Coca-Cola bet on milk and won. But is that enough?

When you walk into Coca-Cola's Chicago office, you're greeted by a giant cowbell instead of the iconic logo. The reason? The company made a bet on milk, and its investment in the Fairlife brand has proven to be a huge success.

Fairlife introduces an innovative milk filtration process that increases protein, halves sugar and removes lactose. The product has become the fastest growing Coca-Cola $KObrand in the US, despite costing three times more than regular milk. It surpassed $1 billion in sales in 2022, a huge jump from $90 million in 2015.

Coca-Cola CEO James Quincey has long championed a vision of a "comprehensive beverage giant" that doesn't just rely on sodas. He has invested in coffee and sports drinks alongside milk. However, 60% of the company's revenues still come from sales of sweetened beverages and concentrates, showing how difficult it is to reduce dependence on the core segment.

Coca-Cola's growth in recent years has come mainly through price increases, not through higher sales. In the fourth quarter of last year, prices rose 10%, but sales volume fell 1%. In contrast, PepsiCo's main competitor can rely on its substantial revenues from the food segment, which gives it more stability.

Fairlife's popularity has soared, thanks in part to the weight-loss trend with drugs such as Ozempic, which promote higher protein intake. Fairlife contains 13 grams of protein per serving compared to eight grams in regular milk, making it an attractive choice.

Despite its success, the brand has faced challenges. In 2019, a video leaked with evidence of animal abuse on farms supplying milk for Fairlife. Coca-Cola had to face a boycott and switched suppliers. Still, the brand was able to recover and is now expanding.

Fairlife is already sold in a third of households in the US and Canada and Coca-Cola sees room for further expansion. It plans to open a fourth $650 million plant in New York to meet growing demand.

But the departure of Fairlife boss Tim Doelman presents a new challenge. The future of the brand now falls to Becca Kerr, who also runs the Minute Maid brand. Only the future will tell how she will meet this challenge.

Fairlife has become one of Coca-Cola's biggest acquisitions and an important part of its strategy. However, given the continued dominance of sweetened beverages and the need for further innovation, there is still a long way to go to diversify the portfolio.

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Source: CNN