CoCo carves out a new RTD category with coconut vodka and rum

Being first to market comes with its own set of challenges.

CocoVodka

By Will Novosedlik

The RTD space is hard. Hard lemonade. Hard tea. Hard kombucha. Hard coffee. Hard seltzer.

Enter hard coconut water. Toronto-based CoCo, the two-year-old start-up and maker of CoCo Vodka and CoCo Rum, has piggybacked off the success of traditional coconut water, benefiting from the millions of advertising dollars Vita Coco, Zico and other coconut water brands spend on informing the public about the health benefits and hydration of coconut water.

CoCo is a classic start-up story. A lawyer, Avneet Grewal, and a sales consultant, Mark Convery, walk into a bar. After a drink or two, the conversation turns toward the subject of hangover cures. Turns out that after a night of drinking vodka or rum, both like to hit coconut water the next morning to rehydrate. Then they had a eureka moment: what if they made a beverage that combined vodka and coconut water, allowing them to remain hydrated while drinking?

It worked. It also tasted great, owing partly to the fact that they use real coconut water instead of the powdered version. And in this category, flavour is the key purchase driver, as expressed by almost 70% of consumers.

Starting an entirely new sub-category is a double-edged sword. There’s no competition, but at the same time, no one has any idea what the product tastes like, or how it will perform. Despite this, CoCo has managed to secure some major industry and retail partners, such as LCBO, Walmart, Costco, Walgreens, Winn Dixie, Total Wine and RNDC (the second largest alcohol distributor in the U.S.).

How did they do it? “Good old-fashioned trial,” says Convery. “You couldn’t get these products at bars or restaurants. You couldn’t even go to the LCBO for tastings. We knew influencers were becoming popular on Instagram and Facebook so we reached out to lots of different people and asked: ‘Hey, would you like to try this product? And if you like it, make sure you post about it.’” The strategy worked.

During lockdowns, CoCo approached distributors and were generally turned down. The distributors preferred to rely on the brands everyone was familiar with, but CoCo sent samples anyway. According to Convery, “That was it. People who had been in the industry for 30 or 40 years would call us and say, ‘This is the best drink we’ve had in a long time.’”

Holding on to that distinction will be a challenge. As often happens, the first one into a new category makes it safe for others to play there, and if it’s not careful, it ends up with arrows in its back. Predictably, Diageo, the multinational alcohol beverage company that owns brands such as Tanqueray and Smirnoff, is about to release its own spirit and coconut-based drinks. It’s partnering Captain Morgan with Vita Coco, the world’s largest coconut water company, to launch three flavours next year. Fighting a giant like that is going to take some clever footwork.

CoCo was smart enough to trademark the term “hard” coconut water, so Diageo is calling its version “spiked” coconut water. CoCo has also taken advantage of its head start. When the brand launched in the LCBO in 2021, its owners predicted other brands would begin to copy their idea and knock them out of the market. “So our strategy was to grow into as many markets as quickly as possible. If a player did come to the table, then we’d at least have a broad presence,” says Convery.

To cover the U.S. market, CoCo has a production facility in the state of New York. It manufactures for the Canadian market out of Toronto. Taking a page from the playbook of Mike’s Hard Lemonade, the goal is to sell the U.S. rights to an American company so that if CoCo ever became an acquisition target, it might still be able to keep the Canadian rights and be built as a Canadian brand.