Stock Wars: Alkaline Water Company Vs. Vita Coco

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.

This week, the duel is between a pair of beverage companies: Alkaline Water Company Inc. WTER and Vita Coco Company Inc. COCO.

The Case For the Alkaline Water Company: This Scottsdale, Arizona-based company was launched in 2012 with the mission of combining two popular wellness trends: the alkaline diet that advocates cutting down on acid-producing foods and the perceived health benefits that come from pink Himalayan rock salt. The company blended these concepts into bottled water and trademarked “Alkaline88” for its product brand.

Today, Alkaline offers a line of fruit-flavored alkaline water, and it also sells a line of hemp-derived CBD products under the “A88CBD” brand. The company, which has been publicly-traded since 2018, said its products are in more than 70,000 retail stores while becoming the nation’s 10th largest enhanced water brand.

Last May, the company was in the media spotlight when it signed basketball legend Shaquille O’Neal as its brand ambassador; he also joined the company’s board of advisors and became an equity partner. Alkaline President and CEO Ricky Wright proclaimed, “We are so happy to have Shaq as our ambassador; he fits the brand perfectly. Nothing is smoother than Shaq and Alkaline88.”

In recent corporate developments, the company signed an agreement with Europa Sports Partners for the distribution of its Alkaline88® products to health and fitness venues around the country, and it expanded its military retail presence by adding the Alkaline88 1-gallon to 80 Navy Exchange Service Command stores and 170 Defense Commissary Agency commissaries. It also expanded its retail presence in more than 220 Meijer Express locations in the Midwest, more than 400 Stop & Shop supermarkets in the Northeast and more than 370 Maverik stores in the West.

In its most recent earnings report, the fiscal year, third-quarter data published on Feb. 14, Alkaline recorded revenue of $15.1 million, up from $9.6 million one year earlier, and it experienced a net loss of $10.7 million compared to $4.3 million 12 months earlier. The company showed a 10-cent loss per share, both basic and diluted, compared to a 6-cent loss in fiscal year, third-quarter 2021.

In announcing this data, Wright noted the fiscal year, third-quarter represented “our second consecutive quarter with greater than 50% year-over-year growth. What makes the results of this quarter even more impressive is that historically, our third-quarter sales are the lowest during our fiscal year. Our growth continues to accelerate into our fourth quarter as we now begin to see bottled water ‘resets’ and new SKU additions at retailers across the country. We believe that year-over-year quarterly growth will continue through fiscal 2023 and we reiterate our guidance of $62 million for fiscal 2022.”

Alkaline’s shares opened for trading on Wednesday at 83 cents; the company’s 52-week range is 68 cents to $2.35.

See Also: The complete Benzinga's Stock Wars series

The Case For The Vita Coco Company: This company has one of the more colorful roots stories: on a winter evening in 2003, best friends Mike Kirban and Ira Liran met two Brazilian women in a New York City bar. Liran later married one of the women and moved with her to Brazil, and when Kibran came to visit he noticed the prevalence of packaged coconut water in the local retail stores.

Originally called All Market Brands, Vita Coco was launched in 2004 and overtime expanded its line of packaged coconut water to include coconut milk, chocolate-flavored coconut water, the plant-based energy brand Runa, the sustainable enhanced water Ever & Ever and the protein-infused bottled water Pwr Lift. When the company held its initial public offering in October 2021, the trade news resource FoodDive.com reported Vita Coco owned a 46% market share for the coconut water segment, larger than the next 10 biggest brands combined.

Among its recent corporate developments, Vita Coco was certified as a B Corporation, less than a year after being incorporated as a Public Benefit Corporation. Founder and co-CEO Kirbran said being in the company “of like-minded organizations will create collective impact to democratize health and wellness.” Also, the company recently announced a pact with The Big Ten Network, its first collegiate sports partnership that and bolsters Vita Coco’s marketing efforts into the Midwest.

In its most recent earnings report, the fourth-quarter data published on March 10, Vita Coco reported net sales of $86.5 million, up from $69.5 million from one year earlier, and a net loss of $3.4 million compared to a net loss of $17 million in the previous year. The company showed a 6-cent loss per basic and diluted share, whereas it posted 29-cent earnings per share in fourth-quarter 2020.

Co-CEO Martin Roper was frank about the quarter’s problems, noting that the gross margins were “impacted by a 15% increase in the cost of goods per case equivalent versus prior period mostly due to a worsening of ocean freight rates and other domestic logistics costs which came in higher than expected. In total, we absorbed $8 million of incremental costs of goods on a rate/mix basis in the fourth quarter and $24 million for the full year."

Roper added that because of “ocean freight service and cost challenges to the East Coast, our inventory is out of balance geographically. Starting in late 2021, this created increased domestic logistics inefficiencies and some service challenges, which are continuing into 2022. To address our margin pressures caused by transportation costs including demurrage and incremental ports surcharges, we intend to implement further price increases and reduce promotional activities through fiscal year 2022. Overall, we believe our business is healthy and our commercial platform can support our multiple growth initiatives for long-term growth.”

Vita Coco’s shares opened for trading on Wednesday at $10.05; the stock’s 52-week range is $7.51 to $18.61.

The Verdict: Both companies are doing a wonderful job filling niches in the beverage market. Vita Coco’s reliance on imported coconuts puts it at more of a disadvantage based on what Roper described as inventory problems and expected product price increases — how long that will take to correct itself is uncertain, but if ongoing supply chain hiccups are any indication, it is easy to assume that change for the better will not occur until well into the second half of this year.

But while Vita Coco came off its last quarter with difficulties, Alkaline seemed to be hitting a new stride. It debuted its first traditional marketing campaign (including television commercials) featuring Shaquille O’Neal and also sponsored two awards at the Sports Illustrated Awards. The company’s retail presence also expanded with its debut in Walmart Inc.'s WMT Sam’s Clubs stores and an expanded product presence in CVS Health Corp CVS and GNC stores.

Both companies’ stocks are trading on the lowish side, which makes them attractive for long-haul investors awaiting upward price motion. Alkaline’s shares in particular should be doing much better, and the continued expansion of its retail presence can help put some muscle on its stock performance. If the company is able to keep its retail prices down, there will a significant win-win in its near-term future.

While Vita Coco’s success in commanding its sector deserves attention, this Stock Wars duel goes to Alkaline — with all of the right factors in place, the coming months should be an exciting time for this small but intriguing company.

Photo: Tookapic / Pixabay