Vita Coco Sees Fourth-Quarter Gross Margin Near 33% As Freight Costs Spike And Supply Runs Tight
Container delays and surcharges held back shipments, and new pricing in early 2027 will not fully cover the freight peak.
Vita Coco, which sells coconut water and other plant-based drinks, expects fourth-quarter gross margin of approximately 33%, Chief Financial Officer Corey Baker said on the company's third-quarter earnings call, as an ocean-freight cost spike hits the income statement while supply limits shipments.
A freight spike lands in the fourth quarter
Baker said full-year gross margin is still expected at about 40%, and the full impact of cost increases that began in early summer will mostly arrive in the fourth quarter. Third-quarter gross margin was 38%, broadly in line with last year.
Chief Executive Officer Martin Roper said the company bought spot-rate containers and paid significant surcharges over contract rates to secure supply. He called current ocean freight costs "unusual and likely temporary" and said rates to Europe have eased from a July peak.
The company raised its full-year outlook anyway: net sales of $810 million to $820 million and adjusted EBITDA of $170 million to $175 million. Third-quarter net sales rose 34% to $244 million, with net income of $35 million, or $0.58 per diluted share, against $24 million, or $0.40, a year earlier.
Demand ahead of supply
Shipments lagged demand in the quarter. Baker said U.S. Vita Coco shipment growth trailed U.S. retail scan growth of 23%, and management expects shipments to outrun scans in coming months as system inventory is rebuilt.
Asked by a Bank of America analyst to size the lost business, a senior executive said it is very difficult to quantify completely lost sales, but "there's definitely deferred sales." The executive added that "how much of that is lost is open."
The executive said current plant capacity was planned about 18 months ago, when growth was expected in the mid-teens. Capacity utilization is running at 95%; Roper said the company should reach its preferred 85% in 2028, with new capacity arriving in the back half of next year.
Pricing that will not cover it all
The company has told retailers it will raise prices in early 2027. An executive said the increases aim to cover permanent costs such as packaging and factory wages, but will not fully cover the current transportation peak, and that the company reserves the right to take more pricing if ocean freight stays high.
The Coper acquisition, which closed in late July, contributed $29 million of net sales in the Americas, and it is also capacity constrained. Baker said the company held back raising prices this year while it judged which cost increases were permanent.
Roper said the company expects strong shipment growth through year end as it rebuilds inventory ahead of 2027.
Sources
- Vita Coco Q3 EPS $0.58 Beats $0.46 Estimate, ... — benzinga.com
- Vita Coco posts a beat-and-raise quarter as coconut water demand remains strong (COCO:NASDAQ) | Seeking Alpha — seekingalpha.com
- Vita Coco Company (COCO) Q3 Earnings Preview: What You Should Know Beyond the Headline Estimates — Yahoo Finance
- Compared to Estimates, Vita Coco Company (COCO) Q3 Earnings: A Look at Key Metrics — Yahoo Finance
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