COCO Q2 Deep Dive: Growth in Core Coconut Water and Innovation Offset Margin Pressure

Coconut water company The Vita Coco Company (NASDAQ:COCO) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 17.1% year on year to $168.8 million. On the other hand, the company’s full-year revenue guidance of $572.5 million at the midpoint came in 0.6% below analysts’ estimates. Its non-GAAP profit of $0.42 per share was 14.6% above analysts’ consensus estimates.

Is now the time to buy COCO? Find out in our full research report (it’s free).

StockStory’s Take

Vita Coco’s second quarter results were met with a negative market reaction, despite revenue and non-GAAP earnings exceeding Wall Street expectations. Management attributed the quarter’s revenue growth to strong demand in core coconut water products, rapid expansion in international markets, and the rollout of new beverages like Vita Coco Treats. CEO Martin Roper noted, “Net sales in the quarter were up 17%, driven by growth of the Vita Coco Coconut Water up 25%,” highlighting the influence of both category expansion and improved supply chain execution. However, gross margins declined from last year as inflation and higher freight costs weighed on profitability.

Looking ahead, management’s guidance is shaped by expectations for continued branded growth, especially in coconut water and emerging product lines, but also acknowledges persistent cost headwinds. Roper cautioned that, while top-line momentum is strong, “there’s a lag on the mitigation actions” for cost pressures such as tariffs and ocean freight, which are expected to impact margins in the near term. CFO Corey Baker added that further SG&A investments, particularly in international expansion and marketing for new products, remain key priorities to maintain growth. The company plans to navigate these pressures by leveraging its diversified supply chain and adjusting pricing as needed.

Key Insights from Management’s Remarks

Management pointed to healthy consumer demand, innovation in product offerings, and successful international expansion as the main contributors to the quarter’s results, while also flagging cost inflation and tariffs as significant margin headwinds.

• Coconut Water Category Growth: Vita Coco’s core coconut water line saw significant growth in both the U.S. and international markets, with household penetration and consumption per household identified as key drivers. Management highlighted that growth is broad-based, supported by category mainstreaming and expanded usage occasions.
• Innovation and Product Expansion: The national rollout of Vita Coco Treats, a coconut milk-based beverage, contributed to other products growing by over 100%. While distribution is not yet universal, management emphasized the early success and ongoing efforts to pitch additional retailers, citing the potential for Treats to become a long-term growth avenue.
• International Market Momentum: European sales, especially in the U.K. and Germany, grew rapidly, supported by increased marketing investment and brand share wins. Management believes international operations could eventually match the scale of the Americas segment, reflecting the underdeveloped state of the coconut water category in these regions.
• Private Label Volatility: The quarter included anticipated declines in private label sales due to lost contracts, but new private label business was secured for 2026. Management described the segment as healthy but lumpy, with future growth likely to be uneven as new programs ramp up.
• Margin Pressure from Costs: Gross margins fell due to higher ocean freight rates, inflationary cost factors, and the introduction of a 10% baseline tariff. Management expects further short-term volatility in freight and tariff-related expenses, with mitigation strategies including pricing adjustments and supply chain diversification.

Drivers of Future Performance

Vita Coco’s outlook centers on sustaining branded growth while managing ongoing cost headwinds from tariffs and freight, with international expansion and product innovation prioritized.

• Branded Product Expansion: Management expects high-teens growth in core coconut water products and incremental gains from new beverages like Vita Coco Treats. Efforts to expand SKUs in convenience stores, foodservice, and retail channels are anticipated to support continued sales momentum, particularly as distribution broadens.
• Cost Inflation and Tariff Risks: The company faces ongoing inflation in ocean freight and uncertainty regarding additional U.S. import tariffs on coconut water. Management is assuming a 10% tariff in current guidance but acknowledges the risk of higher rates, which could pressure gross margins. CFO Corey Baker said mitigation measures—such as pricing adjustments and supply chain flexibility—are being pursued.
• Strategic SG&A Investments: Increased spending on marketing and international operations is expected to drive long-term branded growth, but may limit operating leverage in the near term. Management sees these investments as necessary to build brand presence and capture share in underpenetrated markets.

Catalysts in Upcoming Quarters

For the upcoming quarters, the StockStory team will be monitoring (1) the rollout and performance of Vita Coco Treats in additional U.S. and international retail channels, (2) management’s ability to offset cost inflation and tariff-related margin pressures through supply chain and pricing actions, and (3) progress in expanding distribution with large partners like Walmart and private label wins for 2026. The pace of international category development and normalization of freight rates will also be important markers.

Vita Coco currently trades at $32.31, down from $36.77 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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