Coca-Cola Bets on High-Quality Milk to Surpass Soft Drinks
In 2020, the beverage giant fully acquired Fairlife and its ultra-filtered milk. Taking a gamble amidst declining figures, but seizing the growing interest in healthy living, this bet seems to be paying off.
When James Quincey assumed the role of CEO of Coca-Cola in 2017, the beverage conglomerate faced declining sales of soft drinks due to health concerns. This prompted a significant shift in strategy to diversify beyond sugary offerings.
A key move? Pivoting from carbonated drinks to something as classic as cow’s milk.
Launched in 2012, Fairlife was originally a joint venture between Coca-Cola and Sel ect Milk Producers, employing sleek, minimalist packaging. It positioned itself alongside niche almond, protein, and even pistachio milks, outperforming bulk-packaged drinks in dairy aisles.
In its latest earnings call, however, Coca-Cola anticipates a tempered growth trajectory for Fairlife in 2025 while building a new plant in New York. Despite the growth of carbonated drinks still representing the majority of Coca-Cola's sales, Fairlife has outpaced other major non-soda acquisitions like Costa Coffee acquired in 2018.
Exploiting the Wellness Trend
The North American market has proven willing to invest in health, whether with free-range eggs or Fairlife's protein-rich milk. Coca-Cola has entered the right category at the right time, said Citi analyst Filippo Falorni to CNN.
“The U.S. experienced a shift towards more health-conscious consumers, focusing especially on protein intake in recent years,” Falorni noted.
According to Beverage Digest, protein shakes amount to a $6 billion market. For American consumers, medium-priced consumables are often cut fr om budgets in favor of cheaper or significantly differentiated products.
Fairlife, with its successful branding strategy, has achieved the latter and also capitalizes on Coca-Cola's vast distribution network, possibly the world's best, noted Falorni.
Risks to Continued Growth
TikTok’s health-conscious users frequently post workouts featuring Core Power shakes or morning cold brews made healthier with Fairlife milk. However, trends in health and wellness can shift rapidly.
In 2022, Fairlife and Coca-Cola settled a $21 million lawsuit over allegations of animal mistreatment. The lawsuit claimed consumers were falsely charged a premium because Fairlife advertised well-treated cows.
While Fairlife is expanding production with a new facility in New York, Coca-Cola is “not stopping with Fairlife but exploring more categories to broaden their portfolio,” said Falorni.
