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Over past coupla years, coconut water category has been a marvel of consistent growth, even outpacing energy drink segment in recent periods as consumers flock to message of natural hydration. But is something rotten in Thailand (and Vietnam and Taiwan)? What have been persistent rumblings about adulterated coconut water came into stark view last week as authorities in Thailand raided pair of production plants in Samut Songkhram province that they believed were producing fake coconut water from water and flavors. Samples of the suspected artificial coconut water were collected for further testing, per report in The Thaiger publication. From what we've been hearing, the issue extends far beyond Southeast Asia, with the far more favorable economics of adulterated coconut water making it irresistible for marketers, including some selling in US, to opt for the lower costs that adulteration brings, in segment where technical challenges in testing reduce the chances of exposure. Per that report, Samut Songkhram officials said they intend to work with nation's Food & Drug Administration and Dept of Medical Sciences "to develop accurate testing methods for fake coconut water and create a consistent enforcement standard." Among reasons for growers to be upset is that they're not enjoying the same bounty as finished products do as some brands resort to formulation subterfuges to stretch the coconuts they purchase.For some players that rigorously offer 100%-pure coconut water, the issue has posed a dilemma: they've been frustrated at more robust margins their rivals' cheat products bring but worried that blowing the whistle might discredit the entire category in consumers' eyes, tarnishing even the honorable players. Note that a couple of issues are in play here: marketers of 100%-pure coconut water who're secretly adding sugar as well as those completely fabricating the liquid. The added-sugar issue doesn't concern brands like Vita Coco whose packing states explicitly that sugar has been added, as long as the quantity is accurately stated, but rather those that claim the 100%-pure mantle. Another nuance pointed out to us by exec at US brand: New-to-category entrepreneurs behind some adulterated US brands may not even be aware that they're selling tainted products but rather be relying assurances from unscrupulous overseas copackers.One contact pointed us to Chinese-language video that whistle-blower has posted on YouTube for benefit of Taiwanese trade that cites exacting test using method called Stable Isotope Fingerprint Technology that can trace the origin of water and sugar more precisely than more commonly available testing techniques. According to translation we were provided, he claims that test of 4 popular brands found that all 4 contained added water and added sugar, with none meeting 100%-pure standard. One major brand was even found to contain starch-based syrup to artificially increase sweetness and thickness. He didn't name names and it's not clear that brands shown at retail in video represent more than stock footage.Per analysis contained in video, the economics are not even close. Per that account, producing a liter of pure coconut water requires 3 to 4 fresh coconuts costing nearly 30 RMB. Add in cold chain logistics and sterile bottling and total cost exceeds 35 RMB per liter. By contrast, some counterfeit items in market made from tap water, fructose syrup and flavorings can cost less than 2 RMB to produce and be sold for as little as 6.9 RMB per liter, deeply undercutting rigorous players while still generating gross margin of 350% or more. Given those stark economics, "many brands have abandoned their quality standards and joined the ranks of those producing counterfeit products," whistleblower laments.

Coconut Water Raid in Thailand Reflects Growing Concern Over Suspected Wave of Counterfeit & Adulterated Items Sometimes Masquerading as 100%-Pure

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