Why your coconut water will get more expensive

Leslie Shaffer | Writer for
Motorists ride past fallen coconut trees in Compostela Valley in the Philippines on December 5, 2012, a day after Typhoon Bopha hit the province. At least 274 people were killed.
Ted Aljibe | AFP | Getty Images

Typhoons have battered the Philippines over the past year and the country's already vulnerable coconut trees took a hit even as demand for trendy coconut-based products is climbing.

"Tree damage is likely to accelerate the decline of the coconut production in the Philippines," said Jason Wong, a research analyst at Euromonitor, in an email. "Even after the typhoon, the rotting trees are likely to become infected with pests," he said, noting it may take several years for plantations to recover.

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More than a tenth of the country's total coconut-tree population may have been damaged or destroyed, Hiroyuki Konuma, assistant director general for the Food and Agriculture Organization of the United Nations, or FAO, said via email. He cited estimates from the United Coconut Associations of the Philippines (UCAP) that the archipelago's coconut oil exports may drop by nearly 25 percent this year.

Cuckoo for coconut water

The Philippines has a 59 percent share of global coconut exports, according to the Philippine Coconut Authority.

"The average national coconut yield remains low at 43 nuts per tree per year, about 50 percent of the potential yield" of the type of trees typically planted in the Philippines, Konuma noted.

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The damage comes as demand for coconut products, including water, oil, milk and timbers, is growing at more than 10 percent a year, the FAO estimated in a report last year.

Coconut water especially has become a trendy hydration beverage in recent years, with sales in developed markets growing strongly. The number of new coconut water product launches jumped around 540 percent from 2008-2012, according to data from consumer research firm Mintel.

One coconut water maker, Vita Coco, had U.S. sales of around $240 million in 2013. With Red Bull China's recent purchase of a 25 percent stake in the company, the marketing muscle is expected to galvanize coconut water demand in China as well. Beverage giants Coca Cola and PepsiCo also have products in the segment.

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"International consumption of coconut water is still expected to continue to grow," Euromonitor's Wong said, citing consumers' growing awareness of the product's health benefits. "Prices are likely to increase due to the drop in supply."

The Philippines' coconut trees could face more storm damage ahead. The archipelago typically sees about 20 typhoons a year, but they've become stronger in recent years amid rising ocean temperatures. In November last year, Typhoon Haiyan, likely the biggest cyclone to ever make landfall anywhere, struck the Philippines, killing more than 6,100 people. This month, Typhoon Rammasun killed around 100 people.

The storms come as the FAO was already concerned about Asia's coconuts as the trees are aging.

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Coconut trees reach their peak production of as much as 400 coconuts a year between 10 and 30 years of age, but with many of the region's trees planted shortly after World War II, their production is declining, the FAO said in a report last year.

To be sure, there is some positive news. FAO's Konuma noted that replanting programs have been accelerated, with younger plantations expected to start producing within five to 10 years.

Replanting is expected to be done using trees with better genes and using more sustainable farming practices, such as planting trees in triangular patterns to make them more resilient to strong winds, Konuma said.

The FAO is also tweaking replanting to diversify incomes for coconut farmers by promoting intercropping, or planting complementary crops alongside the trees, which can potentially double coconut productivity.

But compared with the "overwhelming" typhoon damage, "the budget allocated for the rehabilitation is only a small fraction of the need," Konuma said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1