Vita Coco: Michael Kirban

So—no joke: two guys really do walk into a bar. While sharing a few drinks on a winter night in New York City, best friends Michael Kirban and Ira Liran met two young women from Brazil. That chance encounter eventually led to a business idea: to sell Brazilian coconut water in the US, as an alternative to Gatorade. In 2004, Michael and Ira launched Vita Coco, only to discover that another startup—Zico—was selling a nearly identical product. The two companies went to war, using the time-honored tools of corporate sabotage, but eventually Vita Coco emerged as the top selling coconut-water in the U. S. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  We get support from US Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't. Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings. And you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems.

• 0:45Guy Raz?

  But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned. Money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes

• 1:30Guy Raz?

  based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2:00 AM kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one Hard question. How do we make sure AI goes well for people?

• 2:14Guy Raz?

  So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan, build the prototype, analyze the market, maybe even come up with the idea. What separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt.

• 2:54Guy Raz?

  Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting and a CMS built in, so the work is production ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams and businesses ship production-ready sites faster than ever while getting every detail right. Prompt, inspect, edit and publish in one place at a whole new pace. AI agents and humans work together.

• 3:36Guy Raz?

  The agents bring speed and scale and people bring taste, judgment and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on.

• 4:21Guy Raz?

  NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new, expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it.

• 5:06Guy Raz?

  If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Hey, really quick before we start the show, How I Built This is now a book, and it's coming out in a few weeks. It's full of insights, advice, wisdom, and guidance, all told through the stories of some of the most amazing entrepreneurs on earth. And if you preorder the book right now before September 30, I will send you a signed book plate to put inside the book for free. To order the book and to get your free book plate,

• 5:51Guy Raz?

  visit guyraz.com.

• 5:56Guy Raz?

  Just a quick heads up before we start the show. There are a couple of swear words in this episode, so you may want to keep that in mind if you're listening with kids. OK, now, on to the show.

• 6:10Speaker 01

  I would go in on my rollerblades because I could hit, I don't know, 50 stores in a day on my rollerblades, whereas if I was, you know, walking, it'd be a lot less.

• 6:18Guy Raz?

  Yeah.

• 6:18Speaker 01

  One of the early stores I went into, I found the store manager. First, he's laughing at me because I'm on rollerblades and I'm a sales guy without a polo shirt and a briefcase. And he takes a sip and he said, "This is never gonna work. It tastes like sock water."

• 6:42Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:53Guy Raz?

  I'm Guy Raz, and on the show today, how Michael Kirban shipped thousands of cases of coconut water to New York, fought off a brand that looked just like his, and built VitaCoco, the top-selling coconut water in the country.

• 7:14Guy Raz?

  You remember that kid in high school who was weirdly interested in business, who had almost no interest in going to college or starting a traditional career, but was determined to start something on their own? You might have snickered about them, or even rolled your eyes, or maybe that kid was you. Well, that kid was also Michael Kirban. Michael had the benefit of watching his dad pursue a bunch of different business ideas, including ideas that failed. But the specter of failure never worried him. He knew from a very early age that it's part of the game, that you gotta take big swings, which means you will

• 7:57Guy Raz?

  also strike out a lot. And the biggest swing Michael would take would be for VitaCoco. You've probably seen their familiar Tetra-pack boxes of coconut water in pretty much every convenience store. In the early 2000s, when Michael was trying to launch the brand in New York City, he was pretty confident that coconut water would take off. At the time, most people who bought coconut water were immigrants from places like Vietnam, India, the Caribbean, and Latin America. But Michael had a hunch that coconut water could compete with sports drinks like Gatorade.

• 8:36Guy Raz?

  Now, at the exact same moment, someone else had the same exact hunch. It would become a product known as Zico. And so what happened, and what you will hear, is a story about a war. The coconut water wars of the early 2000s. A war with sabotage, subterfuge, dirty tricks, and eventually, a pretty decent outcome for both parties. Today, Bitacoco is the biggest brand of coconut water in the US. It has about 40% market share. But it would take a lot of time and a lot of obstacles to get there.

• 9:17Guy Raz?

  Michael grew up in Connecticut, and when he was nine, his parents split up. It was amicable, but while Michael's sister chose to live with their mom, Michael decided to stay with their dad.

• 9:30Speaker 01

  My mom got custody. I think my dad gave my mom custody. And my dad was actually packing his things and preparing to leave the house. And I packed my Snoopy suitcase, put it with all my dad's stuff. And I remember my mom coming home and saying, "What's this?" And I said, "I'm moving in with dad." And she said, "Okay." And that was it.

• 9:50Guy Raz?

  Wow, that's amazing.

• 9:51Speaker 01

  My mom ended up, a few years later, ended up moving into New York City. So I'd spend weekends in the city, and I'd still see her quite a bit. But I was super close with my dad.

• 10:02Guy Raz?

  What did your parents do when you were a kid?

• 10:05Speaker 01

  As a kid, my dad was an entrepreneur. My dad always had businesses before him. My grandfather always had different businesses. My great-grandfather, same thing. So I come from a long line of entrepreneurs. I don't think there's a single male in my family who's graduated from college on both sides. And my dad, when I was young, had a roller skating rink, which was awesome. And those were the successful days. And then he had other businesses that weren't so successful. And we went through periods of doing well, and then other periods of not doing so well.

• 10:38Guy Raz?

  And were those like, that's where birthday party? I had a roller skating birthday party in 4th grade, I remember it. Birthday parties and church groups and youth group events and stuff like that happen there?

• 10:48Speaker 01

  Everybody I went to school with as a kid had their birthday party at the roller skating rink. So, so it was good. So I got to go to all the parties, whether I was invited or not.

• 10:57Guy Raz?

  Yeah.

• 10:58Speaker 01

  And then as roller skating kind of went out and wasn't a cool thing anymore, he turned the place into a rap concert hall. So I grew up, you know, at 12, 13 years old, you know, hanging out with Beastie Boys, LL Cool J. You know, as a kid, it was really, really cool experience.

• 11:12Guy Raz?

  So he really pivoted because I was thinking that, what happened to roller skating? It was great. It was like one day was there and then it was gone.

• 11:19Speaker 01

  Yeah, it was a real fad. I mean, it just, you know, people stopped going and he pivoted very quickly. And, uh, you know, that worked for a little bit of time and then just didn't work anymore. So.

• 11:29Guy Raz?

  Um, in terms of school, how, how was it for you? Was it hard? Was it easy? Were you a good student? Not a good student?

• 11:37Speaker 01

  School was really tough. Um, I had several learning disabilities from attention deficit disorder to form of dyslexia. And as I got into high school, they diagnosed me and by diagnosing me, they put me in what we used to refer to as romper room, which was, uh, half the day in normal classes and half the day in basically it was special ed. It was a room with me and other kids who, uh, many of which had, had, had more complicated issues than I had. You know, I knew I was very late in reading and, you know, math was really hard for me. And I had a clear goal and that goal was to get Cs and, uh, you know, or get as close to passing as possible.

• 12:18Guy Raz?

  Yeah.

• 12:19Speaker 01

  Um, and that was always the objective. And I, I always knew that I would be successful in whatever I did.

• 12:26Guy Raz?

  But why? How did you know that?

• 12:29Speaker 01

  I don't know. I just felt, because even then, right? Even though I was in these classrooms, I was still successful in things that I wanted to do, you know? I was not the best athlete, but I worked hard and, you know, I was able to play ball and I wasn't the best, you know? I definitely wasn't a good student, but I was able to get by and I just, you know, I just had this confidence from an early age.

• 12:53Guy Raz?

  Were you, were you, um, did you go to a big high school?

• 12:57Speaker 01

  No, I went to actually a really small high school in this small town. And actually, so my junior year in high school, my dad started spending a lot of time in Florida because he was starting to build a business there, doing kind of vacation rental property management stuff for tourists coming to Orlando and then corporate housing and things like that. And I was alone quite a bit my junior year and I would, I would have big parties. I would charge admission. I turned it into a business every weekend.

• 13:24Guy Raz?

  Wow.

• 13:24Speaker 01

  I was, you know, making significant money.

• 13:26Guy Raz?

  You have parties at your dad's house?

• 13:28Speaker 01

  Yeah.

• 13:28Guy Raz?

  With his permission, I'm assuming?

• 13:30Speaker 01

  Yeah, he knew. Um, and, you know, super responsible, collecting keys and sure, nobody went anywhere if they were drinking, nobody was driving, um, you know, really, really responsible, but they were big parties and I was charging admission and it was a nice.

• 13:43Guy Raz?

  Wow.

• 13:44Speaker 01

  Successful venture at the time.

• 13:45Guy Raz?

  So you were, and, and like, do you remember where you were charging like five bucks or 10 bucks to come in?

• 13:50Speaker 01

  Yeah, that's right. It was five bucks and 10 bucks for freshmen.

• 13:53Guy Raz?

  Nice. You, you and your dad eventually, I guess, moved to Orlando and then you went to college, uh, to the University of Alabama, which.

• 14:03Speaker 01

  Yeah.

• 14:03Guy Raz?

  I don't know, being like a northern kid at a, at a southern school, how, like, was that, like, had you, did you enjoy it?

• 14:10Speaker 01

  I had a good time. I enjoyed it, but towards the end of the second semester, I realized, I was actually sitting in an economics class and I was listening to a professor and I remember not understanding what he was speaking about. And I remember thinking that I'm not learning anything from him. I'm spending money to go here. I could very easily not be here and use that money or, or make money, right? And so there was this moment, I remember exactly where I was sitting when I said, I'm done, like, school's not my thing. And about a week later, I was back in Orlando and then, uh, that was it.

• 14:44Guy Raz?

  And did your dad ever say, hey, Mike, you know? I think you ought to get a degree, a college degree, or not at all.

• 14:51Speaker 01

  Never even.

• 14:52Guy Raz?

  Wow.

• 14:53Speaker 01

  What do you want to do? Do you want to do that? Do you think you need a college degree? Do you want a college degree? And it was, it was more of a question to me. And that was kind of the way I was raised with everything, right? Like even in, in high school, like what do you want to be when you get older? Do you want to be an academic? Then if you do, you need to start really studying. If you don't, you need to get through. Like it was just a, especially back then, it was different.

• 15:13Guy Raz?

  It sounds like your relationship with your dad was almost like, like you guys were roommates, like friends.

• 15:18Speaker 01

  Yep, to this day. And we're business partners too, right now. So for the past 25 years. So yeah, no, it's definitely more of a friendship and a partnership and a, yeah, absolutely.

• 15:31Guy Raz?

  So you come back to Florida, to Orlando, and you like go back to your dad's house and live with him there?

• 15:37Speaker 01

  Yep.

• 15:37Guy Raz?

  And what was your plan?

• 15:39Speaker 01

  I didn't have one. And it was around that time that my grandfather on my mother's side, who I was also very close with, passed away up in Connecticut. And so I went to Connecticut and spent some time with my grandmother, helping my grandmother who had Alzheimer's. I was helping with, you know, all sorts of family matters and stuff at 19 years old.

• 15:59Guy Raz?

  Yeah.

• 16:00Speaker 01

  And then I went back and forth to Orlando, which is, I was actually in the process of starting a business at the time with my dad and my friend. This computer software company that we were developing to help run my dad's business.

• 16:12Guy Raz?

  This is the, your dad was doing a property management business?

• 16:15Speaker 01

  Yes.

• 16:16Guy Raz?

  And, and who was your, who was your friend?

• 16:18Speaker 01

  He was a friend of a friend, actually. I met him in Orlando. He was a computer programmer. And brought him in to help write this system for my dad's business.

• 16:26Guy Raz?

  And what was the, what was the, like, what did it do?

• 16:30Speaker 01

  So it does everything from marketing of the apartments, from booking and, and scheduling to housekeeping, management, move in, move out, billing. I mean, it's, it's, uh, so it's a pretty large system.

• 16:42Guy Raz?

  So this is like Salesforce, but specifically for.

• 16:45Speaker 01

  Exactly.

• 16:45Guy Raz?

  Property man. And so you started this. Kind of business with your dad and your friend or you really actually formally started a business?

• 16:53Speaker 01

  Yeah, so originally it was just, let's build this for my dad's business. And then we started showing it to some of my dad's friendly competitors. And we had our first sale and then we created a business and I was going back and forth to Orlando at the time, but there wasn't much of a business there. It was mostly development work that was being done.

• 17:11Guy Raz?

  And I should mention that during some of this period of, like, you weren't even in the US, right? Like, you decided to spend some time in Italy?

• 17:20Speaker 01

  Yeah, it's during that time period that I was in Italy. And I can remember back then being on payphones on the street in Italy, having conversations about, should we invest and go to this trade show to show the software? Is it ready? Is it, you know? And, you know, that's before there were cellphones or anything else.

• 17:39Guy Raz?

  So why, sorry, so you decided that you want to go to Italy for you. First of all, why did you want to go to Italy? What was it?

• 17:46Speaker 01

  Because I didn't know what I wanted to do.

• 17:48Guy Raz?

  Right.

• 17:49Speaker 01

  I didn't even know if one day, you know, if I would come back and go to work doing that business. At one point, I almost opened a bagel shop in Florence. You know, I had no real plan whatsoever.

• 18:00Guy Raz?

  Yeah.

• 18:01Speaker 01

  And just wanted to take some time and experience and, you know, took courses at the university in European politics, which I just found very interesting. I traveled by myself. I think it was during that time that I really found myself and I know everybody says this, but, you know, it really was so impactful. It was a very impactful time in my life.

• 18:24Guy Raz?

  So, all right, so you, you're in Italy and do you, at some point, do you decide, you know, I'm going to go back to Orlando and just kind of focus on that business?

• 18:33Speaker 01

  No, I actually went from Italy to New York, moved in with my sister in New York City and then eventually found my own place. And I was doing a few things. I was doing some promoting. I actually invested in and helped open an event space in Manhattan.

• 18:52Guy Raz?

  How did you have money, by the way? Did you inherit some money from your grandfather when he died?

• 18:55Speaker 01

  So my grandfather left me like $40,000.

• 18:58Guy Raz?

  Right.

• 18:59Speaker 01

  And that money was what I was to use for college. So that's part of the reason I decided not to go to college anymore because I felt I want to make this money last me a little bit longer.

• 19:07Guy Raz?

  Yeah, so you had that money to kind of keep you going.

• 19:09Speaker 01

  That's right.

• 19:10Guy Raz?

  But I'm wondering, when you got to New York, because this is, you were 21, so this must have been. The late 90s, I mean, you wouldn't be able to get a job, a lot of jobs without a college degree at that point, right?

• 19:21Speaker 01

  Yeah, yet I never would have like

• 19:23Guy Raz?

  Looked for that, right.

• 19:24Speaker 01

  Job. I never even thought that I would ever have a job. It just never crossed my mind.

• 19:29Guy Raz?

  You thought, I'm gonna start something.

• 19:31Speaker 01

  Yeah, but I was never really overly focused on looking for that thing either, right? I was just kind of doing, and the software business was starting to, you know, we got a couple of clients, there was no money to be, you know, made yet, everything was going back into the business. And then when the software was a little bit more stable and ready to actually sell, that's when I decided that, and I remember exactly where I was, and I had bought an apartment. I took the remaining money that I had, I had like $20,000 and I, I used it as a down payment on a one bedroom apartment in, in Greenwich Village. And I remember being in that apartment and talking on the phone with my dad and having this conversation about, you know, let's start seeing if we could sell this thing.

• 20:15Speaker 01

  And that's when I went to work and took a small salary and started, we started building that business together. And then there was, the break was a trade show, right?

• 20:23Guy Raz?

  Right.

• 20:24Speaker 01

  It was a trade show that was formed specifically for the corporate housing industry. And it was at that trade show where we started getting real leads.

• 20:31Guy Raz?

  So, so you're doing that business and, and it, and did it start to grow pretty quickly?

• 20:38Speaker 01

  It was a slow burn. I mean, we, you know, it was, it was a grind for many years. It wasn't until 2005, 2006, that we had a couple of big breaks. We brought in Marriott at the time as a customer and another large multinational who was in this space and started to actually make money. Before that, it was really like paycheck to paycheck, you know, trying to pay the bills type of thing.

• 21:07Guy Raz?

  So, all right, so you were doing that, it's the early 2000s, you're living in New York and, and you got, you're lucky, you bought an apartment in the 90s in, in Greenwich Village, because back then you could put $20,000 down and get an apartment. Today, you couldn't get a parking space for $20,000.

• 21:21Speaker 01

  Not even close.

• 21:22Guy Raz?

  And it sounds like you were doing fine. You know, you had this, this sort of steady income and you were traveling and you were selling this, this software and that was it?

• 21:30Speaker 01

  Yeah, I would say for Anybody my age at the time, when most of my friends were graduating from college or starting their first year of work, I had a business that was up and running that was, you know, it wasn't printing money, but it was successful. And I was really balancing work and life, which I've always done. I've always taken very seriously.

• 21:54Guy Raz?

  What did that mean? You were doing what?

• 21:57Speaker 01

  So when I wasn't on the road and I wasn't traveling and I wasn't on one specific phone call, because I was working from home, I was down at the local cafe down the street where I used to go every day, having a very long lunch and talking to all my friends that were also there. And then I would probably, you know, sit in Washington Square if it was nice and sunny and read a book and start talking to people and meeting people and creating friendships and conversations and...

• 22:22Guy Raz?

  How would you do that? I'm curious. How would you just, you just strike up conversations with people?

• 22:27Speaker 01

  Yeah, I guess. Or people would strike up conversations with me. It's New York City. And I was always on my rollerblades and I was always outside. You know, it's actually funny. I think of myself almost as somewhat shy, yet my life has been the opposite. And I think it's, it's, it is strange.

• 22:47Guy Raz?

  So you're, so you're living in New York and hanging out with friends. And I guess around 2003, you and a friend, is this Ira? Ira Liran?

• 22:56Speaker 01

  Yep. He goes by Ira. He's Israeli.

• 22:59Guy Raz?

  You guys are hanging, and he was a friend of yours from high school?

• 23:02Speaker 01

  So Ira was from New York, or from Israel originally, but grew up in New York City. And then went to study abroad in Florence. And I had just come back from Florence and a bartender who I'd become friendly with in Florence, became friendly with Ira. And Ira was going back to New York to visit his family, you know, for something. And the bartender gave Ira coffee, wine, a few other things to bring and said, find my friend, he's in New York, bring this to him as a gift.

• 23:33Guy Raz?

  Oh, wow.

• 23:34Speaker 01

  And Ira looked me up. I remember exactly where we met up. We met up at that same cafe that I was talking about. It was on Thompson Street in Houston. We hung out and we just hit it off. We became friends and we hung out all the time.

• 23:48Guy Raz?

  And what did you have in common?

• 23:50Speaker 01

  I think we're both very similar in that we're very social. We like to have a good time. We're, you know, very driven in a way. And we were always looking for business opportunities. You know, I remember he wanted to start a power washing company. And I helped him. I bought a power washer and loaned it to him. And, uh, you know, created a little business there. I helped him with something else he was working on. And so we were kind of always doing some sort of business in a weird way, even though we didn't have a real formal business at the time. And so we were just, uh, we just hung out quite a bit.

• 24:30Guy Raz?

  All right. So the, so the two of you guys are hanging out. And this is important because I, from what I understand, this is, there's a, a pretty significant event that happens. Um, you didn't know it at the time. You guys are, I guess, at a bar and you meet two women from Brazil. Is, what's the story?

• 24:45Speaker 01

  Yeah. So we were at this party and we were there for a long time. It was like a February or something. It was cold. It was late at night and I remember Ira saw these two girls leaving and convinced them to come back into the bar, take their coats off and have a drink. They were from Brazil and we sat at the bar and we chatted and we talked for quite a while.

• 25:05Guy Raz?

  Wait, so these, these two young women from Brazil are just, you know, chatting. But there's no, because obviously this is going to eventually lead to coconut water. But there's no conversations about coconut water at this point, right?

• 25:19Speaker 01

  So coconut water actually did come up at the bar. In a weird way, we were talking about food. We were talking about Sao Paulo. We were talking about restaurants and somehow it came up. Coconut water, aguacico. We actually remember, I, we remembered afterward having a conversation about it. But it wasn't like, you know, at that moment at the bar, you know, anything specific besides one of those things that are great about Brazil.

• 25:44Guy Raz?

  Yeah. Like you could go to the beach and, uh, you could get not Sao Paulo, but in Rio. And, uh, there'd be people likely coconuts and they'd, uh, crack one open and get some coconut water.

• 25:54Speaker 01

  Yep.

• 25:55Guy Raz?

  And that's some, something that they may have mentioned about what they miss about Brazil.

• 26:00Speaker 01

  Well, it is a cultural thing in Brazil, more than just a beverage. And in a lot of the tropical world, it's a cultural thing. It's coconut water is, has all sorts of health properties. And in every country in the world, every tropical country in the world, your grandmother tells you a different reason why you should be drinking coconut water. And it's an incredibly popular beverage that has a cultural connection beyond just being a juice or beverage.

• 26:30Guy Raz?

  So, so what happened after you, you met those women at the bar that night?

• 26:35Speaker 01

  So, one of them, Era, he ended up, you know, seeing a couple of days later. And then we started hanging out together for the next week or two while she was in, a short period of time that she was in, in New York.

• 26:50Guy Raz?

  Yeah.

• 26:50Speaker 01

  And he ended up falling in love with her. And when she went back to Brazil shortly thereafter, he went back with her.

• 26:57Guy Raz?

  Wow. And he plans to go to Brazil for what, like a long period of time? Or he doesn't know, or he just, he just goes down and follows her?

• 27:05Speaker 01

  At the time, he wanted to just, you know, go down, check it out. He wanted to be with her. And so he went, he found his own place. And he didn't really have much going on down there. I went down to visit several months later and he's like, I'm gonna stay.

• 27:20Guy Raz?

  And when you got there, what did you do?

• 27:23Speaker 01

  We hung out a couple of days in Sao Paulo, hung out with her and her friends and her family. But while I was there, I mean, you know, he was talking about staying and he was talking about, you know, different business opportunities. I remember he was looking at leather from the Northeast, making women's shoes, which was, you know, becoming a business for export in Brazil at the time. And he was talking about coconut water. And in Brazil at the time, coconut water was, I think, within, you know, maybe a year or so prior to my visit, they'd started selling coconut water in a tetrapack and shelf-stable. So it was in grocery stores now, it wasn't only on the beach. And it was becoming incredibly popular in people's refrigerators all over the country, not just on the beach in Rio. And he showed it to me.

• 28:07Speaker 01

  He took me to a couple of grocery stores, we talked about it. He was in the early stages of developing what was somewhat of a business plan.

• 28:16Guy Raz?

  What, let me just go back for a second. When you get, when you are hanging out with Yoda there, does he say to you, hey, Mike, people drink coconut water here. It's on, you can get it in grocery stores. Check this out. I think we should, I think there's an opportunity in the US. Did he, was he already saying that when you got there?

• 28:33Speaker 01

  Yeah, and it wasn't a we thing. It was him, you know, like.

• 28:37Guy Raz?

  Him, alright.

• 28:38Speaker 01

  I'm looking at different opportunities. This is one of them. This is one of them. And this is one of them. I was more intrigued by the coconut water thing than any of the others.

• 28:46Guy Raz?

  Why?

• 28:47Speaker 01

  It sounded much more fun and interesting. I had no interest in being in the shoe export import business.

• 28:54Guy Raz?

  Right.

• 28:55Speaker 01

  And, you know, we started digging a little bit deeper while we were there, but then he said he's going to further develop the idea and so on and so forth. And then he came back to New York, I don't know, short period after, with a more developed idea of creating a brand and selling it in the US. He didn't have the brand name or any of those things yet, but he, it was what he was really focused on. And I remember we were back in that same bar on Thompson in Houston, and I said, okay, if you do this, I'll do it with you. I'll invest some money, I'll invest some time, and let's do it together. And I remember we wrote down what each of our responsibilities were going to be. He was going to kind of find the supply and do all these type of things, and I was going

• 29:39Speaker 01

  to figure out distribution and.

• 29:42Guy Raz?

  Right.

• 29:43Speaker 01

  Find customers to buy it.

• 29:44Guy Raz?

  So he was going to deal with the Brazilian side. You didn't, you did not have to go like move to Brazil?

• 29:48Speaker 01

  No, that's right.

• 29:50Guy Raz?

  And this is 2003, I guess?

• 29:52Speaker 01

  Yes, and we were off.

• 29:53Guy Raz?

  But by the way, when you tried coconut water, were you blown away by it? Were you like, oh, my God, this is amazing? Or did you have, did you have a less excited reaction?

• 30:03Speaker 01

  So I had tried it over the years, right? I'd been to the tropics a bit. I had tried coconut water. But the first time I tried it in a package without, you know, my feet in the sand and the whole bit, I wasn't, you know, I wasn't blown away, but. When I started to see that it was outselling Gatorade and every sports drink in the grocery store in Brazil, I thought, maybe there's a business here. And again, it wasn't about creating a big business. We never set out to create a big consumer goods business. It was, you know, let's see if we can make a little bit of money. Never expected it to go further than, you know, New York City.

• 30:47Guy Raz?

  All right. So you go back to New York, then Ira comes back and he says, hey, I'm serious about this coconut water thing. And you say, I'm in, I want to be involved. How much money did you put in? Do you remember?

• 30:58Speaker 01

  I think it was actually, I put in, I think if I'm not mistaken, $75,000 and then later put in, you know, I think the initial investment was 75 grand.

• 31:07Guy Raz?

  And by the way, did you guys like formally put down a partnership and set up an LLC and do all that stuff? Or was it less formal?

• 31:15Speaker 01

  No, we pretty immediately formed a partnership. We created an LLC, put a little bit of money in the bank. I remember when we opened up the bank account.

• 31:24Guy Raz?

  So you were going to stay in New York. He was going to go down to back to Sao Paulo. And by the way, is he still, he went to Brazil originally to date this woman that he met in New York. Were they still together at that time?

• 31:38Speaker 01

  Yes. Yeah. Yeah, they were still together and I think they were engaged at the time.

• 31:42Guy Raz?

  Wow. So that was pretty quick.

• 31:44Speaker 01

  Yeah.

• 31:45Guy Raz?

  He got engaged pretty quick. So he marries this woman in Brazil and he's going to purchase coconut water and send it to you in New York and you're going to figure out how to sell it. But let me try to break this down. First of all, you were going to sell it in the same way they were selling in Brazil in like a cardboard Tetra Pak in New York?

• 32:04Speaker 01

  Yeah, which didn't really exist in any beverage, right? Besides milk.

• 32:09Guy Raz?

  There were cans, there were bottles.

• 32:10Speaker 01

  Yeah. And yeah, for single serve beverage, there was no Tetra Pak.

• 32:13Guy Raz?

  There was nothing like that. Yeah.

• 32:15Speaker 01

  No.

• 32:15Guy Raz?

  So you were gonna, so that was the first thing, because you were inspired by the Tetra Packs. The second thing is, what was the name? How were you gonna, how'd you come up with a name for it?

• 32:23Speaker 01

  We had all sorts of ideas. I can remember phone calls back and forth. And one day, I remember I was sitting at my dining room table, phone rings, I pick it up. I'm like, what's up? He's like, Vita Coco. I'm like, that sounds like a Ricky Martin song.

• 32:39Speaker 01

  And he's like, nope, that's it. And I'm like, you know what? It sounds good. And that was it.

• 32:43Guy Raz?

  So you're gonna call it Vita Coco. You were gonna basically import it to the US in the Tetrapacks. I'm assuming you would go to one of these companies that was already making a Brazilian version of it and you would just have them kind of white label it. They would basically make it for you under your name, Vita Coco?

• 33:00Speaker 01

  That's exactly right.

• 33:01Guy Raz?

  How did you do that? How did he find that company willing to do that?

• 33:05Speaker 01

  So if I recall, he originally went through Tetrapack.

• 33:09Guy Raz?

  Where were they based or where at the time, where are they based?

• 33:12Speaker 01

  So they're a Swedish, Swedish company, Swedish family. They've been packing, you know, milk, think Parmalot, things like that.

• 33:20Guy Raz?

  Right.

• 33:21Speaker 01

  And juices all over the tropical world for a very long time.

• 33:25Guy Raz?

  So he got in touch with the company and said, hey, I'm looking to sell, to get coconut water in Tetrapacks to the US. Who makes it? And they recommended a company in Brazil.

• 33:36Speaker 01

  Yep, they recommended a company who had just, was just getting started. And that turned out to be a disaster. They were getting up and running. They didn't know what they were doing. Coconut water is a very complicated raw material to work with. And, and they didn't survive as a company. And then we quickly shifted to the company in Brazil who was making the most common brand in Brazil. But we had started with this other one.

• 34:03Guy Raz?

  And the other one was also in Brazil?

• 34:05Speaker 01

  Yes.

• 34:05Guy Raz?

  And do you remember what your first order was for? Like, how much coconut water were you gonna buy?

• 34:09Speaker 01

  So I think we had in the bank, 70, 75,000 dollars in the bank.

• 34:12Guy Raz?

  Right.

• 34:13Speaker 01

  And we spent pretty much all of it on the first production. So it was two containers of product, if I'm not mistaken.

• 34:23Guy Raz?

  Shipping containers?

• 34:24Speaker 01

  Yeah, shipping containers.

• 34:25Guy Raz?

  Like, like the back of a truck, like a big 18 wheeler?

• 34:29Speaker 01

  Yeah, it's like those huge metal shipping containers that you'll see in a port.

• 34:33Guy Raz?

  So two of those, that's 75,000 dollars worth of coconut water. It was gonna go on a ship in Brazil and go up the Atlantic Ocean to, I guess, New Jersey. And you would get it there.

• 34:46Speaker 01

  That's right. That was the plan.

• 34:47Guy Raz?

  Were you, was any part of you nervous about spending 75,000 dollars on two shipping containers of coconut water?

• 34:54Speaker 01

  Yeah, but I had already, you know. Like started talking to some retailers and people seemed interested. I didn't think too much about it and I met a guy on the street right near my house. I was going to get my morning cappuccino. I see this guy pulling Naked Juice out of the back of a truck. You know, I knew nothing about distribution or how beverages get to stores. And I went up to him and I said, are you a distributor? Or do you work for Naked Juice or what's the deal?

• 35:23Guy Raz?

  Yeah.

• 35:23Speaker 01

  And he's like, you know, kid, I don't have time. I'm super busy. And I said, I'm sorry, I've got this coconut water project I'm working on. And no, kid, not, not interested. So I went in the store, got my cappuccino, got my croissant. And the guy taps me on the shoulder and says, sorry if I was a little rude. I like coconuts. Tell me what you're doing. I told him. He told me he was a distributor for Naked Juice and other orange juice products at the time. So he wanted to learn more about it. We met a couple of times and then he became my first distributor.

• 35:52Guy Raz?

  But this is even before the coconut water arrived in the US.

• 35:55Speaker 01

  Yeah, it hadn't arrived. I didn't even have a sample.

• 35:58Guy Raz?

  Got it. All right, so you, this is now 2004, I believe. You've got the name of a business and you've got $75,000 worth of coconut water on its way to New York. By the way, what kind of market research did you have, you know, that gave you confidence that people in the US would want it? I mean, coconut water, as far as I understand, in 2004 was like Goya sold coconut water. You could find it in sort of the ethnic aisles of supermarkets, but it was not in convenience stores mainly.

• 36:30Speaker 01

  Yeah, and to be honest, I did such little market research. I didn't even know anything about Goya at the time either. It was just, the stuff tastes pretty good. It's really good for you. It's working really well in Brazil. You know, vitamin water was taking off at the time. There wasn't much else on the shelf that was, you know, healthy and functional and clean and better for you. And just thought, sounds like a good idea. And that was really the market research.

• 36:55Guy Raz?

  And did you, right off the bat, see this as a sports beverage? Like a competitor to Gatorade? Or did you just see this as a nice tasting, natural beverage?

• 37:05Speaker 01

  Now, right off the bat, we saw it as a competitor to Gatorade.

• 37:07Guy Raz?

  Right.

• 37:08Speaker 01

  Because that's how it was drank in Brazil, and that's how it's drank across the tropical world.

• 37:12Guy Raz?

  Like a thirst quencher.

• 37:14Speaker 01

  It's a thirst quencher. It's loaded with potassium, and so it's all about this kind of natural sport drink.

• 37:19Guy Raz?

  Right. And by the way, did you, I mean, New York has such an incredibly diverse population. So there's huge parts of New York, I mean, people from Puerto Rico and the Dominican Republic and, you know, other Caribbean countries knew what coconut water was. It's not, right?

• 37:35Speaker 01

  I mean, That was the beauty of what we were doing, that we didn't really get into this business, understanding that. But pretty quickly, we realized that we would have a real business where we could sell some volume without a ton of brand building and marketing right off the bat.

• 37:51Guy Raz?

  Got it. All right. So Ira is still in Brazil, and he's procuring this coconut water. And it's a white label, so now you've got two shipping containers. I don't even know how many tetrapacks that is, like, what?

• 38:04Speaker 01

  Something like, closing in on 20,000.

• 38:08Guy Raz?

  20,000.

• 38:08Speaker 01

  Cases.

• 38:09Guy Raz?

  Cases.

• 38:09Speaker 01

  20,000 cases.

• 38:10Guy Raz?

  Wow.

• 38:11Speaker 01

  And so we were so excited for the product to land. And one day, I remember picking up the phone, it was the brokerage company. And the girl on the other end, she said, I need your registration number. It's a very specific type of number for low acid food products, which is what coconut water and a tetrapak is. And I said, I have no idea what you're talking about. And she said, well, then you can't import it. And she was in charge of importing it, right? So I would have expected she would have known what needed to be done. And she expected I had done my research and I knew what needed to be done, and it didn't happen. And so she basically told me that we can't import the product until we have this number. I said, great, let's get the number.

• 38:56Guy Raz?

  This was like a number, like a, like what?

• 38:58Speaker 01

  Register.

• 38:59Guy Raz?

  From, who, what, what agency gives you that number?

• 39:02Speaker 01

  The FDA.

• 39:03Guy Raz?

  The FDA. Oh, because this is a food product, yeah.

• 39:05Speaker 01

  So I was, I was like, okay, let's get the number. What do we need to do?

• 39:09Guy Raz?

  Sure.

• 39:10Speaker 01

  And she said, great, I need some information on the facility and so on, but. It's gonna take like three months to get the number. Like, three months? What the hell am I gonna do for three months?

• 39:22Guy Raz?

  Wait, three months? This is just to get the registration number so you could then sell the product? And you did not know you needed to do this? You just thought, you import it and then you sell it?

• 39:31Speaker 01

  Yeah, should be that easy, right?

• 39:33Guy Raz?

  Yeah.

• 39:33Speaker 01

  But it wasn't. I said, what do I do? I mean, the product is gonna lose shelf life. I don't have the money. I need the money from the sales to, you know, to pay for things. And she said, well, you can't sell it. You could either put it in a FDA warehouse. And I said, okay, what's that cost? She said, it's probably about $30,000 a month. I said, that's clearly not gonna work.

• 39:54Guy Raz?

  Wow.

• 39:54Speaker 01

  And she said, the other options are you destroy it or you export it. I said, export it? She said, yeah, it just can't come into the country. And so I said, okay. I hung up the phone. I was freaked out. I didn't know what to do. And then I remembered I had been at this trade show in Chicago where Ira and I went, maybe a month or so earlier, and met a bunch of people from all over the world and, you know, people at trade shows that are always interested, but, you know, there's sometimes not so much follow-up. And I grabbed this card of this really nice guy that I met in the Bahamas who owned an alcohol distributor. And I called him up and I made a deal. I told him I'd send him the product and he wouldn't have to pay me unless he sold it, right?

• 40:36Speaker 01

  Because he wasn't just gonna buy two containers worth of product on a new brand.

• 40:40Guy Raz?

  Right.

• 40:40Speaker 01

  So he said, if you wanna come down and help me sell it, I'll pay you if we sell it. And that's exactly what I did. I went down to the Bahamas, spent, I don't know, probably 10 days at least, maybe two weeks. Went door to door with him and his sales guys. And we hit bars and restaurants and nightclubs. And I was hitting grocery stores and hotels and just selling coconut water in the Bahamas out of a Tetra Pack.

• 41:05Guy Raz?

  And that's a lot of coconut water for the Bahamas. I imagine that's gotta be, you know, what, two boxes per person or something? It's a lot of coconut water.

• 41:15Speaker 01

  It's a lot, but luckily, there was no education needed, right? People knew what coconut water was.

• 41:19Guy Raz?

  Right.

• 41:20Speaker 01

  And people liked to drink their gin with coconut water, you know? And now they could do it without cracking Open a coconut.

• 41:26Guy Raz?

  And, and how long did it take you to sell all that?

• 41:29Speaker 01

  I was there, I think, just short of two weeks, but his guys kept on selling it for, you know, I would say another month or two thereafter. And I, I believe they sold just over half of the product we sent. And then together, we paid to destroy the rest of it because it was at some point going bad.

• 41:46Guy Raz?

  Yeah.

• 41:47Speaker 01

  And he paid me for the product that he sold, which was enough to cover the majority of our costs for the initial product. And that was it.

• 41:56Guy Raz?

  So, all right, so that's a first go around. Meantime, I'm assuming you've applied for the FDA registration.

• 42:02Speaker 01

  Yep. Couple of months later, we got it.

• 42:03Guy Raz?

  So then now take two, try again. Once again, do you order the same amount of coconut water?

• 42:09Speaker 01

  I think we did a little less the second time.

• 42:11Guy Raz?

  Right. All right. So this is, I think, around August of 2004.

• 42:16Speaker 01

  That's right. And I remember the product was arriving like a week later and I went to a GNC store. And I was talking with the manager and I showed him what we were doing. And he's like, that is incredible. It looks amazing, but it's so similar to this guy that was in here yesterday who's selling the same thing. It's arriving next week. And I said, what do you, what do you mean? Is it coconut water? He said, yeah, it's called Zico. And he showed it to me. He had a sample there. And he's like, this is the, it's, it's almost the same thing. It's also blue, you know, it's same packaging.

• 42:48Guy Raz?

  Wow.

• 42:49Speaker 01

  And I remembered my heart sinking.

• 42:51Guy Raz?

  Wow.

• 42:52Speaker 01

  Being like, this is not happening.

• 42:57Guy Raz?

  Why don't we come back in just a moment of the competition between VitaCoco and Zico got ugly and why Michael started out as the underdog and made that work to his advantage. Stay with us. I'm Guy Raz and you're listening to How I Built This from NPR.

• 43:25Guy Raz?

  Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's 2004, and Michael has just launched Vita Coco in New York City, only to discover that a very similar brand, almost a dead ringer, called Zico, has launched in the same place at exactly the same time.

• 43:48Speaker 01

  That was the problem. In the early days, we didn't know if there was space for both of us.

• 43:52Guy Raz?

  Right, right.

• 43:52Speaker 01

  And so there were plenty of accounts that they would get first, and we couldn't get in.

• 43:58Guy Raz?

  And I should mention here, your competitor in all this, the guy who's running Zico, is this guy named Mark Rampola, who he's like a Peace Corps guy and tries coconut water, and he's inspired to sell it in the US. And you'd never, you had no idea that this thing was launching, and they probably had no idea you were launching.

• 44:18Speaker 01

  Yeah.

• 44:18Guy Raz?

  Because this is like still pre-social media.

• 44:20Speaker 01

  Yeah, no, yeah, exactly. So we knew nothing about each other. We just, you know, started running into each other in the street. I remember one of the biggest distributors in New York, I went and pitched him, and Mark was in there, you know, the same week. And he ended up choosing Mark.

• 44:35Guy Raz?

  Wow.

• 44:36Speaker 01

  I said, but why? He said, because there's this much more sophisticated looking.

• 44:40Guy Raz?

  Because they had that sleek blue bottle.

• 44:42Speaker 01

  Yes.

• 44:43Guy Raz?

  Yeah. And also being brought in from Brazil?

• 44:47Speaker 01

  Yep.

• 44:47Guy Raz?

  Zico, okay. So it was a very similar product and similar price point?

• 44:51Speaker 01

  Same.

• 44:52Guy Raz?

  Same price point?

• 44:53Speaker 01

  Yep. But yeah, no, I mean, running into Zico everywhere, everywhere we would go, whether it was a yoga studio or a grocery store, whatever it was. People were like, oh, I love your product. It tastes great, but I just brought in the other one.

• 45:05Guy Raz?

  Oh, wow. And did you know, like, this is 2004, 2005, did you, when you started to find out about Zico, did you find out that they were better capitalized than you? They had more money?

• 45:16Speaker 01

  Yeah, I knew they had a bunch of partners, and they had real capital, and they had, they just, they also, I think I found online somehow their business plan was published, or their market, initial market research was published. And I remember thinking, holy crap, these guys actually did like market research, and they actually had a business plan.

• 45:36Guy Raz?

  Wow.

• 45:36Speaker 01

  Like, they're for real.

• 45:38Guy Raz?

  All right, so they get, they get a distribution deal with one of these big distribution companies. And by the way, we should mention, this is super important because you just going from bodega to bodega, you're not going to be able to scale.

• 45:51Speaker 01

  That's right.

• 45:51Guy Raz?

  You've got to sign with a distributor. It's sort of like, it's not really the right term here, but it's kind of like a mafia system, sort of.

• 45:59Speaker 01

  100%.

• 46:00Guy Raz?

  The distributor, you gotta kind of go to the distributor, the distributors, they, they-

• 46:04Speaker 01

  They bless it.

• 46:05Guy Raz?

  They bless it. If you don't work with them, good luck getting shelf space.

• 46:09Speaker 01

  That's right.

• 46:09Guy Raz?

  Meantime, you're kind of grinding away trying to get your stuff on shelves. When you would go into stores that were not familiar with coconut water and you tried to convince them to carry it, was that easy? I mean, did anybody say, I don't, I don't like the taste of this?

• 46:26Speaker 01

  Yeah, all the time. I would go in on my roller blades because I could, I could hit, I don't know, 50 stores in a day on my roller blades, whereas if I was, you know, walking, it'd be a lot less. And I would go in and show it to, you know, the store manager, whatever it was. And half the time I'd get kicked out. Sometimes they would find it interesting. They would say, send me some, but find out later they weren't going to actually take it. And then other times, people were just like, no way, this is ever going to work. I remember one of the early stores I went into, I roller bladed in there and found the store manager. And first he's laughing at me because I'm on roller blades and I'm a sales guy, you know, without a polo shirt and a briefcase. And he takes a sip and he

• 47:08Speaker 01

  said, this is never going to work. It tastes like sock water, is what he said. And, and I said, I promise you. I said, give me a chance. I said, take two cases, put it in the store, and if it doesn't work, I'll buy it back from you. And he did. And pretty quickly, it started working really well in his store. And he was one of the early, real early success stories.

• 47:32Guy Raz?

  But how did people discover it? I mean, if it's just on the shelves, just randomly, people saw, Vita Cola, this, this looks interesting.

• 47:39Speaker 01

  I was, every single evening, I was in stores handing out samples.

• 47:44Guy Raz?

  Oh, wow.

• 47:44Speaker 01

  Talking about all the health benefits and everything else and getting people to try- And again, remember, I had this instant consumer in people from the Caribbean, people from Southeast Asia, people from Latin America. And, you know, in some cases, they would taste it and they would buy a case. No, they weren't buying a case of anything else. First time they're trying it in a store, right? So I had some early success. And then after I would do my demoing, my sampling, I'd go home and do the bookkeeping. And that was kind of what the day looked like.

• 48:13Guy Raz?

  And meanwhile, you and Zico are totally at each other's throats. Like you guys would sabotage each other. It was like Uber and Lyft, you know? Like, there were stories about VitaCoco guys taking the price tags off Zico products in stores and Zico calling up stores and saying, well, we'll sell you 50 cases and give you 25 cases for free. And they would inundate stores with Zico in order to prevent VitaCoco from being on the shelves. Is all that true?

• 48:39Speaker 01

  That is true, and it goes even deeper.

• 48:41Guy Raz?

  Okay, tell me more. What else?

• 48:43Speaker 01

  I mean, they would, they would literally, just to piss us off, they would set up their sampling truck outside of our office every other day and sample people. So everybody around our office would be walking around with Zico.

• 48:56Speaker 01

  I mean, it just, it was a constant battle.

• 48:59Guy Raz?

  And did you, were you obsessed with this guy, Mark?

• 49:01Speaker 01

  Obsessed.

• 49:02Guy Raz?

  Obsessed. And did you ever meet him at this point? Had you met him?

• 49:05Speaker 01

  We, we came across each other here and there at a trade show. We just.

• 49:11Guy Raz?

  Was it like, like, you know, remember in Seinfeld where they'd be like, hello Newman?

• 49:16Speaker 01

  It was that. It was exactly that.

• 49:18Guy Raz?

  It was like, hello, Michael?

• 49:19Speaker 01

  Yep. Hi, Mark.

• 49:21Guy Raz?

  And that was it?

• 49:21Speaker 01

  That's it. We became brutal enemies for years.

• 49:24Guy Raz?

  Cause he was, he was, he was kind of crushing you guys.

• 49:27Speaker 01

  Yeah, yeah. In the early days, yeah.

• 49:30Guy Raz?

  And was that because he was running a better business than you were running? Cause it was the same product.

• 49:36Speaker 01

  I think getting distribution early was the key difference for the first couple of years. He had a huge leg up.

• 49:43Guy Raz?

  How did you finally land? Cause I read that in 2006, you actually did land a deal with a distributor, a smaller one.

• 49:52Speaker 01

  Yeah.

• 49:52Guy Raz?

  And that was kind of a turning point for you at that time because then you started to get, there was a distributor who would focus on getting you into more and more stores.

• 50:02Speaker 01

  The beauty about them is they were a bunch of guys that had left the distributor where Zico was sold.

• 50:08Guy Raz?

  Right.

• 50:08Speaker 01

  So not only were they a much smaller distributor, but they also had it out for that distributor and for Zico. So together, we had a this

• 50:18Guy Raz?

  It was a war.

• 50:19Speaker 01

  Drive to win.

• 50:20Guy Raz?

  Wow.

• 50:20Speaker 01

  It was a war. Yeah.

• 50:22Guy Raz?

  And

• 50:22Speaker 01

  Yeah, we were not going to lose.

• 50:24Guy Raz?

  And what kind of things did you do to Zico?

• 50:26Speaker 01

  A lot of that, you know, I mean, literally like buying their product out of stores, putting it in trashcans, taking their point of sale material down, hiding it in back rooms.

• 50:36Guy Raz?

  Wow.

• 50:36Speaker 01

  Stupid stuff.

• 50:37Guy Raz?

  This is ugly.

• 50:37Speaker 01

  And you know, you think about it, I mean, they weren't huge businesses. They had two very passionate founders.

• 50:43Guy Raz?

  It was only in New York mainly.

• 50:45Speaker 01

  It was really in New York and it was, we both built these small sales organizations that were also incredibly passionate and treated the brand like it was their own and any move on it was a personal attack.

• 50:58Guy Raz?

  So aside from you handing out free samples at little shops in New York, what other marketing were you able to do on the cheap?

• 51:08Speaker 01

  It was that, it was, Ira came up with this, this idea he saw in Brazil with like this blow up costume and he had a Vita Coco Tetrapak made and we put Ira's brother in it and he would go around New York City as a Vita Coco Tetrapak. We, we made these bicycles that were amazing where we took these, like a normal bicycle and attached a little small trailer behind it and we would ride around New York City and we had these billboards on the back of our bikes that said, you know, try Vita Coke or drink Vita Coke, what's great, or take a two minute vacation or these different things. And that was our advertising. So it was like a moving billboard.

• 51:48Guy Raz?

  And I guess at a certain point, you hired a guy to really kind of aggressively help you sell. I only know him by the name of Goldie. Who's Goldie? What did he do?

• 52:00Speaker 01

  Goldie is the best. Goldie is Michael Goldstein. Goldie was at Vitamin Water. And then when Vitamin Water sold to Coke, I brought him over and he came over because his wife is Brazilian and he loved coconut water. He thought it was a great idea. I never thought I would be able to recruit somebody from a company like Vitamin Water. And he came over and he is just this incredibly aggressive, charismatic, competitive, incredible guy that just does not stop. And so my competitive drive and wanting to win was accelerated to a whole new level.

• 52:41Guy Raz?

  Okay. All right. So you, so you, um, so you're still trying to compete with Zico, which is still better funded. And I guess in 2007, you take in some outside capital because at this point, up until that point, was it just you and Ira who, who owned the company for the first three years?

• 52:58Speaker 01

  Yeah.

• 52:59Guy Raz?

  You had no outside investors. So you, you brought in $2 million to an outside investment firm that got, what I read, 20% of your company. So it sounds to me like you really needed the cash at that point. Like you guys were pretty low on cash.

• 53:13Speaker 01

  Yeah.

• 53:14Guy Raz?

  It's, you know, it's not insignificant, but it's not 20%. Wow. For 2 million, that's a pretty great deal.

• 53:19Speaker 01

  Well, we were doing less than a million dollars in sales. Um, so we were not a big company. And so when you think about it, it's actually a decent valuation on the business at that.

• 53:30Guy Raz?

  And what does a $2 million infusion of capital enable you to do?

• 53:34Speaker 01

  We hired Goldie.

• 53:36Guy Raz?

  Okay.

• 53:36Speaker 01

  We hired some marketing people. I wasn't doing as much in-store sampling anymore. Now I had other people to do that.

• 53:43Guy Raz?

  Yeah.

• 53:43Speaker 01

  And those people were, you know, our brand educators. We started to invest small amounts into marketing. Like we got a van and put coconuts on top of it and, and painted it Vita Coco. And we started to, you know, Vita Coco would, a van would arrive, hydrate everybody and do some hula hooping and all sorts of stuff and then leave.

• 54:05Guy Raz?

  And Ira was still based in Brazil, handling operations there.

• 54:09Speaker 01

  Yep.

• 54:10Guy Raz?

  By the way, how did you guys pay each other? Were you, I mean, I'm assuming that you were handling all the finances and the money and the accounting. And so would you just send him a check every month or something?

• 54:20Speaker 01

  Yeah, deposit to his bank account. We went on salary, not so early. I mean, we, we had one or two employees before we actually went on salary.

• 54:31Guy Raz?

  Still, at this point, Zico is kind of kicking your butt, I think. I mean, you were, I think in, by 2009, you're selling like 30,000 cases a month in New York and, and Boston and a little bit in Miami and LA. It's pretty good. That's two containers, two and a quarter containers worth of VitaCoco a month. It's not bad.

• 54:49Speaker 01

  Yeah, there's actually, if I think about it, there's actually probably, say, 6,000 cases on a, on a container. So it's a little bit more than that.

• 54:58Guy Raz?

  But you were not, you were not like hugely profitable, maybe barely profitable at the time?

• 55:02Speaker 01

  No, we were losing, we were losing money.

• 55:04Guy Raz?

  And then I guess around, around the time you kind of got hammered a bit, because I think it was like 2009, Coca-Cola announces this huge investment in Zico.

• 55:15Speaker 01

  That's right.

• 55:15Guy Raz?

  With, with a path to, towards acquiring the business, which means that all of a sudden they get this huge infusion of cash. I mean, do you remember what you were, what you were thinking when you found out about that?

• 55:27Speaker 01

  I was thinking, shit, this is the end of us. Like, how are we going to compete with Coke? You know, there's just no way.

• 55:34Guy Raz?

  If Coca-Cola is taking an interest or basically makes an investment in Zico, they're going to make sure it's a winner and that you're not a winner. And I, if I was in your position, I would be terrified.

• 55:47Speaker 01

  We were, but I also realized that, you know, Coke is just so large and Zico was just so small for them at the time that it was going to be, you know, people were telling me they're not going to be successful. You know, you have to remember, they bought, I think at the time, a third of the business with a path to owning the whole thing over three years or something like that. So they didn't own 100% of it. It was too small for them to focus on and to put real resources towards. And that was, you know, an advantage for us. I think Mark, the founder of Zico and the team there expected it to be easy. Once they did their deal with Coke and it wasn't that easy.

• 56:26Guy Raz?

  But how, how were you able to differentiate yourself? How were you able to make the case to somebody to buy Vita Coco over Zico if it was more or less the same beverage?

• 56:38Speaker 01

  So pre Coke, it was more or less the same beverage. As soon as Coke invested in that business, they moved to a concentrate model. So they were no longer 100% pure premium coconut water, not from concentrate. So we quickly changed our packaging and put in huge letters across the front, never from concentrate. And that became our big selling difference.

• 57:00Guy Raz?

  All right. And I guess in January 2010, you raised $5 million. But from what I understand, this was not intended to be a fundraising round. And you got that money from celebrities. So first of all, how did that even begin? What's the story?

• 57:15Speaker 01

  So around the same time that Coke invested in Zico, a friend of a friend introduced me to Guy Oseri, who is Madonna's manager, today's U2's manager. He's quite connected in Hollywood. And I had coffee with Guy.

• 57:31Guy Raz?

  He wanted to have coffee with you? They just said, hey, Madonna's manager wants to have coffee with you.

• 57:36Speaker 01

  So basically, this friend of a friend introduced us because he knew that Madonna was already drinking Vita Coco.

• 57:43Guy Raz?

  Wow.

• 57:43Speaker 01

  Guy was married to a Brazilian and therefore has coconut water in the house. And he saw this as a big category, a potentially big category in the future. And so he was willing to take a coffee.

• 57:55Guy Raz?

  He wanted coffee with you, thinking this is going to be maybe an endorsement deal with Madonna, something like that?

• 58:01Speaker 01

  That was kind of the idea, you know? I mean, he said Madonna's drinking it on stage. She's talking about it in interviews. It's part of her diet and so on and so forth. How can we work together? And my response was, I don't have any money to pay her. And even if I did, I wouldn't therefore have any money to put her on billboards or invest behind you.

• 58:21Guy Raz?

  You did not have enough money.

• 58:22Speaker 01

  We're not, we're not Coke. We're not Pepsi. We're not of that scale, that size. And then almost jokingly, I said, you know, but we are looking to raise some money, you know, if you guys wanted to invest and his ears perked up, he said, you know, not only will Madonna invest, but I'll get other people.

• 58:40Guy Raz?

  Cause he manages so many different, he manages personally only U2 and Madonna, but he oversees a management company that manages tons and tons of famous musicians.

• 58:50Speaker 01

  That's right. And he's just super connected and friends with all of these people. And he started making some phone calls and he, you know, called Demi Moore and he called Matthew McConney, called Anthony Kiedis, a bunch of people and, you know, said, I'll take, we'll take, we'll, me and my friends, we'll take the whole round. Madonna took the majority of it and they all put in the rest of the money. They took the round and now we had these people with a much bigger mouthpiece than we could have, talking about our brand and that was a game changer.

• 59:19Guy Raz?

  By the way, are they still investors Madonna, Demi Moore, Anthony Kiedis? They still are?

• 59:23Speaker 01

  Yep.

• 59:24Guy Raz?

  All right. So all of a sudden you've got all these big celebrities. You've got the Red Hot Chili Peppers lead singer, you've got Madonna. And as investors, I guess they were incentivized to talk about your brand because it would also increase their investments.

• 59:37Speaker 01

  Yeah. Which was amazing, right? So now we're not paying somebody to endorse our brand. They've in theory paid us, right? They've invested.

• 59:45Guy Raz?

  Right.

• 59:46Speaker 01

  Now they have ownership.

• 59:47Guy Raz?

  Yep.

• 59:47Speaker 01

  And they're now more motivated than if they were getting paid, you know, a couple hundred grand or whatever it is to go do something and talk about it. They're super motivated because first of all, they love the product. That's why they invested. But now they have real skin in the game.

• 1:00:01Guy Raz?

  All right. So when they started to talk about it, did you start to see growth as a result of that?

• 1:00:06Speaker 01

  Yeah, quickly. First, we started to see a ton of incoming inbound PR. I would say we got more PR than any brand of any sort our size should have ever gotten. So I was this guy selling this little coconut product that people a few months earlier had never heard of, going on news shows and, and getting to a point where a year earlier I would go anywhere else in the country and nobody would have ever heard of coconut water or VitaCoco. And, you know, all of a sudden you walk into a store in Minneapolis or you walk into a store in Dallas or wherever, and people are like, oh, yeah, yeah, yeah, yeah. That's that coconut water thing. I've heard about it. Everybody's drinking it, right?

• 1:00:48Guy Raz?

  So what did that mean? I mean, did that make it easier for you to get? Cause I think around that time, um, you also get signed with. A new distributor, a very significant one, which was the distribution company that does Dr. Pepper and Snapple. I think it was like the third biggest after Coke and Pepsi, a distant third, but still pretty significant.

• 1:01:09Speaker 01

  Yeah, so it was it was huge because now we had a national footprint, right? Now we could go to national retailers, whether it be Walmart, Kroger, Target, and sell to them on a national level. While at the same time, we were getting this great expansion of awareness. So it worked out really well. I think a lot of brands struggle because they get one or the other way before the other, right? So you maybe you start to get awareness, but you just can't build distribution because you don't have the distribution footprint and power to be able to do it, or vice versa. You build distribution. You see that a lot. And the brand just doesn't pull because nobody knows what it is. For us, these things kind of came together at a very interesting time and it really worked.

• 1:01:50Guy Raz?

  So what, I mean, you're still up against a brand that is backed by Coke. How were you able to win? Because I think you did. I mean, eventually you had you kind of dominated market share. I think it's like 60% of market share at one point for VitaCoco.

• 1:02:05Speaker 01

  Yep.

• 1:02:05Guy Raz?

  How did you beat Zico when they were clearly kicking your butt in the first few years?

• 1:02:11Speaker 01

  They relied on Coke. And so they had some really interesting distribution points that we couldn't get, whether it be certain accounts in airports or whatever it might be, food service, things that we just couldn't get to with our distribution network. But we had built a team that was just willing to run through walls and willing to fight to beat Coke. You know, we were the underdog and they should have won. You know, if you remember, I said, I, early on, when Zico was acquired by Coke, I had, you know, several people tell me, don't worry, the entrepreneurial startup business will win because Coke just won't focus on it. And I realized after about a year or two, that that was in fact true. And it wasn't only in New York. It wasn't only in you in the in the US. By this

• 1:02:56Speaker 01

  point, we were fighting each other in London. We were fighting each other in Seoul. We were, you know, we were becoming a global brand and they were trying to do the same thing at the same time.

• 1:03:07Guy Raz?

  All right. So you guys are now really. You know, starting to grow. And do you, do you remember what year you actually became profitable?

• 1:03:14Speaker 01

  Yeah, it would have been 2011.

• 1:03:19Guy Raz?

  Okay, so this is, I mean, this is amazing because you just really launched the company in 2004. It takes you about seven years before you turn a profit, which is not unusual at all. But can you explain what it is that makes it so expensive? Because it seems like a fairly cost-effective business. I mean, you don't own the factories, you don't own the coconut plantations. You're basically having a third-party, white-label coconut water for you and sending it on container ships, which are pretty relatively cheap. So why, why was it so expensive? Where was your money going?

• 1:03:55Speaker 01

  So the biggest expense is obviously cost of goods. So you make the product, you ship it across the world, you ship it, you know, to stores, whatever it is. Let's say that costs 50% of your wholesale price. So you're already 50% down. Then you spend, you know, 10, 20% on marketing. Then you have a team and you have operating expenses and an office and everything else. And unless you have real scale, you know, by the time you're done, you're competing for space against Coke, Pepsi, Carrick Dr. Pepper and Nestle and everybody else. You've got to fight for that space. You need people for that.

• 1:04:33Guy Raz?

  And is that, because I'm thinking coconut water, the margin's got to be huge. You know, you're, it's not very expensive, it's coconut water. And you can charge three, four times the price of the cost to make. But is that just not accurate?

• 1:04:45Speaker 01

  No, I mean, you're climbing a tree for every single coconut you get.

• 1:04:48Guy Raz?

  So harvesting coconuts, that makes sense, is more expensive than harvesting, I don't know, oranges?

• 1:04:55Speaker 01

  Yeah, but don't compare it to orange juice. Compare it to vitamin water, compare it to water.

• 1:05:02Guy Raz?

  Which doesn't have any fruit, right?

• 1:05:04Speaker 01

  There's nothing. It's, it's an ingredient, it's an ingredient powder mixed with water in a plastic bottle created down the street in the US. Yeah.

• 1:05:12Guy Raz?

  And how were you able to, because, because, I mean, I'm imagining that because a coconut is an organic product, you can't, it's hard to make, maintain the consistency. Like, some crops are not as sweet, some, you know, might not produce as much water. Some may have more salinity or acidity. Like, how, how do they maintain consistency?

• 1:05:38Speaker 01

  Yeah, it's a big, that was a big issue for us early on, not only in Brazil, but as we started to produce in other countries. Taste was different, potassium levels were different, sodium levels were different, sweetness and sugar levels were different. So taste was an issue, but also nutritional panel was an issue. So over the years, we created a procurement team, a supply chain team, that has become the best at blending ages, breeds, to create a consistent taste across the globe.

• 1:06:09Guy Raz?

  And to make money, you've got to sell a lot of it.

• 1:06:11Speaker 01

  That's right.

• 1:06:13Guy Raz?

  All right, so 2011, you get hit with a class action lawsuit because basically the claim was that you guys were touting the health benefits and the nutrients in Vita Coco, and you get hit with a class action lawsuit from people who say, well, this, you know, there is no evidence and so on and so forth. Let me ask you about class action lawsuits, because on the one hand, I don't want to minimize them, they're legitimate, and most of the time, people have legitimate reasons to be involved with them, but I think they're also used by corporations to slow down competitors as well.

• 1:06:49Speaker 01

  Yep.

• 1:06:50Guy Raz?

  Is that what happened in this case, from your view, your point of view?

• 1:06:53Speaker 01

  Yeah, I think, you know, look, at the time, I was convinced Zika was involved. I don't know if they were or not at this point.

• 1:07:02Guy Raz?

  You said it was like a, it was like a influence campaign to, to slow you down?

• 1:07:06Speaker 01

  Yes.

• 1:07:07Guy Raz?

  And, and you have no evidence that Zika was involved?

• 1:07:09Speaker 01

  No, you know, I, I, I felt, and I still feel to this day, that either there was a competitor involved, or it was just a money grab. And typically, we've been through several of these, we had another big one a couple of years ago, typically, these are money grabs, you know?

• 1:07:26Guy Raz?

  And they're, both these class action lawsuits are based around the same idea that you are misrepresenting the health benefits of coconut water?

• 1:07:33Speaker 01

  No, the first one was that, the second one was that we had a little tagline on our brand that said, born in Brazil, it was on the back of our package.

• 1:07:42Guy Raz?

  And by that point, you were not sourcing all your coconuts from Brazil?

• 1:07:45Speaker 01

  No, about a third came from Brazil, and we talked very openly about all the work we do in the Philippines, and Sri Lanka, and Indonesia.

• 1:07:52Guy Raz?

  But you were born in Brazil.

• 1:07:54Speaker 01

  The brand was born in Brazil.

• 1:07:56Guy Raz?

  And that was your point?

• 1:07:57Speaker 01

  That was my argument, yes.

• 1:07:58Guy Raz?

  And people, and you got sued from people who said, no, you're not born in Brazil?

• 1:08:02Speaker 01

  Yep, and we literally spent $4 million on legal fees to fight it and we won.

• 1:08:07Guy Raz?

  But the first one you did settle, I think for

• 1:08:09Speaker 01

  Yeah.

• 1:08:10Guy Raz?

  For five or six million. In a sense, did you learn the lesson that you had to be more cautious about how you describe the health benefits of VitaCoco?

• 1:08:18Speaker 01

  Yeah, I mean, the lawsuit claimed, you know, we were claiming that it was life enhancing. Since then, we're obviously very careful about all of our packaging and all of our marketing materials goes through, you know, all sorts of legal checks before anything goes into market because you don't want to make false claims, but it's less about making false claims and it's just about making claims in general that could lead to somebody insinuating that you were trying to deceive, which is the last thing we want to do, right?

• 1:08:47Guy Raz?

  Yeah. All right, so you, once that distribution deal happened, you were growing really fast and big. And by 2014, you sold a quarter of the company

• 1:09:00Speaker 01

  Yeah.

• 1:09:01Guy Raz?

  To a Chinese like investment group that invests in foods and

• 1:09:06Speaker 01

  Yeah, it's actually Red Bull China, so they're the owner of the Red Bull brand in China. So they're a huge beverage company in China. They were looking to diversify, bought 25% of the business and became our distributor in China.

• 1:09:19Guy Raz?

  Wow. So not only do they buy 25% of your business, I think they paid $165 million for it, but they become your distributor in China, which means you are guaranteed, more than guaranteed, to become a huge, hugely profitable because that's a brand new market for you.

• 1:09:35Speaker 01

  Yep.

• 1:09:35Guy Raz?

  The biggest market in the world.

• 1:09:37Speaker 01

  That's right. So, you know, kind of like Madonna and them coming in as investors, we had somebody coming in and buying part of our stake and at the same time, we got major value add, right?

• 1:09:48Guy Raz?

  Yeah.

• 1:09:49Speaker 01

  And it just worked very well.

• 1:09:50Guy Raz?

  So you got to keep seven, I mean, 75% of company you and your investors got to keep, which you, I think you still own today, you and your investors own 75%. You got Hundred sixty five million dollars for twenty five percent of the company, which I'm sure gave you more than financial stability and security for ever and ever and ever. Why not just sell the whole thing? I mean, why not, you know, sell a hundred percent of the company?

• 1:10:15Speaker 01

  It made selling a hundred percent of the company much less interesting, right?

• 1:10:19Guy Raz?

  What did?

• 1:10:20Speaker 01

  By taking money off the table, a significant amount of money, right? So I've got the financial security to not have to worry about anything. So now I could take bigger risks, always calculated, but I could take risk. I could go longer and enjoy the people I work with, which is basically, you know, my second family. I love what I do. I love the creative aspects of it. What else am I going to do, right? So I don't have to sell the business. That's the beauty of the position that Red Bull China kind of put me in. So now I'm super focused on, you know, what does the business look like five years from now? And kind of thinking about this business as a broader platform of better for you, healthier, functional beverages as compared to VitaCoke with a coconut water business.

• 1:11:05Guy Raz?

  We are in the middle of the most trying time for every business in the world, unless you're Zoom or Slack. I have to imagine that my, I would think that initially when people were freaking out that there was a spike in sales. We heard this from Clif Bar and other brands, Spindrift, but that after a while they slowed down because people are not going into Walmart and Target and supermarkets as methodically as they might have been before the pandemic. So is that the case that the, that sales spiked and now have slowed down again?

• 1:11:39Speaker 01

  Yeah, so the first few weeks, we saw massive spikes, really, really significant growth. And that was an awkward position to be in. The world was falling apart. People were losing their jobs in unprecedented numbers and we were seeing these massive, what we were calling pandemic profits. So that led us to do some things to get back to our local communities. Shortly after the spike, we saw the big club stores continued to do well. Everything else kind of declined. And then after a couple of weeks, it started. Really pick up again and the business now across all grocery, all mass and club stores is growing significantly. And I think it's because people are spending more time at home, they're

• 1:12:23Speaker 01

  consuming more. We've become somewhat of a of a household staple. People are making their smoothies every morning at home and they're using our product.

• 1:12:31Guy Raz?

  Have you had to have any any layoffs?

• 1:12:34Speaker 01

  No, none. We're all working from home. We're going to keep the office closed until September. And even though some people, you know, everybody's got work to do and some people are working harder than they were in the office. Others might not be as busy, especially during a time when things are closed. If we can afford to keep people, now is the time to to keep people employed as as much as possible, for sure.

• 1:12:58Guy Raz?

  What do you think it takes to be a successful entrepreneur? I mean, because clearly in your case, it's not education, right? It's not formal education or post, you know, secondary education. There's something else or other qualities. What do you think they are?

• 1:13:14Speaker 01

  I think for me, I think never having a fear of failing has been very important, right? I've I've been told since I was young by everybody besides my immediate family, you know, specifically as we talked about my dad earlier. I was told quite a bit as a kid that I'm never going to be successful, right? So what's the worst I could do is fail like everybody thought I could or would. So I think that kind of sparks a bit of the risk taking nature that is needed for an entrepreneur. I also think that an entrepreneur who's going to not only be an idea guy, there's plenty of idea guys that can't really create great culture and great organizations. So I think

• 1:13:58Speaker 01

  it's a combination of the ability to take an idea, but also the ability to execute against the idea and bring people along for the ride. And I think that's been one of the things that have has helped us become very successful.

• 1:14:11Guy Raz?

  When you think about, you know, what's happened to you and and the success of Vitacoco and your success, your financial success. How much do you think that's because of your work and your work ethic and your skills? And how much do you think it has to do with just luck, just being lucky? Being lucky that you met those Brazilian women, you met Ira, and people cut you breaks? I mean, how much do you think it's luck? And how much is it just your raw, hard work?

• 1:14:41Speaker 01

  I think in order to be successful, you need some luck, right? I look at my life and I look at everything that I've been able to accomplish, not only through work, but also personally and family and everything else. I've been incredibly fortunate, incredibly lucky. But I also think that hard work and positivity brings what could be luck, brings good fortune. It could also be willing something to happen. And that comes with a lot of hard work.

• 1:15:16Guy Raz?

  That's Michael Kirban, co-founder of Vita Coco. As for his relationship with the founder of Zico... By the way, do you still hate Mark Rambola?

• 1:15:26Speaker 01

  No, he's amazing. We've become friends ever since. We invested in a couple of businesses together. We're good friends now.

• 1:15:34Guy Raz?

  So the coconut wars, happy ending in the end?

• 1:15:37Speaker 01

  Oh, yeah. I think because we won.

• 1:15:43Guy Raz?

  Thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at [email protected]. And if you want to send a tweet, it's at howibuiltthis or at Guy Raz. This episode was produced by J.C. Howard with music composed by Ramtin Arablouei. Thanks also to Candice Lim, Derek Gales, Julia Carney, Neve Grant, and Jeff Rogers. I'm Guy Raz, and you've been listening to How I Built This.