Niche drink being pitched as natural sports beverage

Beijing-based Reignwood Group is buying a 25 percent stake in a top-selling coconut water brand owned by All Market Inc in the United States to expand the drink into this fast-growing niche beverage market in China.

Reignwood, the distributor of the Red Bull energy drink in China, will acquire the stake in the New York City-based All Market, owner of Vita Coco, for about $165 million.

The deal has been signed, but details are still being finalized, according to a marketing employee at Reignwood surnamed Kan.

He said it is expected that a subsidiary of Reignwood will represent and run Vita Coco in China. Reignwood will also distribute Vita Coco in China, the company was quoted as saying by The Wall Street Journal.

"We will learn from our experience in operating Red Bull in China how to distribute Vita Coco, and we have faith in the healthy beverage market in China," Kan said.

Coconut water drinks, which do not have fat, are being pitched as a natural sports beverage.

Commercialized coconut water, typically pasteurized and sold in cartons, is not widely available in China. Reignwood plans to roll out Vita Coco in major Chinese cities this fall, initially focusing on gyms and high-end supermarkets, and then expand distribution if consumers develop a taste for it, according to The Wall Street Journal.

The announcement indicates an aspiration to develop premium niche segments such as coconut water in the emerging beverage market in China, said Jason Yu, general manager of Kantar Worldpanel China.

According to Kantar, beverages are a growing sector of fast-moving consumer goods and consumers are willing to pay a premium for products with proven health and nutrition benefits.

Sales of functional drinks, juice and herbal teas have all grown strongly despite an overall slowdown in retail sales.

"We expect the link with Reignwood Group will increase its chance of success by leveraging the distribution network and local market knowledge. However, it is also critical to create demand for ‘coconut water’ as flavored water is a niche in the beverage market, so consumers will need to be educated on the benefits it can provide," said Yu.

Vita Coco will have to truly differentiate itself from the already crowded competitive landscape by relying on clever marketing, he said. United States-based beverage giants Coca-Cola Co and PepsiCo Inc have also bought large stakes in coconut-water brands.

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