Kiwi coconut milk startup expanding to Australia and US

Tommy Holden and James Crow started up Auckland-based Little Island Coconut Creamery in 2010. Photo / Facebook

Kiwi food and beverage company Little Island Coconut Creamery is moving into exports of coconut milk, kicking off in Australia and then expanding into the US state of California early next year to take advantage of a global trend to plant-based food.

Tommy Holden and James Crow started up the Auckland-based company in 2010 making dairy-free, coconut cream-based NiceBlocks and ice-cream, and added coconut milk stored in the supermarket chiller with other dairy alternatives last year. It has partnered with Samoan coconut cream producer Ah Liki for the supply of the base ingredient.

Coconut milk now comprises half of the startup's $3.2 million in annual revenue and Crow said it's focusing first on long-life milk exports as an everyday consumer staple rather than the ice-creams, which are more seasonal and attract lower margins offshore. He's forecasting revenue to rise to $5.2m in the 2017 financial year from Australian exports while US revenues should kick in the following year.

Tasting panels the startup has just completed showed American consumers preferred Little Island over existing coconut milk products, giving it the confidence to move into the market early next year as a premium product following a few, minor tasting and packaging tweaks.

Although Little Island faces a handful of coconut milk competitors already in the US, "the number one thing is taste", Crowe said, and he believes that, along with its Kiwi story, will win consumers over. "We'll have a founder-driven sales pitch in the US," he said.

They're also hoping to get their products into Australian supermarkets shortly and are about to sign an Australian national distribution deal for the milk range which includes 1 litre and 360 ml bottles in flavours ranging from original, chocolate, strawberry, banana and coffee.

Plant-based food globally is undergoing what Crow calls a "startup boom". Earlier this year Eric Schmidt, chairman of Google parent Alphabet, picked plant-based protein as one of six hot global trends.

Plant-based alternatives to milk and yoghurt are growing at an 11 per cent compound annual growth rate in the US and while almond milk has dominated that space until now, the Californian drought is affecting almond production.

Crow said the rise in non-dairy alternatives hasn't escaped the eye of the traditional dairy industry. French dairy giant Danone made a US$10.4 billion deal in July, its largest acquisition in a decade, to buy US organic foods producer White Wave Foods. White Wave is the fastest-growing company in the US food and beverage industry with its range including organic, soy, coconut, cashew and almond milks.

Little Island was co-founded by the two entrepreneurs with backing from Phoenix Organics co-founder Chris Morrison and another former Phoenix staffer, John Evans, who are both on the board. Marmont Capital, a private capital fund set up to invest in Kiwi food and beverage start-ups, has become its largest shareholder, one of only two investments it has made in the past two years.

A further fundraising round of $2m-to-$3m is planned for later this year to fund the US export drive, a leap up from the $700,000-odd raised to date.

Marmont Capital co-founder Matt McKendry, who is also on the board, said the coconut brand was a small business facing a big global food trend. "There are not too many similar opportunities in New Zealand with such a core value proposition," he said.

McKendry reckons any New Zealand food and beverage business should consider exporting to Australia first because of its more competitive retail scene which means "they'll gain a lot of fitness in this space", before advancing to other countries like the US or Asia.

In New Zealand, Little Island's "enemy was dairy" and trying to convert people from cow milk to plant-based food, but that shift was already well-established in the US and its "enemy will become almond", McKendry said.