When James Quincey took over as CEO of Coca-Cola in 2017, the soft drink industry was grappling with a decline due to health concerns over sugary beverages. To diversify its portfolio, Coca-Cola made a strategic move into the dairy industry with Fairlife milk, an acquisition that has significantly exceeded expectations.
A Profitable Dairy Venture
Fairlife, launched in 2012 as a joint venture between Coca-Cola and Select Milk Producers, leveraged innovative packaging and an ultra-filtered milk system that removes lactose and sugar while doubling the protein content. The brand quickly gained traction in the health-conscious market, outperforming traditional dairy products.
In 2020, Coca-Cola fully acquired Fairlife for an initial $980 million. By 2022, Fairlife’s sales surpassed $1 billion, driven primarily by its Core Power protein shake, which faces little direct competition in the market. According to Coca-Cola’s latest earnings report, the total cost of the acquisition is now projected to reach $6.2 billion.
Market Growth and Challenges
Despite its rapid growth, Coca-Cola expects Fairlife’s expansion to moderate in 2025 as it invests in a new production facility in New York. While Fairlife contributes significantly to Coca-Cola’s diversification, carbonated beverages still dominate the company’s sales, with competitor Pepsi relying on its Frito-Lay snack brand for revenue diversification.
Fairlife’s success has highlighted the growing demand for high-protein dairy alternatives. “The expectations were never for Fairlife to be this successful, even for Coke,” said Kaumil Gajrawala, an analyst at Jeffries. Citi analyst Filippo Falorni noted that the North American market’s increasing health-consciousness has fueled the demand for protein-rich products like Fairlife.
Social Media and Consumer Trends
Fairlife has benefited from its popularity on social media platforms, where fitness enthusiasts frequently showcase its Core Power shakes in workout routines and coffee recipes. However, viral trends are unpredictable, and brands in the health and wellness sector must continuously evolve to maintain consumer interest.
Additionally, Fairlife faced controversy in 2022 when Coca-Cola settled a $21 million lawsuit over allegations of inhumane treatment of cows. Despite this setback, the brand has continued to thrive, capitalizing on its differentiated product positioning and Coca-Cola’s robust distribution network.
Looking Ahead
While Coca-Cola remains focused on Fairlife’s growth, analysts expect the beverage giant to seek further expansion into other health-oriented categories. “Dairy has been tricky for Coke to get into, but this is a nice contributor to growth,” Gajrawala said.
As Coca-Cola navigates evolving consumer preferences, Fairlife stands as a testament to the company’s successful diversification strategy beyond its traditional soda empire.
