Questioning AI · Why does price competition force the coconut water industry to collectively cross the bottom line?

Original First Published | Jinjiao Finance (ID: F-Jinjiao)

Author | Mai Yingzai

Who would have thought that the health-boosting coconut water loved by the middle class is slipping from a “health myth” into a trust crisis.

Recently, Beijing News sent four mainstream “100% coconut water” products on the market for testing by European agencies. The results showed that all tested products contained external water or external sugar.

| Beijing News Report

This test result directly shatters the industry’s core selling point of “all-natural.”

In recent years, coconut water has leapt from a marginal category to a darling of capital, not mainly because of taste appeal, but because it precisely captured the public’s imagination of a healthy lifestyle.

Low fat, low calorie, natural electrolytes—especially the lone “coconut water” on the ingredient list—are almost a ticket to a zero-burden world in today’s consumer context.

With this narrative, the price of 7-15 yuan per bottle was deemed reasonable. Middle-class consumers bought in bulk, drinking it as a daily water substitute, creating a blue ocean worth $1.1 billion.

Now, this health filter has shattered. Detecting external water or sugar means it’s no longer a gift from nature, but a synthetic illusion under industrial intervention. More painfully, the prominent “100%” label now seems especially ironic, even potentially false advertising.

| The product images sent for testing, attached in Beijing News report.

What’s more unsettling is that the brands now under scrutiny are not fringe players.

Although Beijing News blurred the logos of the four coconut water brands, based on packaging and specifications, the market generally believes they involve major brands like IF, Hema’s own brand, Qing Shang, and Jiguoyuan.

| Image of the tested products from Beijing News

If even the leading brands cannot prove their innocence in the lab, it may indicate that the entire coconut water industry is sliding into chaos.

Capital markets are always the most sensitive. After the fake coconut water scandal broke, “the first stock of coconut water” IF was hit hardest. Its parent company, IFBH, saw its stock fall for four consecutive trading days, with a total decline of 21.13%. As of noon March 18, its market value shrank to HKD 3.302 billion.

But more than the evaporated numbers on paper, everyone wants to know:

How much secret “technology and tricks” are hidden in the so-called “100% coconut water” that people drink?

Unable to justify themselves

According to Beijing News, the testing used stable isotope fingerprinting. In the industry, this method is called the “DNA parent-child test” for coconut water: it identifies external water through hydrogen and oxygen isotope ratios, and external sugar through carbon isotope structures. Essentially, it traces the molecular source, not relying on corporate claims.

Simply put, it doesn’t ask “Did you add it?” but “Where did it come from?”

The “starch syrup marker peak” mentioned in the report is a highly indicative signal. Because such substances usually only appear as by-products of industrial enzymatic breakdown of starch, and should not exist in natural coconut water.

| A food nutritionist explained more straightforwardly in an interview: “Simply put, its presence indicates the existence of artificial cheap syrup.”

In response to doubts, the four involved brands quickly claimed their production processes contained no additives.

IF even listed four pieces of evidence: negative results for oligosaccharide/syrup markers, carbon isotope ratios conforming to European juice standards, sugar content matching natural coconut water, and no falsification in lab conclusions. Based on this, they further accused the media of “misleading and false claims.”

On the surface, this appears to be a standard “evidence-based self-justification.” But the problem is, this chain of evidence does not truly cover the core controversy.

The 21st Century Business Herald cited industry opinions that pointed out, the core evidence IF listed cannot fully prove that coconut water was not added with sugar. “If added sugar uses ‘transformed beet syrup,’ it can bypass these tests. Also, the tested sample and the product on shelves are not necessarily the same.”

As for IF’s claim that the “product fully complies with the European Fruit Juice Association (AIJN) standards for natural coconut water,” there are logical flaws. According to the AIJN reference guide, parameters like isotope ratios within the reference range only prove the parameters meet standards, which is a necessary but not sufficient condition for unadulterated product. It cannot confirm the product is genuinely pure.

Whether it’s adulterated or falsely accused, the coconut water industry led by IF probably needs to produce more convincing reports.

However, before the truth is fully clarified, public opinion has already undergone a massive collective turn.

As #椰子水塌房# quickly topped trending searches, the previously “clean, disciplined, middle-class” image was torn apart. On social media, consumers who paid a premium for “all-natural” products are experiencing a near-betrayal disillusionment.

“After drinking so much health water, it turns out to be industrial sugar water,” “Is there any truly clean coconut water on the market?”… These questions are not only a challenge to brands but also a full-scale eruption of long-standing doubts about the industry’s “tax on intelligence.”

“Counterfeiting is an industry secret”

Consumer emotions are quickly ignited, and this is no coincidence. Doubts about coconut water have long existed, but they mostly stayed at the level of “suspicion,” lacking concrete evidence.

These suspicions often stem from an unbalanced cost calculation.

Logically, one coconut usually yields only 200-300 ml of coconut water, meaning 1-liter products require 3-5 coconuts. The retail price of a single coconut often exceeds 10 yuan, so raw material costs alone reach 30-50 yuan. Plus, about 90% of the coconuts used are imported from Southeast Asia, with transportation, cold chain, and wastage further increasing costs.

Given this cost structure, a question is hard to avoid:

How do many “100% coconut water” products priced as low as 9.9 yuan per liter come from?

| Source: Chopping Chili Spicy

As early as a CCTV investigation, three typical cost-cutting methods were summarized: blending old coconut water with tender coconut water, directly diluting with water, and adding sugar and flavoring to adjust taste.

Further analysis shows this logic has even been industrialized.

Old coconuts tend to be sour but cost only about one-tenth of fresh coconuts. Some small and medium manufacturers use them as a base, mix with external water at a 1:5 ratio, add a small amount of fresh green coconut water for flavor, and finally calibrate the taste with sugar and flavoring. The packaging then claims “100% coconut water” and hits the market.

On the upstream supply side, standardized “formula services” have even emerged: the proportion of pure coconut water can be 10%, 30%, or 50%. Industry insiders say this is an open secret.

What makes consumers most uncomfortable is that this blending is almost “imperceptible.”

Coconut water itself has a natural sweetness, with a wide taste range. Even if external sugar is added or diluted, it’s hard to directly identify by taste. This causes all past disputes to be difficult to resolve through “sensation” alone.

Until now, the Beijing News report finally moved the issue from experiential suspicion to technical verification, making the previously vague industry outline more concrete.

But a new question arises: Why does an industry that appears “natural and healthy” tend to rely on technology and tricks?

Three words: too competitive.

Data from Zhuoshi Consulting shows that China is the fastest-growing coconut water market globally, with a compound annual growth rate of 60.8% from 2019 to 2024. The explosive growth has attracted many players, leading to market segmentation and price wars.

Currently, the industry has formed a clear three-tier hierarchy: imported brands like IF and VitaCoco occupy the high-end; domestic brands like Jiguoyuan and Qing Shang, leveraging upstream supply chains or channel advantages, compete in the mid-range; factory white-label brands penetrate lower-price sinking markets.

Price wars push brands to break bottom lines, and adulteration becomes a survival tactic amid intense price competition.

In an industry heavily dependent on agricultural products with dispersed supply chains, the most direct and covert way to cut costs is by modifying formulas.

Thus, “adulteration” is no longer just a moral issue but increasingly a competitive strategy.

Meanwhile, the lagging standard system exacerbates chaos.

For a long time, China lacked a unified, mandatory coconut water standard. The distinction between “pure coconut water” and “coconut-flavored beverages” was vague, and regulation lacked enforcement.

Only by the end of 2025 did the first “Coconut Water” industry standard officially come out, clarifying the definitions of “pure coconut water” and “coconut-flavored beverages.”

Whether this red line can stop those who have already expanded and accumulated resources—“blenders”—remains a big question.

The big reshuffle has just begun

If the industry environment provides the soil, then the business model amplifies risks to the extreme.

Take IFBH as an example, this company is almost an extreme case of a “light-asset OEM model.”

By the end of 2024, the company had only 46 employees, no self-owned factories, and no core production technology, yet in 2025 achieved about $176 million (roughly RMB 1.2 billion) in revenue, an 11.9% increase year-on-year.

According to its prospectus, in 2023 and 2024, the top five customers contributed 97.9% and 97.6% of sales, respectively; its purchases from the top five suppliers accounted for 92.3% and 96.9%. According to Prism, these “customers” are essentially distributors, and “suppliers” are OEM factories.

In other words, this is a typical “middle-layer business”: not controlling production, not directly reaching consumers, just amplifying traffic and channel efficiency between the two ends.

Under this structure, resource allocation is very clear: heavy marketing, light R&D.

In 2025, IFBH’s marketing expenses reached $13.01 million, up 77%; among which advertising alone was $9.16 million, exceeding last year’s total marketing spend. By the end of 2024, among 46 employees, 20 were in sales and marketing, only 5 in R&D.

In short, IFBH does not produce coconut water but only transports it from Thailand to China.

Although registered in Thailand, its revenue structure heavily depends on the Chinese market. In 2025, 97.4% of its income came from mainland China and Hong Kong.

This light-asset model makes it difficult for IFBH to effectively monitor raw material purity through supply chain control. Perhaps, after profit margins are squeezed to the limit by price wars, brands have silently tolerated cost-cutting by suppliers.

Financial data concretely reflect this pressure.

In 2025, IFBH’s revenue continued to grow, but net profit fell 31.7% year-on-year. The superficial reason was increased marketing investment, but the core driver was the continuous erosion of gross profit margin due to price competition. The company explained in its financial report: “The product sales mix slightly changed, with increased sales of 1-liter coconut water with lower gross margins.”

Cash flow changes are even more sensitive. During the same period, operating cash flow dropped 70.5%, from about $41.75 million to $12.33 million, a cash contraction of nearly RMB 200 million, indicating that the “growth” is losing its gold content, and the capital chain is under obvious pressure.

| IFBH Financial Report

Market feedback is equally direct.

According to Ma Shangying Data, IF’s market share of coconut water dropped from 62.5% in Q1 2024 to 30.3% in Q3 2025, nearly halved.

This presents a typical dilemma: shrinking profits and cash flow, while losing market share and facing intensified competition.

Under such constraints, it’s hard for companies to pursue both scale expansion and supply chain refinement. Upstream production compliance is often sacrificed for short-term survival.

To ease pressure, IFBH continues to expand.

In 2025, the company increased its distributors in China from 3 to 7, planning to further expand sales networks in 2026, and set up a branch in Shanghai to strengthen local channels and distribution management.

However, this scale expansion, funded heavily and with already tight cash flow, is more like a high-stakes gamble—any misstep could lead to a “growth without profit” death spiral.

IF’s dilemma is just a microcosm of the entire coconut water track’s “collective stall.”

Currently, the coconut water scene is trapped in a pathological balance: one side is fragmented supply chains and long-standing lack of industry standards; the other is PPT-driven marketing pushing product strength to the limit. Counterfeit products run rampant, becoming a chronic industry disease, and the entire track shows an unhealthy “virtual fire.”

In this “scale-only” hunting ground, quality control has long given way to cost advantages. Many brands, to survive in the sinking market price wars, are willing to tear off their last shred of dignity, allowing “high-tech” tricks to run rampant in packaging, destroying the industry’s trust foundation.

When a lifestyle can only be sustained by shoddy stories, and so-called middle-class drinks are riddled with flaws beneath their fancy appearance, a major reshuffle is imminent.

The isotope wave is just the first thunderclap. When the tide recedes, next year’s table may see few players still without “technology.”

References:

Yan Cai Jing “Big Explosion, Coconut Water Traps the Middle Class”

Chopping Chili Spicy “IF, Jiguoyuan, Qing Shang Major Brands Fall into Fake Scandal? Why Coconut Water Keeps Exploding”

Bertong Finance Tech “Before March 15, Coconut Water First ‘Exploded’”

Prism “Thai Rich Kid Rakes in Chinese Money, Now Big Trouble”

21st Century Business Herald “Controversies, Stock Price Halved, the Turmoil of ‘100% Pure Natural Coconut Water’”

Author’s note: Personal opinions only, for reference.