Last month, Los Angeles-based growth-equity investor PowerPlant Ventures announced its acquisition of ZICO coconut water from The Coca-Cola Company (NYSE: KO). PowerPlant Ventures co-founder and managing director Mark Rampolla had founded ZICO in 2004, subsequently selling the brand to The Coca-Cola company in 2013 for an undisclosed sum. Late in 2019, The Coca-Cola company announced the sunsetting of a number of brands, one of which was ZICO. Below, Rampolla shares the journey from WSJ leak of the deacquisition news to the sale itself and looking forward to rebuilding ZICO with a keen focus on sustainability.
What was the journey to re-purchasing ZICO like – did you have a heads up on the sunsetting of the brand?
Coke was pretty close-to-the-vest before the announcement was made, after a leak in the Wall Street Journal. It took about two weeks for them to reach back out and say that they were interested in talking to us about a sale. They did plan on selling some of these brands, and that ZICO was among them. They did say there would be an organized process and expected to have multiple bidders for ZICO and other brands. I told them we wanted to be part of the process, so we set out as a fund to do our own diligence. ell.
What do you think the announcement of sunsetting this and other ‘hydration’ category brands means for Coca Cola and the other big players going forward?
Strategics are in a challenging time, for sure. For many years, they could rely on organic growth from population growth. All of the sudden, in last 10 years, you’ve seen smaller, up-coming brands capture material-enough share that it started to affect them. In response, they’ve taken different approaches, starting venture arms, making early-stage investments, starting late-stage investments. They haven’t quite figured out how to integrate these brands. In Coke’s situation, they put a lot of effort into this emerging brands group – at the end of the day, something like the economic crisis comes along and they want to go back to their core.
I understand it, it’s disappointing in many ways, but their loss is our gain. There is still a lot of work to be done in this category, and the beverage industry as a whole. If this is where they want to focus, then we will have to build this category of better-for-you businesses on our own.
What does this re-acquisition mean for the Powerplant Ventures Fund?
From a fund-standpoint, our job is to find and invest in what we think are the next-generation, great brands that we think will help rebuild the food system. Do we believe in the category, believe in the product, believe in the team, will it create value for our fund and our investors? ZICO met all of these criteria.
We took a very hard, tough look at this to make sure that it wasn’t driven by personal emotions, to be frank. To that extent, I recused myself from the voting process. This is emotional – once it sort of ticked off that it makes sense for the fund, that was when I let myself get excited about it. The way I can describe the feeling about purchasing ZICO back from Coke is this: my wife and I have two amazing, wonderful teenage daughters. ZICO is sort of like if they had this unruly but high-potential younger brother. And first we sent him off to an Ivy league school but then he came back from his education halfway through because it just wasn’t a great fit. And now we’re going to figure out how to set him back out on his journey.
We had made nine investments in our fund, this is the 10th. We are winding down this fund – we will likely do no more than 12 investments. We’ve been doing well, and it needs to continue to perform well.
How are you structuring the new ZICO team?
Tom Hicks is a known quantity in the beverage industry. I’ve known him for a decade. As soon as this possibility even came to mind, I started to jot down a handful of names and his was on my first list. Timing happened to work, and we started discussions immediately. Tom has worked with Alan George as his CFO for a number of years across a number of companies. Tom as CEO and Alan as CFO are the perfect team – they know the industry and have experience with better-for-you beverages for many years. Tom also had a brief role at Coca-Cola, where he helped with the ZICO sale to Coke so now it’s all coming full-circle.
What’s different now about taking on ZICO versus starting the organization from the ground up so many years ago?
Most importantly, I don’t have to explain to anyone what coconut water is, and I don’t have to explain what ZICO is. My phone has been ringing off the hook with distributors, consumers, retailers, brand partnerships. That’s a big difference from 15 years ago when it took us forever to get calls back from major retailers. Now they’re calling us. It’s a known category. We still think there is plenty of room to grow the category, but it’s easier when people are familiar with it. I also think that there’s a much broader number of options for what people would call routes-to-market. The time I was building and negotiating with Coke in 2009, the concept of e-commerce barely existed, let alone direct-to-consumer. Amazon was barely carrying food back then. Now you have many large e-comm distributors. Retailers have their own digital sites as well. There are a lot more ways to work with consumers without relying on something like a Coke.
What are you most looking forward to digging into with ZICO in 2021?
One thing that is intriguing about coconut water is that even when we started, there was more supply chain for coconut water than orange juice. Coconut water was a waste product. We could build an entire industry around a product with a low environmental footprint. It’s a minimally disruptive product. So now, I’m particularly excited about building out infrastructure sustainably, focusing on biological corridors, biodiversity and inclusion.