In July 2012, 33-year-old Mike Zighelboim was hungover on a golf course in El Salvador and in need of hydration. When his friend popped open a fresh coconut with a key, Mike got the idea for a business: "I heard a juice box sound, and something clicked."
Bottled coconut water was gaining popularity in the U.S. by way of new brands like Vita Coco and Zico. Mike, who was raised in Miami, El Salvador, and Guatemala, grew up drinking fresh coconut water. But he'd never had a coconut so delicious, or seen one that was so easy to open, as the one he sipped from on that El Salvadorian golf course, he says.
A quick Google search revealed it was legal to bring these ready-to-crack coconuts home to the U.S. Mike packed his luggage with 300 of them, with plans to sell them in Miami. Though he was held for hours by the Transportation Security Administration, who X-rayed each coconut, Mike was given the go-ahead, since he was importing a nut and not a fruit.
At the time, 27-year-old Dani Zighelboim, Mike's sister, was a senior at Babson College studying entrepreneurship. When Mike called to tell her his coconut water pitch, she dubbed it "the dumbest business idea she had ever heard." Then, back in Miami for winter break, Dani took a sip and came around.
Within five months, they launched Coconut Cartel, which imported raw coconuts from El Salvador to the U.S. for sale. Those quickly became a favorite at upscale Miami hotels, where guests sipped the refreshing water straight from the coconut. Five years later, the company expanded into liquor sales with a new product, Coconut Cartel Special, which combines aged Guatemalan rum with coconut water, and which can be enjoyed by the glass.
Despite stringent regulations and the fact that most of the market is dominated by five multibillion-dollar alcohol companies, Mike and Dani have managed to secure partnership deals with Breakthru Beverage Group, Empire Merchants, and Allied Beverage Group, three leading U.S. liquor distributors. Coconut Cartel is on track to ship 10,000 cases of bottled rum in 2020. (The company declined to share sales revenue as they're finalizing a round of funding.)
By capitalizing on the coconut water trend, and by strategically using social media, Mike and Dani have been able to leverage their multicultural background and capture the attention of celebrities to launch and grow their business. Here are some of the most valuable entrepreneurial lessons they've learned along the way.
From the get-go, Coconut Cartel was an all-Zigs-on-deck operation. In the early days, Mike packed three suitcases with coconuts and made about 10 runs back and forth from El Salvador to Miami, where he and Dani stored the nuts at their grandmother's house in a spare bedroom.
Dani insisted they put their stamp on the coconuts — literally. Mike, who learned how to laser engrave while working as an intern during Fashion Week, engraved each one with the words "Coconut Cartel," making them the first company to brand a coconut.
From there, Mike and Dani began courting buyers. The siblings stuffed their cars or backpacks with coconuts and pitched their product to anyone they could find in the hospitality industry. The coconuts wholesaled for $3.75 apiece, and hotels priced Coconut Cartel's products at $12 for virgin coconut water and as much as $38 for a spiked coconut.
Together, the siblings sold their "Instagramable drinks" to high-end hotels like Soho Beach House, The Standard, and The Edition, where A-listers like Drake, Prince Harry, and Kendall Jenner, among many others, tried them.
What started with carrying coconuts in suitcases has become a fully fledged business operation. The siblings now work with harvesters in Jiquilisco, El Salvador, who cut the coconuts from trees, peel them down to the brown "nut," engrave them, and ship them to Miami that same day to be stored in a cool, dry place.
Mike, who didn't attend college, says his lack of a degree made it difficult to secure a traditional job but did teach him how to hustle. And his hard work and creativity paid off. While Mike hand-delivered an order to the exclusive Soho Beach House in Miami, Drake and his crew happened to be at the bar. The product caught the rapper's eye.
Drake approached Mike about the drink and, after chatting, the rapper extended an invitation to his Rosh Hashanah dinner that evening. Mike ditched his family's holiday celebration and ended up not only joining Drake for the Jewish New Year, but tagging along for a few stops on his Toronto tour.
By getting the rich and famous to post selfies, or to get photographed by paparazzi with a Coconut Cartel-branded coconut in hand, Mike capitalized on an opportunity for free exposure.
The success of branded coconuts is a lesson in creative marketing Dani says any entrepreneur can utilize: "If you're trying to go viral, you can intentionally create something that incentivizes people to take a selfie with it."
And free platforms like Instagram have "created the most even playing field in the world" when it comes to marketing, says Mike.
Born in Miami to Latin American parents, the siblings were raised between the U.S. and Central America in a family of entrepreneurs.
As "third-culture kids," meaning they were raised and socialized in a culture other than that of their parents, Dani and Mike were uniquely positioned to leverage their cultural knowledge of Guatemala and El Salvador and their social network in Miami. That helped them "to bridge the gap between Central America and the U.S. using marketing relevant to millennials," says Mike.
That's good advice for aspiring entrepreneurs, regardless of your background, according to Dani. "Create your own lane. Find a niche that you can be the best at," she says.
And the Zigs have found yet another niche. In 2016, they decided to pivot from coconut water to spirits after they noticed how almost all of their clients were adding rum to their coconuts. "We learned people had a stigma around rum, like it was too sugary or it made them sick, and we saw that as an opportunity to change people's minds," says Dani.
After two years of research and development, the Zigs came up with the idea to proof premium aged Guatemalan rum with fresh coconut water from El Salvador. They leveraged their cultural insights to earn the trust of Central American partners, which helped them form new business relationships.
"It was like going to one of the best vineyards in France and asking them to let us put coconut water in their wine," says Mike.
The big takeaway, says Dani, is that business opportunities are everywhere – even in nature: "If you're looking for an opportunity to start a business, you don't need to reinvent the wheel, just re-present it."
This story has been updated to reflect that when Mike Zighelboim first had the idea for his business, he was on a golf course in El Salvador.
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