Vita Coco Q2 2025 Earnings Report

Vita Coco EPS Results

• Actual EPS: $0.38
• Consensus EPS: $0.36
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.32

Vita Coco Revenue Results

• Actual Revenue: $168.76 million
• Expected Revenue: $162.20 million
• Beat/Miss: Beat by +$6.56 million
• YoY Revenue Growth: +17.10%

Vita Coco Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 8:30AM ET

The Vita Coco (NASDAQ:COCO) develops, markets, and distributes coconut water products under the Vita Coco brand name in the United States, Canada, Europe, the Middle East, Africa, and the Asia Pacific. The company offers coconut oil and coconut milk; juice; Runa, a plant-based energy drink; packaged water under the Ever & Ever brand name; and PWR LIFT, a protein-infused fitness drink. It also provides private label coconut water and oil to retailers. It distributes its products through club, food, drug, mass, convenience, e-commerce, and foodservice channels. The company was formerly known as All Market Inc. and changed its name to The Vita Coco Company, Inc. in September 2021.The Vita Coco Company, Inc. was incorporated in 2004 and is headquartered in New York, New York.

Vita Coco Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Q2 net sales rose 17% year-over-year to $169 million, driven by a 25% increase in coconut water and 102% growth in other products like Vita Coco Treats.
• Positive Sentiment: The national rollout of Vita Coco Treats added an estimated 4% incremental growth to the coconut water brand family in U.S. retail scans.
• Negative Sentiment: Consolidated gross margins fell about 450 basis points to 36% in Q2 due to elevated ocean freight costs, goods inflation, and a 10% baseline tariff; freight rates are expected to ease later in the year.
• Positive Sentiment: Higher coconut water inventory versus last year positions the company for a strong Q3 as it laps service issues and reduces promotional activity.
• Positive Sentiment: International net sales climbed 37% (coconut water up 43%) on strong U.K. and German growth, with plans to scale European operations to match the Americas business.

Presentation

[Operator]

Hello, and welcome to the Vida Coco Company Second Quarter twenty twenty five Earnings Conference Call. My name is Michelle. I'll be coordinating your call today. Following prepared remarks, we will open the call to your questions with instructions to be given at that time. I'll now hand the call over to John Mills with ICR. Please go ahead.

[John Mills, Managing Partner at ICR]

Thank you and welcome to the Vida Coco Company second quarter twenty twenty five earnings results conference call. Today's call is being recorded. With us are Mr. Mike Kerben, Executive Chairman Martin Roper, Chief Executive Officer and Corey Baker, Chief Financial Officer. By now everyone should have access to the company's second quarter earnings release issued earlier today.

[John Mills, Managing Partner at ICR]

This information is available on the Investor Relations section of the Vida Coco Company's website at investors.thevitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial performance results. Certain comments made on this call include forward looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements are based on management's current expectations and beliefs concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward looking statements. Please refer to today's press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today.

[John Mills, Managing Partner at ICR]

Also during the call we will use some non GAAP financial measures as we describe our business performance. Our SEC filings as well as the earnings press release and supplementary earnings presentation provide reconciliations of the non GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well. And with that, it is my pleasure to now turn the call over to Mr. Mike Urban, our Co Founder and Executive Chairman.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Thanks, John, and good morning, everyone. Thank you for joining us today to discuss our second quarter financial results and our expectations for the balance of 2025. I wanna start by thanking all of our colleagues across the globe for our continued strong performance, particularly in a dynamic environment and for their commitment to the Vital Go Go Company and advancing our mission of creating ethical, sustainable, better for you beverages that uplift our communities and do right by our planet. In the second quarter, we continued to see strong performance against our key initiatives. Coconut water remains one of the fastest growing categories in the beverage aisle, growing 20% year to date in The US and 35% in The UK based on Surcana data.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

This coupled with the acceleration of the emerging German market has resulted in very strong global net sales performance for our second quarter and similarly strong reported gross profit, net income and adjusted EBITDA. Year to date, according to Surcana, Vita Cocoa Coconut Water continues to perform very well, growing 16% in retail dollars in The US and growing 39% in The UK. In 2025, our US commercial initiatives include emphasis on Vita Coco multipacks, Vita Coco farmers organic, and Vita Coco juice, the expansion of our SKUs in convenience stores, continued investment in our food service efforts, and the national launch of Vita Coco Treats. We're excited about the initial performance of Vita Coco Treats in The US and for the future of innovative coconut milk based beverages, which creates new usage occasions that could offer us yet another path for long term growth. According to Surcana, Vita Cocoa treats would have added 4% to the growth rate of Vita Cocoa Coconut Water in the second quarter US retail scans if reported as a consolidated brand family.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

This is a good start, but we still have a lot of work to do. Year to date, our international business is very healthy and accelerated with strong performance in Europe. Our increased investment this year in The UK, Germany, and other select European markets is paying off with healthy growth and brand share wins, and we intend to continue our focused investment in select markets in an effort to drive long term gain. In our investor presentation on June 4, which is available on our investor relations website, we laid out an index for estimated consumption per capita for coconut water in our current major markets. While The US is the most developed market, household penetration is still well below other juices like cranberry juice or orange juice, And our current Vita Coco coconut water growth in The US is coming from both growth in household and growth in velocity per household through consumption occasion expansion.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

We're excited about the current performance and believe that we can at least double The US coconut water category in the coming years. We believe that the coconut water category is still in its infancy in markets outside of The US and that there is significant long term potential as these markets develop. We're very proud to be the leading brand in our primary markets and the primary driver of this category growth. Over time, we believe our international business will become a larger part of our consolidated growth story, and I expect our European operations could eventually be as large as our Americas businesses today. In summary, the acceleration of the category that we saw in late twenty twenty four has continued through the 2025.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

And with our significantly stronger inventory position, strong retail programming and innovation, and additional production capacity, I believe that we are well positioned to continue our growth and I'm excited for the remainder of the year. And now I'll turn the call over to our Chief Executive Officer, Martin Roper.

[Martin Roper, CEO & Director at The Vita Coco Company]

Thanks, Mike, and good morning, everyone. I'm pleased to report Vita Coco's continued strong performance in the second quarter. Net sales in the quarter were up 17% driven by growth of the Vita Coco coconut water up 25% benefiting from strong growth in the coconut water category and improvements in our own available inventory and service levels. We also saw 102% growth in our other products category, primarily representing the positive impact from vitacoco treats. Our branded scan results in The United States were very strong, although slightly behind category growth due to the drag in our scans, primarily created by the changes in the Walmart set late last year.

[Martin Roper, CEO & Director at The Vita Coco Company]

Our Walmart trends improved slightly during the quarter, but we're still down high single to low double digits, creating an estimated low single digit drag on our total US branded scan trends in the quarter. We've had preliminary discussions with Walmart about the next potential reset. Based on those discussions, expect an improvement in distribution with a joint goal of attracting coconut water category shoppers to Walmart. If these plans are implemented, we believe that Walmart will become a growth engine for our brand in 2026 and beyond. The second quarter saw the impact of the private label transition that we expected and referenced in February.

[Martin Roper, CEO & Director at The Vita Coco Company]

The private label business remains strategically important to us and we continue to bid on select private label opportunities. We believe we are very competitive in these bids and recently secured new private label business, which will benefit us in 2026. Our gross margins were down in the quarter relative to last year due to a number of inflationary cost factors, including higher ocean freight rates, cost of goods inflation due primarily to the addition of new capacity and the initial impact of the 10% baseline tariff, which started to hit our P and L late in Q2. We believe ocean freight rates are still elevated relative to historical levels and we're operating primarily on spot rates with some fixed price arrangements on certain lanes to secure capacity. With U.

[Martin Roper, CEO & Director at The Vita Coco Company]

S. Tariff outcomes uncertain, we expect short term volatility in ocean freight rates, but we believe that rates should decline on average through the balance of the year. If we see competitive fixed rates offers for long term contracts that make sense to us, we would be willing to enter into fixed rate agreements to cover more lanes. Entering the third quarter, we have significantly more Vita Cocoa Coconut Water inventory than at the same time last year and expect a very strong third quarter for our branded business as we lap major service issues and reduce promotional activity from last year. In the second half of the year, we plan to use our improved inventory position to drive consumer trial and to secure incremental promotional opportunities where available.

[Martin Roper, CEO & Director at The Vita Coco Company]

We believe that the strong category growth is a positive indicator for future growth and supportive of our long term branded growth algorithm. For 2026, we have secured adequate production capacity to support continued branded growth and to support our expected private label relationships. Our planned US based price increase in May to cover inflationary cost of goods pressures produced an approximately 7% increase at US food retail according to Surcana over the quarter. The initial consumer reaction to these increases has been in line with our expectations, but it is too early to fully understand any long term price elasticity impacts. We're currently assuming that the baseline U.

[Martin Roper, CEO & Director at The Vita Coco Company]

S. Tariff rate of 10% continues, which as we noted last quarter applies to approximately 60% of our global cost of goods sold. We are currently executing U. S. Retail price increases to cover the unmitigated tariff costs of this baseline rate.

[Martin Roper, CEO & Director at The Vita Coco Company]

With our diversified supply chain and the important role of coconut water in our consumers lifestyles, a healthy category, and our brand strength, we believe that we can navigate any additional tariff impacts. Given the uncertainty on the timing and sizing of any additional tariffs above the baseline 10% rate and the uncertainty of the lead time impact of implementing any mitigating activities, we are not including any such announced tariffs in our outlook. We have a global diversified supply chain sourcing primarily from The Philippines and Brazil with some additional sourcing from Thailand, Vietnam, Sri Lanka, and Malaysia, which gives us flexibility to react to any long term tariff changes. To summarize, our category is very healthy. Our brand is performing and our supply chain is supporting growth and provides us with flexibility to mitigate the potential tariff impacts long term.

[Martin Roper, CEO & Director at The Vita Coco Company]

We are confident in our team's ability to execute and deliver on our plans and and for the full year 2025 our confidence in the category invited cocoa brand trends remains very high. We believe that longer term we will benefit when nation freight rates return to historical levels and this should allow us to achieve or beat our long term financial targets. With that, I will turn the call over to Cory Baker, our Chief Financial Officer.

[Corey Baker, CFO at The Vita Coco Company]

Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the second quarter twenty twenty five financial results and our outlook for the full year. For the 2025, net sales remained very healthy, increasing $25,000,000 or 17% year over year to $169,000,000 Vita Cocoa Coconut Water grew 25%, partially offset by private label declines of 25%, where we have begun to see the impact of the private label losses we discussed last quarter. On a segment basis within The Americas, Vita Coco Coconut Water increased net sales 22% to $120,000,000 and private label decreased 37% to $15,000,000 Vita Coco Coconut Water saw a 21% volume increase and a slight net price mix benefit, while private label sales were driven by a 34% decrease in volume and a 3% decrease in price mix. For the 2025, our International segment continued to deliver strong results, with net sales up 37% and Vita Coco coconut water growing 43%, driven by strong growth across all our major markets.

[Corey Baker, CFO at The Vita Coco Company]

Private label sales increased 29% due to strong sales of private label coconut water. For the quarter, consolidated gross profit was $61,000,000 an increase of $3,000,000 versus the prior year. On a percentage basis, gross margins finished at 36% for the quarter. This was down approximately four fifty basis points from the 41% reported in Q2 twenty twenty four. This decrease in gross margins resulted from higher year on year ocean freight rates, higher finished goods product costs and a 10% baseline tariff that began to impact our gross margins late in the quarter.

[Corey Baker, CFO at The Vita Coco Company]

This was partially offset by favorable product mix. Moving on to operating expenses. SG and A costs increased $7,000,000 to $36,000,000 within the quarter, driven by increased marketing expenses, higher people related costs, increased reserves for bad debt and overlap of rent expense for our new office. Net income attributable to shareholders for the quarter was $23,000,000 or $0.38 per diluted share compared to $19,000,000 or $0.32 per diluted share for the prior year. Net income benefited from higher gross profit and our larger unrealized gain on derivatives and a lower year on year tax rate, partially offset by higher year on year SG and A spending.

[Corey Baker, CFO at The Vita Coco Company]

Our effective tax rate for Q2 twenty twenty five was 19% versus 25% last year, which is primarily driven by discrete tax benefits and a favorable geographic mix of pretax profits. Q2 twenty twenty five adjusted EBITDA was $29,000,000 or 17% of net sales compared to $32,000,000 or 22% of net sales in 2024. The decrease in adjusted EBITDA was primarily due to the higher SG and A expenses, partially offset by higher year on year gross profit. Turning to our balance sheet and cash flow. As of 06/30/2025, our balance sheet remained very strong with total cash on hand of $167,000,000 and no debt under our revolving credit facility.

[Corey Baker, CFO at The Vita Coco Company]

Our accounts receivable increased by $39,000,000 versus 12/31/2024, primarily due to increased net sales within the quarter. We exited Q2 with a very strong category in The Americas and Europe, healthy inventory levels, exciting innovation and confidence in our team's execution and our VIACOCO brand. Our updated guidance reflects our current best assumptions of marketplace trends, competitive price actions and our expected price elasticity under a 10% baseline tariff environment and an assumption that ocean freight rates will soften through the balance of the year. We are confident in our ability to continue to deliver strong top line performance and therefore are raising our full year net sales guidance to between $565,000,000 and $580,000,000 We expect gross margins at the midpoint of our prior guidance range of approximately 36%, with SG and A growing low to mid single digits, resulting in full year adjusted EBITDA of 86,000,000 to $92,000,000 We are now expecting Vita Cocoa Coconut Water sales to grow in the high teens with incremental growth coming from Vita Cocoa Treats, partially offset by the weakness in our private label business. We expect strong Q3 net sales performance as we lap the inventory shortages of last year with a tougher Q4 net sales comparable due to the benefit of distributor and retail inventory replenishment.

[Corey Baker, CFO at The Vita Coco Company]

We are expecting gross margins for the full year of approximately 36%. We expect gross margins to be sequentially lower in Q3 due to the timing of tariff impacts and mitigating pricing actions as well as temporarily higher ocean freight rates flowing through the P and L with Q4 gross margin sequentially improving. We expect full year SG and A to increase in the low to mid single digits due to increased people investments, including increased incentive and stock compensation and other focused investments to support the delivery of our growth objectives as we aim to maintain our strong branded growth momentum into 2026. And with that, I'd like to turn the call back to Martin for his closing remarks.

[Martin Roper, CEO & Director at The Vita Coco Company]

Thank you, Corey. To close, I'd like to reiterate our confidence in the long term potential of The Vita Coco Company, our ability to build a better beverage platform and the strength of our Vida Cocoa brand and the coconut water category. We are confident in our ability to navigate the current environment and are excited about our key initiatives to drive growth. We have strong brand and a solid balance sheet, and we are well positioned to drive category and brand growth both domestically and internationally. Thank you for joining us today and thank you for your interest in The Vitacoco Company.

[Martin Roper, CEO & Director at The Vita Coco Company]

That concludes our second quarter twenty twenty five prepared remarks and we will now take your questions.

[Operator]

Thank Our first question is going to come from the line of Kamal Gyarwala with Jefferies. Your line is open. Please go ahead.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Everybody. Good morning. I guess a couple of things. The first on revenue, obviously doing very, very well. Can you maybe is it possible to parse out how much of that is sort of inventory rebuild and such now that supply is in a place where you'd like it to be versus some equivalent of like same store sales type of trends?

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

And then with treats and treats going national, is happening? Has it already happened? And is there just anything in the figures that we should be aware of as it relates to that contribution?

[Martin Roper, CEO & Director at The Vita Coco Company]

Joel, well, good morning. So on the retail scan side, it's obviously reflective of healthy inventory, but we had healthy inventory in Q2 of last year. So I wouldn't say that any of the scan trend data is reflective of easy comparison parables. We will certainly see that in Q3, but I wouldn't say that in Q2. And then relative to treats, we rolled treats nationally sort of ended Q1 in The US.

[Martin Roper, CEO & Director at The Vita Coco Company]

It was also introduced in The UK. And so I would say that's national and we have good coverage. We didn't get complete retailer authorizations everywhere, but for a first step, it was very good. So I think what you're seeing on sort of shipments certainly is the launch in Q1, which would obviously have benefited a little bit from inventory fill of the pipeline. And then Q2 is probably more reflective of sort of potential ongoing state.

[Martin Roper, CEO & Director at The Vita Coco Company]

But obviously, until you get repeat going, we don't really know what the ongoing rate of sales are. But we're very happy right now, and I think as we indicated, it's added a little bit to our total branded scan volumes in Sucana in The US. Importantly, Sucana, depending on how you buy it or Nielsen, may only report coconut water. So treats is a coconut milk based beverage and may be outside of the visible Vita Coco brand trends that people see depending on what data they have.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Just add a couple of things. I think in terms of growth, household and consumption per household are growing really fast, and that is probably the biggest driver of the growth as the category is mainstreaming. And then in terms of treats, like Martin mentioned, yeah, we we we had a national rollout, but it was in specific retailers. So there's a lot of lot of distribution to be had, which will be pitched coming up in the next month or two for, next resets, which would be next March. So a lot of opportunities to build distribution on it.

[Corey Baker, CFO at The Vita Coco Company]

The one thing I'd add on the top line growth, Kamal, is the international business is very, very strong, growing over 40 in the quarter and not really impacted at all by any out of stock. Small amount, it is mostly consumer growth in UK and Germany.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Okay. Got it. Actually, brings up another question, but I wanted to on international, should we how should we be just thinking about sort of scale mix effect margin is, you know, I'm looking at your, you know, your SG and A has come up and it's been a lot of people and a lot of other investments in the brands. How are you sort of are you sort of spending up ahead of growth? Are you looking to maybe catch up?

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Because obviously growth is quite substantial and you need maybe a higher base of investment. How are you sort of thinking about that between domestically and internationally?

[Corey Baker, CFO at The Vita Coco Company]

From an SG and A perspective, we are investing, I'd say, a little bit ahead of the curve, and we're making strategic investments. We've talked about first Germany with increased SG and A marketing and then as we look to expand, but not doing anything excessive, so it's not catch up. And then to support the growth we're seeing in both markets, we've been investing in supply chain resources to ensure we have the supply, right the quality, the right factories to support that growth. So SG and A growing mid single digits, investing ahead of the curve, but nothing crazy, I'd say.

[Kaumil Gajrawala, Managing Director at Jefferies Financial Group]

Got it. Thank you.

[Operator]

Thank you. And one moment as we move on to our next question. And our next question is gonna come from the line of Bonnie Herzog with Goldman Sachs. Your guys is your line is open. Please go ahead.

[Bonnie Herzog, Managing Director at Goldman Sachs]

All right. Thank you. Good morning,

[Martin Roper, CEO & Director at The Vita Coco Company]

Good morning, Greg.

[Bonnie Herzog, Managing Director at Goldman Sachs]

I had a couple of questions on your guidance. First, you raised your top line growth and essentially narrowed your gross margin guidance, but maintained your EBITDA guidance, which I guess implies less leverage. So just trying to understand maybe what changed there. And then second, your full year EBITDA guidance does imply a lot faster growth in the second half of about, I think it's 22% versus the decline you saw in the first half. So I realize the year over year compares are easier in the back half, but just hoping you could give us just a little bit more color on the drivers of this expected acceleration.

[Martin Roper, CEO & Director at The Vita Coco Company]

Sure, well, me take it and then maybe Corey can cover for what I might maybe miss. I think we obviously feel very good about our branded top line, and I think that's driving the increase guidance as we look out on the back of the year. Certainly, in the second half of the year, we're gonna benefit from a very easy comparisons in q three relative to the out of stocks that we had last year and then a little bit of a swing back in Q4 where Q4 last year we benefited from replenishing the inventory. But we have some pretty easy comparisons. So we feel pretty good.

[Martin Roper, CEO & Director at The Vita Coco Company]

I think on the gross margin side, frankly, we struggle on guidance. We're saying it's approximately 36% and we're pretty obviously comfortable with that. Obviously, that's a tightening, I suppose, from 35% to 37%, but I don't think we really wanted to do 35.5 to 36.5%. It felt sort of silly. But what I would say on the cost side is we've got a number of factors going on.

[Martin Roper, CEO & Director at The Vita Coco Company]

There's obviously some higher ocean freight that we experienced in Q2 from the spike that occurred in the indexes that, you know, will obviously flow through into our P and L in the second half of the year. That was unexpected, you know, when we last talked to you. We now have a little bit of clarity on the timing of the tariff impact relative to mitigating actions, there's a little bit of a lag on the mitigating actions. So that's also a headwind on the cost of goods side. So that's pulling cost of goods higher, I suppose, than perhaps we would have anticipated, and that's how the whole thing sort of fell together. And sorry if I missed anything.

[Corey Baker, CFO at The Vita Coco Company]

Maybe just two things. One, we talked about in the prepared remarks, the pricing is starting to hit the market, but there is some factors and some mix that drove it a little bit later than expected, which pressures the Q3 margins a bit. And then our SG and A, we talked about last quarter, is a bit more aligned with our sales curve throughout the year. And part as we look into the back here, we did see some increased incentive comp and stock comp that drives a little bit of variance. But overall, that's how the guidance came together.

[Bonnie Herzog, Managing Director at Goldman Sachs]

Okay. That's helpful. So just to, I guess, summarize, so you're feeling good about the top line, the momentum, what you have planned in the back half, but maybe just some conservatism based on or despite, I guess, the freight rates declining throughout the year and just kind of talking through some of the other cost pressures or headwinds that you're facing. Is that how we should think about it?

[Corey Baker, CFO at The Vita Coco Company]

Yes. With what Mark was saying, there's Uh-huh. With higher ocean freight

[Bonnie Herzog, Managing Director at Goldman Sachs]

Yeah.

[Corey Baker, CFO at The Vita Coco Company]

Earlier in the summer that will flow through in q three. So our ability of frame rates continue to drop. Much of that will flow into next year at this point.

[Bonnie Herzog, Managing Director at Goldman Sachs]

Okay.

[Corey Baker, CFO at The Vita Coco Company]

So Okay. We don't see as much motion freight tailwind as maybe we would we would think.

[Bonnie Herzog, Managing Director at Goldman Sachs]

That helps. And then maybe just helps. And then maybe a follow-up just in terms of reinvestments like the SG and A was up quite a bit in Q2. So any more color on that? And then again, just with you guys maintaining the SG and A guidance for the year does imply slower SG and A growth in the second half.

[Bonnie Herzog, Managing Director at Goldman Sachs]

Is that maybe if you could, I don't know, drill down a little bit on the SG and A line, just kind of help us understand just general expense versus some of the marketing, how we should think about your reinvestment needs in the second half? Thank you.

[Corey Baker, CFO at The Vita Coco Company]

The largest was marketing spend in the first half, and that is a combination of the treats, the rollout, a bit of timing overall in the full year marketing. And then the people cost, as I discussed earlier, are led by international, second largest bucket, as well as incentive comp and stock comp items that ultimately would be adjusted out of the EBITDA. Then we had a couple they're smaller but unique items, our bad debt reserves, which is just a calculation on our current accounts receivable increase this year versus actually income last year, so a bit of a unique item. And then we are in the process of moving offices, so we're currently experiencing double rent. So towards the back end of the year, those things normalize.

[Corey Baker, CFO at The Vita Coco Company]

The marketing was more accelerated year to date than it will be in the back half. The the incentive structures will balance out. So just it's a bit more consistent to the year this year than last year.

[Bonnie Herzog, Managing Director at Goldman Sachs]

Okay. That's helpful. I appreciate it. I'll pass it on. Thank you.

[Operator]

Thank you. And one moment for our next question. Our next question comes from the line of Christian Jungarwa with BofA. Your line is open. Please go ahead.

[Christian Junquera, Equity Research Analyst at Bank of America]

Hey, everyone. You have Christian on for Pete. Thanks for taking our question. First, on tariffs, just how potentially higher tariffs than the 10% baseline figure would impact EBITDA this year and potentially next year? And how confident are you guys in that you are going to see 10% tariffs? Thanks.

[Martin Roper, CEO & Director at The Vita Coco Company]

So I think what we would say on tariffs is obviously there's a lot of uncertainty. We're currently operating under a 10% baseline tariff environment, and that is included in our guidance. Last quarter, we discussed how the tariffs would apply to our US based product cost and we provided, I think, the estimate that you wanted to back into it. You took 6% of our global cost of goods dollars and that would approximate to the dollar cost that we think the tariffs would equate to. And that's sort of how you back into an estimate of tariff impact, let's say, a 10% rate, you would come up with a number.

[Martin Roper, CEO & Director at The Vita Coco Company]

Also last quarter, we said if the retaliatory rates were applied, we expected the tariffs based on our current sourcing to be in the low 20s as a percentage rate. Now, obviously, then, you know, the announcements that have been happening haven't really aligned with retaliatory, so that's why we're not really talking about that. And many of the announcements that have happened have been announced frameworks for trade agreements that we haven't seen details yet. And because we haven't seen details yet, we don't really know what's happening on August 1. We're just not including it in any forward looking statements.

[Martin Roper, CEO & Director at The Vita Coco Company]

On the positive side, you know, obviously, everyone's talking and deals are being negotiated that potentially are lower than the recovery rates. Also, on a positive side, there has been anecdotal comments that maybe, you know, commodities and agricultural goods that aren't available in The US might be treated differently, but it's all hypothetical, and there is no specifics. And so very hard to comment on other than to say that we're operating the business and focusing on growth and assuming that once we know what the long term impact on our business is, we can then make long term plans to to deal with it and to mitigate it to the best of our ability. So that's how we're thinking about it. And right now, you know, we have as good as information as everyone else does in the market.

[Christian Junquera, Equity Research Analyst at Bank of America]

Okay. Got it. And then just one more. Just, a common theme from CPG earnings throughout this year has just been how the Hispanic shopper is spending less, and that's putting pressure on companies. I believe you guys have sizable exposure towards the Hispanic consumer yet.

[Christian Junquera, Equity Research Analyst at Bank of America]

You guys continue to post strong sales growth. Do you have any insights on the Hispanic consumer or why you seem to be insulated from this trend? And that's it for me. Thanks, guys.

[Martin Roper, CEO & Director at The Vita Coco Company]

So I don't think our consumer insights is robust enough to sort of pull it all apart. But what we would say is our convenience store trends are very strong, and I think that's visible in the, you know, available scan data. And to us, if there was weakness in the Hispanic consumer as it relates to our brand, that's probably where it would show up. And I think that's where it's showing up on the beer side for those guys who are talking about it. So we don't see it.

[Martin Roper, CEO & Director at The Vita Coco Company]

I think for us, our consumers, while we do over index to Hispanic and Asian and African American, we also tend to over index to what I would call average wealth to above average wealth households or income households. So we probably are a little less exposed to the lower income brackets where maybe that is occurring, but that's again just a guess. We don't have good data on it and frankly given our trends, we're just focused on continuing them.

[Operator]

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Eric DeLorius with Craig Hallum Capital Group. Your line is open. Please go ahead.

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Great. Thank you for taking my questions and congrats on continued very strong top line results here.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Thanks, sir.

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

First one for me on private label. Just trying to help kind of just square the outlook here. So we had some lost regions that impacted Q2. I think I heard from Martin that you perhaps won some additional private label contracts recently. I guess just kind of from these levels in Q2, seasonally adjusted, should we expect modest growth going forward?

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

I guess just overall how to think about potential volatility in private label in the coming quarters?

[Martin Roper, CEO & Director at The Vita Coco Company]

Yeah. Great question, Eric. I think as we said earlier in the year that we lost some regions across multiple retailers, the first impact of that was visible in Q2. The forward looking impact of that is that frankly complicated because, for instance, in Q3 last year, we had inventory issues relative to private label, and therefore, the shipping shipment comparisons are very easy. So I think it's going to be pretty turbulent on a comparable basis for the balance of the year.

[Martin Roper, CEO & Director at The Vita Coco Company]

What I would say is that Q2 reflects all the known losses that we are aware of, and it's probably a pretty good indication of what future trends might look like on a long term basis. But that being said, private label itself is pretty healthy right now, so you're seeing offsetting growth from the category. And on top of that, as we indicated, we have won an additional piece of business that we're excited about. It won't impact until '26. So that's, I think, the best color I can provide you for your modeling.

[Martin Roper, CEO & Director at The Vita Coco Company]

So it's complicated and it's murky because of the year on year, but there's nothing new to report other than that we want something that will help us in '26.

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

No. That's all very helpful. I appreciate that. And just quick one on Walmart. Remind us the timing around shelf resets here and when you may have clarity on if Walmart will go through with these, expanded distribution plans?

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Timing is October, September, October. Some time.

[Martin Roper, CEO & Director at The Vita Coco Company]

If they stick to last year's timing. Right? Last year's timing was sort of November ish. And if they stick to an annual cadence, then we would hope to make progress on this in early q four.

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Yep. Great. And then just last one for me on treats and kind of innovation as a whole. So very nice contribution from treats early on that's rolling out nationally. Can you just kind of comment on how you see the potential for coconut milk based beverages kind of as a category?

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

As you guys kind of look at this, I mean, this mostly be something similar to treats where it's a bit of a sweeter, like indulgent option as opposed to some of the better for you aspects of coconut water? And I guess just overall, I mean, should we should we kind of be thinking of a shift in focus from you guys on the innovation front towards, you know, more coconut milk beverages and away from perhaps isotonics and energy drinks?

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Definitely not away from. I think continuing to, you know, focus on coconut water as as a great sport drink and as super refreshing and as used in all these incredible usage occasions from, you know, the hangover cure to cocktail mixers to smoothies to all of these things. I think as we think about coconut milk based beverages, it's somewhat new to us. It's somewhat new to The US. It's a trend that's growing really quickly and has become quite large in other parts of the world, specifically Asia, China, throughout all of Asia, using coconut milk as a base for this kind of midday indulgent treat.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

It's you see it in all of the coffee shops. The top best selling item is a coconut is is always a coconut milk based refreshment. And so we think that that trend continues and and really expands in North America and Western Europe and throughout the rest of the world. And it's something we want to be, you know, a driver of and big part of. So it's another avenue for growth, not necessarily, you know, taking away from the core, which is by the cocoa coconut water, which we think is still in its early days and has a huge opportunity to continue to grow as as a hydration drink.

[Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Got it. It's very helpful. Thanks for taking my questions.

[Operator]

Thank you. One moment for our next question. Our next question is gonna come from the line of Jim Salera with Stephens. Your line is open. Please go ahead.

[Jim Salera, Research Analyst at Stephens Inc]

Hey, guys. Good morning. Thanks for taking our question. Corey, I just wanted to maybe a quick housekeeping question. You mentioned 4Q gross margin improving sequentially from 3Q.

[Jim Salera, Research Analyst at Stephens Inc]

Do we expect that to still be down from 2Q level? Or just if you can kind of level set that cadence for us just for starters?

[Corey Baker, CFO at The Vita Coco Company]

We haven't provided the quarterly expectation in Q4, especially due to the size, is generally lower year on year throughout the year than us because of the size of the volume within the quarter and some of the fixed investments driving higher costs. But what we do see in the more short term is that impact of tariffs at the beginning of Q3 with the delay of pricing driving it down from Q1, And then you get to the overall approximately 36 for the year based on the remainder of the year. Okay.

[Jim Salera, Research Analyst at Stephens Inc]

And then I certainly appreciate the difficulty of forecasting given all the new cycle and changing tariff rates. But at least what's been announced is the negotiated rate for The Philippines is, I believe, 19%. And so if the assumption is a 10% baseline in your guidance, but we assume that the deal for The Philippines materializes as it's been reported, would it be safe to say that the full year, that 36 gross margin would probably we would probably undershoot that a little bit if we run through a 19% tariff on The Philippines, even setting aside, you know, whatever ends up happening with Brazil?

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

I would say that, yes, the 19% has been announced. But yesterday, you know, commerce secretary Howard Lutnick on Squawk Box said that president Trump has agreed to set zero tariffs for those natural resources that are not grown in The US in trade deals. So we don't know. But if if we're looking at 19% from The Philippines and if our average goes from 10 to 19 or 20 or whatever it is, we feel that we can manage that between between margin mix in '26 with more branded and branded growth, ocean freight rates declining, which we see happening and continuing to happen, and potentially some additional pricing, we think that if that does happen, we can manage the business accordingly.

[Martin Roper, CEO & Director at The Vita Coco Company]

Again, just to be clear, our guidance assumes 10 ongoing. It doesn't assume anything else. And certainly in our mitigation efforts, once we know what the, you know, I suppose the guidelines are or what the rules are, then we can mitigate, but there is a lag. Right? So, again, I think, you know, long term, we're like, okay, We'll be totally fine.

[Martin Roper, CEO & Director at The Vita Coco Company]

And in the medium term, it's like, let's not do anything silly based on announcements that may not, you know, impact us because, again, you know, the the the details are in the details, but we don't have. Right? So that's how we're thinking about it. And our primary focus and our messages to our team is let's continue to drive top line growth and everything will be fine.

[Jim Salera, Research Analyst at Stephens Inc]

Great. And then maybe just one quick follow-up on U. S. Private label sales. I think in the quarter, they were just shy of $15,000,000 Is that a good dollar run rate to think about just kind of for the remainder of the year as we progress forward kind of in that $15,000,000 range or any incremental upside downside to that?

[Corey Baker, CFO at The Vita Coco Company]

The two pieces, what Martin said, Q2 is somewhat representative of the ongoing business. As we talked in the past, private label is hard to capture because the revenue is recorded a little bit differently. But we do see growth in the category overall and and faster growth in private label across the category, plus the incremental business coming that Martin referenced in '26. So we would hope that that number continues to grow from a baseline.

[Jim Salera, Research Analyst at Stephens Inc]

Got it. Great. I appreciate all the detail, guys. I'll hop back in the queue.

[Martin Roper, CEO & Director at The Vita Coco Company]

You. Thanks.

[Operator]

You. And one moment for our next question. Our next question comes from the line of Robert Ottenstein with Evercore ISI. Your line is open. Please go ahead.

[Robert Ottenstein, Senior MD at Evercore]

Great. Thank you very much and congratulations on the continued tremendous success. What I want to do is kind of try to get a little below the hood in terms of that success and maybe understand a little bit about your marketing and category building efforts in The U. S. That have been so successful in terms of at this point, what particular demographics are you targeting for increased household penetration if in fact you're doing that?

[Robert Ottenstein, Senior MD at Evercore]

What particular categories are you looking to gain share from or rather maybe occasions from? It's our sense that four, five years ago, it was more from kind of juice and water. Now maybe it's more sports drinks. So is that happening? So just trying to understand a little bit about, I know you're going into C stores and that's working really well, but trying to understand maybe some of the brand building marketing aspects of your growth strategy.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Thanks. Yeah. I think it's a lot of what we've been doing the last several years and continuing to do that. So if we think about where we're pulling from, it remains pretty equal from three major categories. Right?

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

It's sports drinks, it's enhanced bottled water, and juice. And that continues. We are from a marketing perspective for the first time in a few years, really focusing a little bit heavier than we might have historically on the sports drink aspect, both through our marketing and our communication, and that seems to be working, and we're excited about that. And in terms of demographics, we're growing across all demographics. We're focusing our marketing efforts on young multicultural, more urban consumers, but it is spreading across all demographics.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

We're seeing significant growth in truck stops in the middle of the country. I mean, the category just seems to be working very well everywhere, which is exciting, but the focus of our marketing efforts remains the same that it's been the past couple of years.

[Robert Ottenstein, Senior MD at Evercore]

That's great. And then, you know, as a follow-up, is your strategy in terms of what you're focusing on along the lines that you just mentioned the same, pretty much the same in Europe or are there nuances, regional nuances, whether it's in The UK or Germany that we should be aware of?

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Pretty similar. I mean, there there are regional nuances in terms of, you know, focus periods, whether it be Ramadan, The UK, and these type of things that that, you know, might be different focuses to Hispanic consumers in The US during certain periods. But for the most part, it is the same. Is it is targeting young multicultural consumer.

[Martin Roper, CEO & Director at The Vita Coco Company]

Yeah. And I think one slight difference in in Europe is the category is underdeveloped relative to the to to The US, and I think that's, you know, a huge opportunity for us. So there's a lot more category building and education we have to drive in Europe. And, certainly, that message is being received pretty well because the growth rates are very healthy.

[Corey Baker, CFO at The Vita Coco Company]

Great. Alright.

[Martin Roper, CEO & Director at The Vita Coco Company]

And it's very and it's very early in category development phase.

[Robert Ottenstein, Senior MD at Evercore]

No. Nope. Super exciting. Thank you very much.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

Thanks so much.

[Operator]

Thank you. Our next question is going to come from the line of Michael Lavery with Piper Sandler. Your line is open. Please go ahead.

[Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Thank you. Good morning. Just wanted to touch on freight rates. You mentioned you expect easing later in the year. But can you give a sense of maybe how much you're contracting or already securing for 2026?

[Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies]

I think for recent quarters, you've mostly been more exposed to the spot rates and the contracted levels weren't as favorable. That changed? What's the kind of forward position that you're sitting on now?

[Martin Roper, CEO & Director at The Vita Coco Company]

Yes. I think on a forward basis, we don't have much coverage on ocean freight rates. I think our view is still that they are sort of higher than long term averages, that there is more downward pressure than upward pressure that we see right now partly due to increased capacity and decreasing demand. Obviously, it's pretty volatile. So, you know, that's a consideration, but we think the volatility is manageable within our p and l and that we're better off sort of mostly being spot and not making forward contracts given the downward pressures that we see.

[Martin Roper, CEO & Director at The Vita Coco Company]

Ultimately, the big sort of change in ocean freight freight for us would probably be if the Suez Canal route were to open up for Asia to the to Europe and Asia to the East Coast. That is obviously still shut down, although, you know, there were expectations it would open, but obviously, it's still shut down. But that's the big sort of thing that we still think will eventually open, and that will drive breaks down as a lot of express capacity gets added just by the shortened transit time. So we're sitting on the sideline, and we're comfortable with that. We think we could manage the volatility within our P and L, but that doesn't mean to say it won't cause volatility in our gross margins quarter to quarter as that volatility continues to happen.

[Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Yes. Okay. Thank you. And just on C store and cans specifically, you've got a nice pickup in ACV there. It's still lower than, you know, sort of the grocery levels, but what momentum are you seeing there?

[Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Is there a few change in particular, you've got a little more of a breakthrough is your selling story getting better? What's helping put some wind at your back there?

[Martin Roper, CEO & Director at The Vita Coco Company]

Yeah. I think, you know, we're happy, I suppose, with the increased ACV, but we're unhappy that it is going faster. So but convenience store, I think, as you know, is it's you know, there are a couple of big accounts that sort of gets you to the 20 ACV, and then it's a lot of independent decision makers with a lot of much smaller decision points. So we're making progress. I think, you know, the good news is our selling story and our velocities are healthy.

[Martin Roper, CEO & Director at The Vita Coco Company]

And where we've been able to add, you know, incremental distribution like the one liter in in seven Eleven, for instance, it's it sticks, and it's a very valuable SKU in that in that door, and that's a message we can take on to the rest of that community. So currently comfortable with what's going on there. We obviously have have work to do to keep driving juice. But, yeah, feeling very good about our current T store business, and our trends there are very good.

[Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Okay. Thanks so much.

[Operator]

Thank you. And one moment for our next question. Our next question is going to come from the line of Glenn West with William Blair. Your line is open. Please go ahead.

[Glenn West, Equity Research Associate at William Blair]

Hey, guys. This is, Glenn West on for John Anderson. You guys have have hit on a lot. So maybe if I could just ask a couple of clarifying points on on what you've talked about related to private label and then the Walmart situation. So on private label, you talked about the new business coming in 2026.

[Glenn West, Equity Research Associate at William Blair]

I'm just curious if that business is largely going to offset the losses we've seen and maybe we can expect to see kind of a substantial rebound in that segment or maybe how we can think about how that segment is going to perform kind of in 2026.

[Martin Roper, CEO & Director at The Vita Coco Company]

So we haven't disclosed details on the size of the business. And what I think we would say is it's a large customer, but frankly, we don't really know what the volumes will be until they actually hit because this is a potential new program for them. So it's not really an answer that we can answer other than we're going to try and plan to support a range of outcomes. And then as it relates to, would it replace? Think the again, it's very difficult to tell.

[Martin Roper, CEO & Director at The Vita Coco Company]

It's a large customer. There's a wide range of outcomes. Honestly, we can't really say if it's gonna replace. I think it would be a wonderful outcome for us if next year we were able to get private label back in The US to flat for the year, that would be a good outcome and maybe even grow it. The growth would come from the new account and also continued growth in private label business, but it's so early to tell and there's so much complexity.

[Martin Roper, CEO & Director at The Vita Coco Company]

As we said, label is pretty lumpy in how these decisions get made that I really don't want to provide any sort of forward looking guidance on that.

[Glenn West, Equity Research Associate at William Blair]

Okay, worth a shot. Thank you. And then on Walmart, do you guys have any early reads kind of on the velocity of the SKUs you have that new juice aisle? Because I know you frequently said it's higher foot traffic. So are those SKUs that you have kind of turning much faster or any sort of insight you have there?

[Corey Baker, CFO at The Vita Coco Company]

Velocities at Walmart are really they think they've grown 50 plus percent. It's somewhat hard to tell from a traffic perspective because there's a large reduction of SKUs, but we're very happy with the velocity we're seeing on the SKUs that are in the stores. And we're happy with the overall Walmart performance in general considering the distribution losses. And in the stores where we've maintained distribution, the the brand continues to do very, very well. So we're we're excited about the future of Walmart for sure.

[Michael Kirban, Co-Founder & Executive Chairman at The Vita Coco Company]

And the potential expanded distribution in that aisle with higher velocities. Yeah.

[Glenn West, Equity Research Associate at William Blair]

Great news. I appreciate you guys' time. Thanks.

[Jim Salera, Research Analyst at Stephens Inc]

Thank you. Thank you.

[Operator]

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Martin Roper for any further remarks.

[Martin Roper, CEO & Director at The Vita Coco Company]

Thank you, Michelle. I'd just like to thank everyone for joining our quarterly earnings call today and look forward to talking to you again in three months. Everyone have a great day.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Michael Kirban, Co-Founder & Executive Chairman
• Martin Roper, CEO & Director
• Corey Baker, CFO

Analysts

• John Mills, Managing Partner at ICR
• Kaumil Gajrawala, Managing Director at Jefferies Financial Group
• Bonnie Herzog, Managing Director at Goldman Sachs
• Christian Junquera, Equity Research Analyst at Bank of America
• Eric Des Lauriers, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Jim Salera, Research Analyst at Stephens Inc
• Robert Ottenstein, Senior MD at Evercore
• Michael Lavery, Managing Director & Senior Research Analyst at Piper Sandler Companies
• Glenn West, Equity Research Associate at William Blair