Vita Coco's Q3 2025: Contradictions Emerge on Tariff Mitigation, Pricing Strategy, and Private Label Impact

Date of Call: October 29, 2025

Financials Results

• Revenue: $182.0M, up 37% YOY
• EPS: $0.40 per diluted share (net income $24M), vs $0.32 prior year
• Gross Margin: 38%, down ~110 bps vs 39% in Q3 2024

Guidance:

• Full year net sales raised to $580M–$595M.
• Expect full year gross margin of approximately 36%.
• Anticipate a $14M–$16M increase in cost of goods vs prior year from U.S. tariffs.
• Average applicable tariff rate expected to peak at ~23% and begin hitting P&L late Q4.
• Full year SG&A expected to increase high-single-digits vs 2024.
• Adjusted EBITDA guidance raised to $90M–$95M.

Business Commentary:

* Strong Financial Performance and Category Growth: - Vita Coco reported a 37% increase in net sales year-over-year for Q3 2025. - The growth was driven by the 42% increase in Vita Coco Coconut Water sales and the strong growth in the coconut water category, particularly in the U.S. and the U.K.

• Tariffs and Cost Management:
• The company enfrentarred a $14 million to $16 million increase in costs due to U.S. tariffs, with an estimated 23% weighted average tariff rate for 2025.

• Efforts are underway to mitigate tariffs, including exploring production diversions to reduce tariff impacts and taking pricing actions to cover increased costs.

• International Market Expansion:

• Vita Coco's international segment saw 48% growth in net sales, with Vita Coco Coconut Water growing 47%, driven by strong performance in Europe.

• The acceleration in international growth is attributed to increased investments in key markets and strategies to develop private label business.

• Private Label Challenges and Strategic Focus:

• Vita Coco's private label segment decreased 13% in net sales, reflecting the loss of some private label regions early in the year.
• Despite these challenges, the company retained some business and aims to regain lost regions, indicating confidence in its competitive supply chain position.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong Q3 results: "Net sales... $182 million, up 37% year-over-year," raised full-year net sales guidance, and stated "confidence in the long-term potential" and ability to mitigate tariff impact via pricing, sourcing and freight improvements.

Q&A:

• Question from Bonnie Herzog (Goldman Sachs): Your raise in full-year top-line guidance implies a sharp ~15% decline in Q4 at the midpoint — is that due to a pull-forward of shipments into Q3, private label headwinds, or other factors? And what drives the big EBITDA ramp in Q4?
  Response: Focus is on full-year; Q3 was boosted by a major retailer promotion and tough comps make Q4 appear down, private label remains a drag; tariffs (embedded at ~23%) and timing of inventories are built into EBITDA guidance.

• Question from Bonnie Herzog (Goldman Sachs): Any inventory level differences to call out between Q3 and Q4?
  Response: Limited visibility on retailer and distributor inventories; distributor inventories appeared healthy and ready to support Walmart resets, so focus remains on full-year trends and 2-year stacks.

• Question from Bonnie Herzog (Goldman Sachs): More color on recent private label wins — do they offset prior losses and how aggressively will you pursue private label?
  Response: Private label is complementary; the company has regained some regions lost earlier (not all), views supply chain and multi-source capability as competitive advantages, expects private label to be a slight drag in '26 but will continue to pursue selectively.

• Question from Christopher Carey (Wells Fargo): Will Brazil tariffs be concentrated in Q4 and when might pricing be needed if tariffs persist?
  Response: August tariffs had minimal Q3 impact and are expected to ramp in Nov–Dec to the ~23% blended rate; management is monitoring trade developments and will consider pricing actions in Q1 for potential Q2 implementation depending on tariff and mitigation progress.

• Question from Christopher Carey (Wells Fargo): Where are you in the international expansion and do you have capacity to support it?
  Response: Capacity expanded with 1–2+ new factories annually to support mid-teens growth; Europe (U.K., Germany) is early innings with substantial upside and current supply capacity is sufficient for the next few years.

• Question from Robert Ottenstein (Evercore ISI): How does Europe differ (consumer occasions, competition, margins) and was anything unusual in the quarter that flattered international results?
  Response: Europe (led by U.K.) has different retail/temperature dynamics and lower pricing vs U.S.; brand holds large share in U.K. and Germany is early-growth with strong demand; there was no one-off — just strong demand.

• Question from Christian Junquera (BofA Securities): You said the tariff impact for 2025 is $14M–$16M and a 23% blended rate for next year — can you clarify?
  Response: $14M–$16M FY impact is correct; the ~23% figure is the blended tariff rate on the applicable finished-goods portion (approximately 60% of global COGS), with timing causing much of the 23% impact to hit P&L late Q4 and into next year.

• Question from Christian Junquera (BofA Securities): What levers will offset higher tariffs next year (ocean freight, pricing, sourcing)?
  Response: Primary offsets are pricing already taken, expected lower ocean freight, and sourcing optimization to avoid Brazil where possible; the company is cautious on further pricing until tariff and mitigation clarity emerges.

• Question from Jon Andersen (William Blair): Ocean freight has come down materially — how big an offset is that versus tariffs for gross margin outlook?
  Response: Ocean freight decline helps but transportation is ~one-third of COGS and tariffs (if persistent) represent a larger, structural hit; freight is a meaningful but incomplete mitigation.

• Question from Jon Andersen (William Blair): Q4 guidance implies a large sequential sales drop from Q3 — what's causing that?
  Response: Q3 was unusually strong due to a major promotion and prior-year out-of-stocks; Q4 modeling is uncertain given promotional timing and private label declines, so guidance includes ranges to reflect that uncertainty.

• Question from Michael Lavery (Piper Sandler): How will you deploy the >$200M cash balance — buybacks, M&A, growth, innovation?
  Response: Priorities are core growth (including inventory build), innovation, and M&A if attractive; excess cash would be used for buybacks at appropriate prices after those priorities.

• Question from Michael Lavery (Piper Sandler): Treats — incremental to portfolio and does it drive trial to coconut water?
  Response: Treats is bringing new consumers into the brand with acceptable repeat and appears incremental (no observed cannibalization); management expects further distribution (e.g., Walmart) to support more growth next year.

• Question from Eric Serotta (Morgan Stanley): What competitor pricing moves are you seeing and how is Treats repeat?
  Response: Competitor responses are mixed — some raised prices earlier, others haven't; no clear widespread moves post-August; Treats shows acceptable/positive repeat and further distribution plans are in place.

• Question from James Salera (Stephens): Is multipack growth mainly existing households buying more or new household acquisition?
  Response: Multipacks drive value, velocity and pantry stocking; management estimates roughly half the growth from new households and half from increased consumption per household.

• Question from James Salera (Stephens): If tariffs remain and you blend with current ocean freight expectations, would FY26 gross margins be flat or modestly down?
  Response: Management declined to provide '26 guidance given many moving parts; they will evaluate tariff persistence, freight and mitigation before quantifying next year's margin trajectory.

• Question from Eric Des Lauriers (Craig-Hallum): What lobbying or classification levers do you have to seek tariff exclusions for coconut water?
  Response: Management is actively engaged in D.C. and with producing countries, pursuing trade discussions and classification/exemption efforts to seek tariff relief.

• Question from Eric Des Lauriers (Craig-Hallum): Will marketing spend increase as a % of sales for Treats and consumer education?
  Response: Long-term expectation is marketing/sales to track net or branded net sales; year-to-year variability exists but no structural step-up guidance provided.

• Question from Gerald Pascarelli (Needham): How long to reroute Brazil shipments and can you fully replace Brazil supply?
  Response: Rerouting requires new packaging and validations taking roughly 3–9 months; company may reduce Brazil exposure but likely won't fully exit due to service advantages; goal is to lower weighted average tariff closer to ~20% by end of next year.

• Question from Gerald Pascarelli (Needham): Any optimism trade negotiations will reduce the 50% Brazil tariff?
  Response: Management is hopeful based on diplomatic engagement and public discussions; they expect near-term progress is possible but outcomes remain uncertain.

Contradiction Point 1

Tariff Mitigation and Pricing Strategy

It involves the company's approach to mitigating tariffs and the timing of pricing adjustments, which directly impacts financial projections and consumer purchasing behavior.

Did shipment timing adjustments between Q3 and Q4 or private label impacts in Q4 contribute to the 15% Q4 revenue decline at the midpoint? What are the Q4 EBITDA growth acceleration drivers? - Bonnie Herzog(Goldman Sachs Group, Inc., Research Division)

2025Q3: We expect distributor inventory levels to support Walmart set changes. We think Brazil tariffs are impacting Q4, as we expect a significant increase in tariffs applied to our goods. - Martin Roper(CEO)

Detail your mitigation efforts against tariffs and whether you have pre-positioned inventory to mitigate their impact? - Ethan Huntley(Goldman Sachs)

2025Q1: Our guidance includes 10% baseline tariffs but not potential reciprocal tariffs, which could impact us in the low 20s. We are in a fortunate position where we can plan quite well on a month-by-month basis. - Martin Roper(CEO)

Contradiction Point 2

Private Label Impact and Market Strategy

It highlights the company's stance on private label competition and its strategic approach to the market, which are crucial for understanding market dynamics and revenue projections.

Did you pull forward Q4 shipments to Q3 or expect private-label impacts in Q4? What drives the Q4 EBITDA growth acceleration? - Bonnie Herzog(Goldman Sachs Group, Inc., Research Division)

2025Q3: We view private label as complementary to our brand. We believe in our competitive advantage given our supply chain and sourcing leads. We're optimistic about recovering some lost regions. - Michael Kirban(Co-Founder, Executive Chairman & President)

How flexible is your sourcing strategy to potential tariffs, and what is your outlook on Walmart? - Michael Lavery(Piper Sandler & Co., Research Division)

2025Q1: We believe that our competitive advantage is really around the brand and the supply chain and the portfolio of products that we offer to consumers. Private label, in particular, stems from Walmart, and we're actually quite pleased with where we ended the year. - Mike Kirban(Co-Founder, Executive Chairman)