Coconut water company The Vita Coco Company (NASDAQ: COCO) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 17.2% year on year to $130.9 million. On the other hand, the company’s full-year revenue guidance of $562.5 million at the midpoint came in 1.2% below analysts’ estimates. Its non-GAAP profit of $0.27 per share was 26.2% above analysts’ consensus estimates.

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StockStory’s Take

Vita Coco delivered first quarter results that exceeded Wall Street’s revenue and adjusted earnings expectations, driven by strong growth in its branded coconut water products and successful innovations such as Vita Coco Treats. Management attributed the performance to robust category trends in the U.S. and Europe, as well as improved inventory levels and expanded points of distribution, particularly in convenience and foodservice channels. CEO Martin Roper pointed to 25% year-over-year growth in Vita Coco Coconut Water and highlighted the company’s ability to overcome prior supply challenges, noting, "We have significantly more inventory than last year, which positions us well going into the summer."

Looking ahead, management reaffirmed its full-year revenue outlook but acknowledged uncertainty surrounding U.S. tariffs and ocean freight costs. The company described recently imposed 10% tariffs on imports as a material headwind, with plans to implement price increases in the second half of the year to offset these costs. CFO Corey Baker said, "Our guidance assumes the 10% baseline tariff and does not include reciprocal tariffs that could further impact costs." Management expects pricing actions and supply chain flexibility to help maintain margins, but cautioned that tariff developments and freight volatility could influence results in coming quarters.

Key Insights from Management’s Remarks

Vita Coco’s management emphasized several operational and strategic levers behind first quarter performance, focusing on product innovation, channel expansion, and supply chain readiness. While topline growth reflected strong consumer demand, leadership also addressed cost headwinds and mitigation efforts.

• Branded Product Momentum: Vita Coco Coconut Water saw double-digit growth in key markets, with new multipacks and flavor innovations boosting household penetration and driving category leadership.
• Innovation and New Launches: The introduction of Vita Coco Treats and expanded foodservice partnerships (such as with Joe’s Coffee and Peet’s Coffee) created new occasions and channels for coconut water consumption, supporting incremental sales.
• Private Label Strategy: While private label sales declined due to the phase-out of coconut oil SKUs, management reiterated the strategic importance of private label for supply chain utilization and expects to win new private label contracts in coming quarters.
• International Expansion: The company increased investments in the U.K., Germany, and other European markets, where coconut water household penetration remains low, indicating significant long-term potential. Germany’s volume doubled year-over-year, demonstrating early success.
• Supply Chain Diversification and Tariff Response: Leadership detailed efforts to diversify sourcing, primarily through the Philippines and Brazil, to manage tariff exposure. Management is preparing to implement pricing to offset tariff-driven cost increases and is optimizing fixed and spot freight contracts to manage logistics volatility.

Drivers of Future Performance

Management’s outlook for the remainder of the year is shaped by strong category demand, planned price increases to offset tariffs, and ongoing supply chain investments. The company’s margin expectations depend largely on how external cost pressures evolve and its ability to execute planned pricing actions.

• Tariff and Freight Cost Management: Vita Coco is planning to raise prices in the second half of the year to counter the impact of the 10% baseline U.S. import tariff and elevated ocean freight rates. The company’s diversified sourcing strategy is intended to mitigate potential future reciprocal tariffs.
• Continued Innovation and Channel Growth: New product lines and expanded distribution in foodservice and convenience channels are expected to drive incremental sales and brand relevance, while stepped-up international marketing should support growth abroad.
• Private Label Volatility and Category Health: While private label volumes are expected to fluctuate due to lost regions, management believes strong category trends and increased branded sales will offset this. Risks include uncertain consumer price elasticity and any escalation in tariff policy.

Top Analyst Questions

• Ethan Huntley (Goldman Sachs): Asked about mitigation efforts for tariffs and whether inventory was built up ahead of tariff implementation. Management explained that strong inventory was a result of normal planning, with mitigation focused on cost savings, supplier negotiations, and pricing actions if tariffs persist.
• Kaumil Gajrawala (Jefferies): Inquired about supply sufficiency to meet bold international growth goals. Management stated that coconut supply is ample, but expanding processing capacity requires careful multi-year planning, and they are investing accordingly.
• Eric Serotta (Morgan Stanley): Sought clarification on drivers of higher finished goods costs and the gross margin outlook. CFO Corey Baker cited new factories and higher startup costs as factors, and noted ocean freight rates are expected to soften later in the year, which should aid margins.
• Jim Salera (Stephens): Asked whether multipack growth was a result of consumers stocking up due to tariff headlines. Management responded that multipack momentum is a continuation of prior trends and not driven by recent external events.
• Eric Des Lauriers (Craig-Hallum): Probed management's confidence in consumer acceptance of price increases. Leadership said category prices remain affordable and are anchored by private label, suggesting manageable elasticity if competitors also raise prices.

Catalysts in Upcoming Quarters

In the next few quarters, the StockStory team will focus on (1) evidence that planned price increases are being successfully implemented and accepted by consumers, (2) improvements in operating margin and gross margin as freight costs and tariffs are managed, and (3) continued expansion in international markets, especially Germany and the U.K. Progress on restoring lost Walmart shelf space and scaling new foodservice partnerships will also be important indicators of execution.

Vita Coco currently trades at a forward P/E ratio of 27.2×. Should you double down or take your chips? The answer lies in our free research report.

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