike. Mike. [laughter] >> Twice a month. Yeah. Yeah. But I mean that's that's what I do. Like that's what I do. >> They know what they signed up for. >> Yeah. Exactly. >> Well, I mean the public. >> Yeah. Yeah. >> You're a publicly held company. >> Yeah. And I think I think that's kind of the beauty of our organization too is I have I have a CEO now. >> Okay. >> And he is um he has been in this industry for years. He's um he is he is the opposite of me. >> I was going to say what is he that you're not? Cuz I don't think people understand you founded this company with Ira. >> Yeah. What does it feel like to have someone fill your CEO role but be the complete opposite of you and then you watch that? >> Amazing. If he was the same as me in any way, it would be very difficult. But the best thing about him is he lets me break He lets me step on his toes. He lets me drive the organization and he just goes and puts the train back on the tracks. And that's what keeps things moving so well. We can move really fast with a train that stays on the tracks. I think without it um we don't we balance each other so well. If we were just a train going down the tracks, we wouldn't be where we are today or where we're going. If we were just moving fast all the time and constantly breaking >> we would um fall off the tracks and and have tons of issues. So, it's a really amazing balance. >> Okay. Now, I want to go back a little bit. I want to speak to entrepreneurs out there that are scared to go into debt. >> I want to you to help us explain and understand how debt can be healthy. >> So to start with debt and thinking about how you're starting a business and being an entrepreneur and all of these type of things. >> I was never very good at math. I think I was the only person that graduated from my high school without passing basic algebra. I couldn't pass a math class. >> But I think I understand um calculation. Like I said, calculate >> basic calculation add [laughter] subtracting. You're pushing it, but I could add. No. Um, >> the school system didn't fail [laughter] him. >> Not completely. Um, but everything was was calculated. Okay. So, we I was taking on debt. I was maxing out credit cards. I was I was I was doing all of that type of stuff. Like literally teetering, right? Always. Like, are we going to make are we going to be able to pay your bills? >> No. No. We had rent. As I started hiring people, we had plenty of weeks where we had to like, "Guys, we can't make payroll this week. We're going to make it next week." >> So, what you'd ask employees or contractors, "Hey, I don't have it this week. >> Bear with me. We're going to do it next week. Maybe here's a little bit of extra equity in the company." >> You were giving away equity to keep them happy. >> Yeah. Yeah. For sure. >> And at the time, did employees go, "Mike, this ticket's worth nothing?" >> They believed. Did everyone in your infrastructure believe? >> Yes. Yes. And to this day, it's really it's a part of a big part of the culture is people believe in what we're building. And it's been like that since the beginning. And it's something to do with this product and the ability to really transform the way people are consuming beverages and all of these things. people believed and so we were able to like I think lean on the beauty of this product that we were bringing to market and the brand that we love so much a little harder than if I was selling something that people just didn't truly believe in. >> So having your team internally actually bought into what you're selling, not you're a salesman and you're making them believe or you're incentivizing them with money was quite the opposite. >> They were as motivated as I was. So, you [clears throat] take on the debt. You order your first shipment of coconuts. I don't know why I'm thinking this, but this is the reference I'm going to make. I can't stop thinking about Johnny Depp in the movie Blow. They they were selling what they were selling. >> Um, they needed to find the source >> so that they could cut out all the middlemen. >> Cocoa instead of cocoa. >> Cocoa nuts instead of the other cocoa. >> Exactly. Yeah. Did you get on a little two-seater Cessna and fly somewhere to buy a coconut farm? Or did you send someone somewhere where you could source coconut at a cheaper price so that you can mass distribute Vita Coco at a price that left a profit margin for your company to have? >> Yeah. So, it's actually really cool. In the early days, [clears throat] we went to um the company that was making the brand in Brazil and asked them to make a brand for us. That was how we started using like the local Brazilian company who was making a pro a brand for Brazil. But quickly we realized they were shorting us inventory all the time because their business in Brazil was doing well. The margins weren't great. We weren't we weren't making >> that because of taxes. >> No, it was really because you know the cost was too high. Um >> because you were being brokered the product. >> There was people in the middle. There was all sorts of stuff. >> Johnny Depp in real life. >> Exactly. So, I got on the Sesna and I flew to the Philippines. >> Are you p How do you guys not know Mike Kurban? This is real. Go. >> And I went and I found the largest manufacturer of food grade coconuts in the world. And these guys were making like shredded coconuts for Hershey and Mars. They were making coconut oil and coconut cream, all this stuff. And I go and it's this family business. And this wonderful man who own who is the main owner of the business um takes me for a tour of his factory. And as we're going for a tour of a factory, there's a a river running through the factory. And at the end of the river, there's a waterfall. And he says, "Do you know what this is?" And I go, "It's coconut water." [laughter] And he goes, "Yep." >> He goes, "I have to pay to dispose of it because it's got so high in minerals. I can't put it into the ground without processing it first. So, do you want it?" I'm like, "Yeah, I'll take it. I'll take all of it." And that's exactly how we started. We took a byproduct that was being thrown away, paid to processed to be thrown away, and we showed him how to bottle it with what we learned in Brazil and we started upycling this byproduct. And so, the water was free. But the beauty of it was was that it was literally being thrown away. Now, we're upycling it. And I'm like, this is really good. I went and found the eighth the eight other largest manufacturers of food grade coconuts in the world, and I started replicating that same deal with them. And that is our >> basically licensing the process. >> We basically go in and we say, "We want all your liquid. We'll take it from you. We'll show you how to bottle it and we'll put you in business." >> Because it was a waste for them. >> It was a waste. >> So it cost them money. Actually >> cost them money. So now they're they're packaging and selling us a finished good. >> It's very interesting. >> So it changed our business model to where our margins now worked. We were able to invest in marketing. We were able to invest in people and infrastructure and build a real business. Um a and it gave us a huge supply chain advantage. So today, if you want to get into the coconut water business, you could go find from some broker a container of coconut water, but you cannot build scale because you don't have access to this volume of liquid. Did you sign like were you able to secure exclusive licenses to those byproducts from those companies? >> So essentially, first of all, that's the best chess move I've ever heard. >> Worked really well. Thank you. >> Congratulations. You could [laughter] leave now. >> This has been really fun for me. No, I'm just kidding. Um, okay. How long are those licenses? >> 10 years and then they just continue to turn. But the the fact is like if somebody else wanted to go in and get that liquid, first of all, I have incredible these are like familiar like family relationships that we have with these people. But beyond that, some one of them might be doing 40 million lers of coconut water a year from me. You want to go create a coconut water business and you're like, I know Vitco's contract is extending is is ending and there's a 5-day window. I got to get in there and take that liquid. >> But then you got to go take 40 million liters from him and you don't have a brand big enough yet to take 40 million. >> So you're taking on a bigger risk than you could even >> Nobody can do it. So we h So they the contracts just keep on extending and and these are amazing partnerships that we've had for years. >> It's really all very very impressive. I >> I want to know how celebrity involvement started playing a role in the popularization of coconut water and pop culture. Yep. >> What was your first major celebrity endorsement that was not paid for, that was completely natural, organic, and made you open your eyes to, "Oh my god, we need people with a voice like this to be involved in our business moving forward." >> Yeah. I um through a friend of a friend I met um I connected with this uh guy. Madonna's manager. >> Mad Madonna's manager. Uh Chili Peppers manager. He's he's very familiar um and he's an amazing guy, but we didn't know each other and we were connected um from through a friend and he wanted to grab coffee. I'm like, "Okay, great. We went to the W Hotel here in Union Square. We had coffee and he says to me, you know, I got to tell you, Madonna loves your product. She's drinking it. She's taking it on on on tour with her. She's drinking it on stage." This was probably 2007 or eight maybe 2008. And um >> so you're four years in operation. >> Yeah, a couple couple years into operation. Small business. And he's like, "We need to do something together. She wants to promote your product." I'm like, "What does that entail?" He's like, "An endorsement deal. You know, we should put a deal together." And >> And you really didn't even know what that meant, right? >> I not only did I But what I did know is that it would be expensive. And so >> did you just associate Madonna with I'm going to have to pay a lot to get her to participate? >> Yeah. Yeah. >> Okay. Did you have any money? >> No. So I'm like, I I don't have any money. I can't Not only can I not pay Madonna, I can't pay for a billboard or I can't pay for her. Not not only can I not pay her, how do I put money into what I just shot with her? >> Exactly. Couldn't do it. Makes no sense. Couldn't do it. I didn't have it. So, jokingly, I said, "But I am looking to raise like $10 million to build the business." >> And he looks at me and goes, "We'll take the whole thing." >> I said, "What?" He goes, "Give me two days. I'll come back to you." He comes back to me two days later. He, Madonna, Matthew McConna, Anthony Ketus, Deme Moore, this whole group of celebrities, Gwen Stefani, they all wrote checks and took that investment round. Not only did they write me checks and take the investment round, they went to work for me. I never paid them a dime. They were promoting it in interviews. They were talking about it on they were bringing it on stage. They were bring >> You didn't have to brief them for any of this. >> No, they've done so well. I saw one of them two weeks ago, one of the ones I just mentioned, and they said to me, I say to my financial adviser, you need to find the next Vitco. I need those type of returns. And he's he's like, my financial adviser tells me they don't exist. [laughter] >> Have has anyone exited from that celebrity list? >> Well, it's a public company, so they could sell some stock. They want to they could I know a couple of them have kept. Some of them have sold. >> I know a couple of them have. Yeah. >> Any of them have any regrets? >> Dollars. No. No. The ones that sold. Yeah. Yeah. I would regret if I sold on >> Yeah. >> the day you rang the bell. >> Yeah. Yeah. Exactly. >> Stock has performed quite well. >> Was ringing the bell what you thought it was going to be or was it um more hype than it was? >> It was actually what I thought it was going to be. Um this this moment was validation of what I spent 20 years doing and it basically showed me that people really do believe >> enough for us to get out the door as a public company. Right. Did you feel like a lunatic for a long time? Like no one hears me. No one sees what I >> feel like a lunatic. >> I still feel like a lunatic. >> Well, you are in a good way. But I'm saying as you're you're on this like this journey. I also know that >> 2004 you launch you're not profitable till 2011. >> Yeah. So, uh, in the business world, people think just because you're making sales, uh, and your brand could be growing, expanding in marketplaces, that doesn't necessarily mean you're profitable >> with Yeah. with the bills of the company for sure. I mean, and then I'm not taking any money out. >> Hold on. 2011 hits. >> Yeah. >> You become profitable. >> Humor us with what profitability looks like as an owner after seven years of no money. What does that look like for Mike at the end of year? >> I raised my salary to $120,000 >> after having it at what? >> 60. >> What was the company grossing a year when it was 60,000? >> I mean by 2011 we were doingund $100 million probably. >> You had a $60,000 a year salary and your company was turning $100 million a year in sales >> probably. Yeah, something like that. >> It's beautiful. >> Yeah. You're the People don't understand that the last to eat is the owner. >> Yes. Yeah. For sure. >> You took all the risk. >> All the risk. >> Now you're doing >> uh all public record. >> 700 something >> 700 million a year. >> Yeah. >> Vit Coco owns 51% of the United States market share of coconut water. Right. Consumed >> mid-40s. >> Mid-40s. >> Mid Vita Coco's mid-40s. Then we do a lot of the private label also for a lot of the >> So you're a white label? >> Yeah. Yeah. Yeah, we make a lot of the private label that you would find in in large retailers and stuff like that because we have that supply chain. >> What has been the most successful methods to market the brand either paid or free for Via Coco? >> So, it's obviously changed over time, right, as technology has changed. Uh, back in the day, it was standing in front of a Whole Foods or in a grocery store handing out little plastic cups, >> letting people sample it and telling them why it was so good for them and all of these type of things. That's all I did in the early days. And then I started hiring people to do that. And I had a team of however many dozens of people handing out little plastic cups of coconut water. And then uh social media started to really come into play. And today it is influencer content creator marketing that works because people can people who have clout who actually know something and are educated on a topic whether it's health and wellness or it's sport and nutrition or it's somebody who's great at recipes, cocktail recipes, whatever it is, they have a following and they use the product and that is what really drives people to retail to buy products. It's it's hearing on a large scale from somebody that they trust knows about what they're talk knows what they're talking about. >> You know, I I I like to hear you say that that the influencers have such an enormous impact in product sales. Y >> so for Vita Coco, well, as as the founder, I want to know if you have come to realize how powerful the communities of individual creators are for the sales of your business. >> 100%. What would you say as a founder of a multi-billion dollar company that looks and goes, "We don't invest in creators. We don't care to do endorsement deals." You can't grow. >> You can't get You can't get to enough people >> Mhm. with a message that really resonates and sticks with them because whether they trust the person like for example um you know somebody who is makes amazing recipes and does smoothies and so they start using Vit Cook in their smoothies and now everybody wants to use it in their smoothies or it's somebody completely unknown like we had this this content creator Romeo who did a jingle for us last year. >> There you go. >> And the jingle she was a nobody. Nobody knew who she was. She had no following. But then all of a sudden the jingle started to take off on Tik Tok and it grew and grew and grew and grew and grew. I think it had something like our the jingle she did for us had something like 300 million. Um >> so it was better than a commercial for you. >> So much better. You you can't pay for that. >> Oh yeah. We did this whole project with her. We brought her to the Super Bowl. We did all sorts of fun stuff >> and it was great because people just they they connected with her because she was, you know, a very interesting >> um I only brought it up because I feel like content creators, podcasts, individual multimedia networks that literal individuals own are becoming a better source of acquisition than [snorts] the old methods that existed 20, 30 years ago. >> Absolutely. We are one of the very few brands that is 22 years old and aging down consumer-wise. We're getting younger and younger consumers into our brand. Nobody does that. >> Something is something is working where this year we picked up a huge influx of teenage boys. You know, this happened because of a a trend around looks maxing and all of these type of things and potassium and debloating, right? And coconut water is loaded with potassium and it's got all these health benefits. >> And now, I mean, I have a I have a 13-year-old son. I I can't keep coconut water in the house. He's got friends over and they're they're stealing it. >> Mike, before I wrap up, I want to ask you if you ever were into card collecting >> as a kid >> or collecting anything. >> Cards? anything. Sports cards. >> I was big into baseball cards. That was my first business. I had a safe in my bedroom. I went to card shows every single weekend. I hired my friends and I we bought and sold baseball cards and that was I made I made a living at 12 to 15 years old doing that. >> I love it. Well, before I end each interview, um I'm a card collector and I also started a card business called Center Cut Cards for collectibles >> and uh my company created a one of two card for you, a collectible, and I want to give it to you. >> That's amazing. >> Okay, let me show you. >> So, here's [laughter] >> your Coco. >> Amazing. >> One of two. I get one, you get one. >> This is awesome. >> Look on the back. Tell me if the stats are true. Stats are correct. >> Stats are correct. >> Let's sign it. >> Great job. >> Wait, I've been wanting to sign a baseball card since I was playing baseball as a kid. Come on. >> Now you're signing your own. >> That's amazing. >> You're that guy now. >> So cool. >> Mike, thank you for joining me on Built Different. Really fun. >> I really love the brand you built. I love the spirit underneath what got you here. I love that you're an entrepreneur, that you went door todoor. I love that you don't follow the rules. You are uh a maven in your industry. And I anticipate that Vita Coco will be around for a very long time to come and I'm looking forward to a continued relationship. You're definitely built different for real. >> Thank you. Thank you. This is great. Thank you. >> Thank you. See you guys soon.