The mythic soft drink giant Coca-Cola is growing in a bold manner with emphasis on strong dairy at the helm with Fairlife leading the way. Growth is in the direction of the trend where classic sweet soda sales are not popular due to health concerns and shifting customer preferences. Coca-Cola is banking on “high-end milk” and other technological advancements in dairy as the growth catalyst and as positioning itself for the future days of beverage consumption.
The rise of Fairlife and shift in consumer trends
James Quincey, CEO at Coca-Cola since 2017, perceived the waning popularity of soda on account of health concerns and took the decision to diversify. Part of the fundamental constituents of the strategy is Fairlife, an upscale milk brand that has an exclusive filtration system. The system increases protein content and reduces sugar and lactose content, which is popular with health-conscious consumers.
Fairlife, a joint venture, was fully acquired by Coca-Cola in 2020 for an initial cost of $980 million. The brand’s performance has surpassed expectations, fueled by its growth in the health and wellness category, especially on social media platforms such as TikTok. Fairlife sales reached over $1 billion in 2022, Coca-Cola’s U.S. fastest-growing brand. The total acquisition cost is now valued at $6.2 billion, plus the initial $980 million.
Fairlife’s product line and market impact
Fairlife can thank much of its success on its Core Power brand protein shake, a customer favorite. The drink contains 13 grams of protein in a cup of milk compared to 8 grams in regular milk, a customer favorite. It is easy to catch a TikTok user drinking Core Power prior to working out or Fairlife milk added to a healthier coffee.
Coca-Cola’s gamble on Fairlife has paid off, with the brand achieving $1 billion in retail sales in 2022, up from $90 million in 2015. More expensive than conventional milk alternatives, Fairlife’s success in meeting growing consumer demand for health-oriented products has allowed it to flourish in the market.
Ramping up production and bridging capacity gaps
Increased popularity of Fairlife has created a shortage of capacity, and there is currently demand exceeding supply. To make up for this, Coca-Cola is leveraging growth in manufacturing capacity, including the opening later this year of a $650 million New York state milk plant. The expansion is a reflection of Coca-Cola’s focus on addressing demand growth in Fairlife products and gaining traction in the dairy space.
Beyond Fairlife: Coca-Cola’s complete dairy portfolio
The crown jewel, but Coca-Cola’s aspirations within the dairy space are more than ultra-filtered milk. It has a portfolio full of dairy brands, including Odwalla and Simply Almond. They address different consumer palates and dietary needs, rounding out further Coca-Cola’s presence in the dairy category.
Coca-Cola has over 80 dairy items in the US market, over 15 brands, which proves that it leads in the dairy sector. Prioritizing flavored milk among others in Japan, China, and the USA is a signal that there is a focus on placing young city dwellers at the top of the priority list, who have flavored dairy food as time-effective meals or meal replacement.
Challenges and risks
Although Fairlife has managed to succeed, Coca-Cola is not given challenges with regards to entering the dairy business. Trends among consumers have been known to be capable of reversing quickly, specifically in the health and wellness category. Social media products that are popular at a certain time can also become instantly unpopular, which is why constant innovation and adaptation must happen.
Fairlife and Coca-Cola paid a class-action suit in 2022 for $21 million on allegations of inhumane treatment of cows. It is a call for ethical, sustainable practice for the dairy industry and potential harm to brand name.
Coca-Cola’s investment in Fairlife and the rest of its dairy business is proof of a bold shift away from traditional soft drinks. With the additional demand for healthier, high-protein dairy products, Coca-Cola is setting itself up for future growth in a more dynamic marketplace. There is risk involved, but the fact that the company is prioritizing innovation, ethics, and expanding production capacity suggests that its dairy efforts have a bright future ahead.
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