The Vita Coco Company, Inc. (COCO) Earnings

Management highlights

- **Category & Brand Growth**: Coconut water remains one of the fastest growing categories in the beverage aisle, with year-to-date 2026 retail dollar growth of 29% in the U.S. and 65% in measured European markets. Vita Coco branded coconut water gained share across major markets, matching the 29% U.S. year-to-date retail dollar growth and delivering 57% growth in measured European markets. In the U.S., two-thirds of branded growth comes from increased household penetration, and one-third from higher velocity per household, indicating strong brand momentum. The November 2025 Walmart reset added approximately 5% to year-to-date U.S. retail dollar scan growth. - **Copra Acquisition**: Vita Coco acquired Copra, Inc., a leading player in the U.S. super premium Thai Nam Hom coconut water segment, which represents approximately 13% of total U.S. coconut water sales and is growing faster than the overall category. Copra is the leading private label supplier for this chilled segment and has a fast-growing own branded business, with 42% year-to-date branded growth across U.S. food service and regional retailers. The acquisition adds an integrated sourcing and manufacturing facility in Thailand's Ratchaburi Province, enhancing Vita Coco's supply chain capabilities and positions the company to become the leading player in the super premium segment. The purchase price is $175 million upfront (80% cash, 20% stock) plus a performance-based earnout between $45 million and $100 million in 2029 tied to 2028 gross profit. Copra is projected to generate over $100 million in full year 2026 net sales, and the acquisition is expected to be accretive to adjusted EBITDA margins post-full integration. Vita Coco plans to invest ~$11 million in CapEx to double Copra's extraction output and improve efficiency. - **Cost Dynamics**: Year-to-date 2026 cost of goods has benefited from tariff refunds from 2025 and lower ocean freight costs relative to 2025 full year levels, partially offset by higher domestic logistics and finished goods costs. The company locked in fixed-rate contracts for ~50% of its remaining 2026 container needs for the April 2026–March 2027 period. Recent seasonal fuel and demand surcharges have been implemented by carriers, with uncertain duration. Incremental cost increases for packaging materials, domestic logistics, and energy from suppliers will begin impacting gross margin in mid-Q3 2026. Current tariff headroom allows the company to absorb short-term cost increases, but further sustained cost increases could lead to price increases in early 2027. - **Supply Chain Updates**: A devastating earthquake near General Santos, Philippines damaged a company factory, causing a temporary shutdown and ~1% loss of the company's full annual network production capacity. The company has increased its 2028 capacity targets in response to sustained strong category growth, and is working with multiple partners to secure long-term capacity and investing in additional technical resources to support growth.

Guidance

- The company raised full year 2026 guidance to reflect stronger-than-expected core business performance and the addition of Copra: new full year 2026 guidance calls for net sales of $790 million to $805 million, gross margins of ~40%, and adjusted EBITDA of $154 million to $161 million. - Full year 2026 expectations include U.S. overall coconut water category growth of ~20%, with healthy growth in international markets led by the U.K. and Germany. Consolidated Vita Coco branded coconut water net sales are expected to grow high teens to 20%, with U.S. branded net sales growing mid to high teens. U.S. private label net sales are expected to grow 90% to 100% full year 2026, driven by distribution gains, new accounts, and the addition of Copra. - 2026 gross margins are expected to improve over 2025 levels, supported by tariff refunds, 2025 branded pricing actions, and favorable full-year ocean freight rates, partially offset by cost of goods inflation and a shift to a higher mix of lower-margin private label volume. Gross margins are expected to be lower in H2 2026 than in H1 2026 due to these mix and cost impacts. - SG&A is expected to deliver ~1 percentage point of leverage as a percentage of net sales for 2026, with disciplined investment to support growth and Copra integration. - The Copra acquisition does not change the company's long-term financial targets of mid-teens branded net sales growth and high-teens adjusted EBITDA growth. - The company's board approved a $40 million increase to the stock buyback authorization, bringing remaining available capacity to $61 million under the total $105 million program.

Segment performance

**Americas Segment**: Net sales grew 21% year-over-year to $172 million, contributing 79.6% of consolidated Q2 2026 net sales. Within the segment, Vita Coco branded coconut water grew 15% to $138 million (80.2% of Americas segment net sales, 63.9% of consolidated net sales) on a 7% volume increase and 7% net price/mix benefit; private label net sales grew 83% to $27 million (15.7% of Americas segment net sales, 12.5% of consolidated net sales) on an 82% volume increase and 1% net price/mix benefit. **International Segment**: Net sales grew 63% year-over-year, contributing 20.4% of consolidated Q2 2026 net sales. Both branded Vita Coco coconut water and private label saw strong growth, with branded net sales up 60% and private label net sales up 82% year-over-year.

Risks & headwinds

- Recent carrier-imposed seasonal fuel and demand surcharges for ocean freight have increased near-term costs, and it is unclear how long these surcharges will remain in effect, creating pressure on gross margins in H2 2026. - Ongoing inflation in packaging materials, domestic logistics, and energy supplier costs will begin negatively impacting gross margin starting mid-Q3 2026. Sustained inflation could force price increases in early 2027, which could impact consumer demand. - The company is currently operating at ~95% production capacity, leaving limited room to accommodate unexpected demand spikes or supply chain disruptions. Unforeseen events like the General Santos, Philippines earthquake have already reduced annual production capacity by ~1%. - Integration of the Copra acquisition carries near-term uncertainty around integration costs and execution, leading management to build conservatism into 2026 SG&A guidance. - The super premium Nam Hom coconut water segment relies on unique regional sourcing, and scaling the segment depends on continued agricultural investment and planting in Thailand, which could limit long-term growth if supply does not expand as expected.

Analyst Q&A

• Q: The updated full year guidance implies top-line deceleration and margin deleverage in H2 2026, even after including Copra. What are the drivers of this, and how conservative is the guidance? /

  A: While core H2 growth is higher than prior guidance reflecting continued strong category trends, headwinds from planned distributor inventory builds and the Walmart load-in create the appearance of deceleration relative to H1. Cost inflation from freight and finished goods is starting to hit in Q3 and Q4, driving lower H2 margins. The guidance includes conservatism on SG&A to account for unforeseen Copra integration costs, as the acquisition just closed, leaving upside potential if execution goes better than expected.

• Q: What is the strategic rationale for acquiring Copra now, and what overlap exists between Copra's new capacity and legacy Vita Coco capacity plans? /

  A: The super premium coconut water segment is growing faster than the overall category, representing 13% of U.S. coconut water sales today with room to gain further share. Acquiring Copra gives Vita Coco access to the unique Nam Hom coconut sourcing, manufacturing infrastructure, and private label market position to compete long-term in this high-growth segment, boosting the company's overall category share. Copra's Thailand capacity is dedicated to the distinct Nam Hom product line, and is separate from legacy Vita Coco capacity plans, but both need expansion to support rapid category growth.

• Q: Private label growth was very strong in Q2. What drove this, and what is the expected long-term run rate for this segment? /

  A: Q2 U.S. private label growth was driven by regained distribution at major retailers and a new private label account that started shipping in the quarter, plus an initial pipeline fill for new distribution that creates a one-time uplift. International private label is growing in line with the rapidly expanding European coconut water category, particularly in Germany. For full year 2026, U.S. private label growth is guided to 90-100%, including Copra contribution, and long-term trends are expected to track overall category growth with modest upside from continued distribution gains.

• Q: How will Vita Coco commercialize Copra, and will it add a super premium line under the Vita Coco brand or grow the existing Copra brand? /

  A: The company plans to eventually become the leading branded player in the super premium segment, primarily growing the Copra brand to occupy this position. Copra is currently majority private label, but management follows the same playbook used for Vita Coco: building manufacturing and supply chain scale first to create a competitive moat, then expanding branded presence over time. Private label for this segment currently has lower gross margins but lower SG&A investment requirements, matching the dynamic of Vita Coco's legacy private label business.