The Coca-Cola Company has announced that it will be entering the US milk market.
The global beverage giant announced at the Morgan Stanley Global Consumer Conference that its new “Fairlife” product will be launched in stores in late December.
Sandy Douglas, global chief customer officer and president, Coca-Cola North America said that the company has decided to take “a very significant place in milk,” and that its new product is made on a sustainable dairy using a proprietary milk filtering process that can increase protein by 50 percent, reduces sugar by 30 percent and omit lactose.
“The test markets have been amazing, and we’ve created a joint venture with a bunch of dairy farmers who are innovative leaders in the dairy industry. So you put that next to Simply and you have a nutrition beverage company with tremendous growth potential,” Douglas told the conference.
“Now to be clear, we’re going to be investing in the milk business for a while to build the brand so it won’t rain money in the early couple of years. But like Simply, when you do it well it rains money later. And we can deliver with our business portfolio before the milk comes on full profit line.”
Lianne Van Den Bos, analyst from global market research company, Euromonitor says that Fairlife is the “epitome of on-trend”. She says that the product is twice the protein and calcium compared to full fat milk, half the sugar, lactose-free, sustainably produced and packaged in recyclable bottles.
“Looking at the categories in which Coca-Cola has a presence in North America, two thirds of its sales come from carbonates and juices, which have been underperforming as consumers cut down on sugary drinks. As such, over the years Coca-Cola has moved into sport drinks, reduced calorie options such as Coca-Cola Life and now milk is its next step,” she says.
“In fact when looking at similar products that are positioned around high protein, lactose-free, and low-calorie, sales have been booming in North America as US consumers have flocked towards products which promise satiety or alternative, lactose-free products, as some studies suggest that lactose can be linked to digestive problems. Non-dairy milk alternatives, yoghurt and fortified flavoured milk have all show strong growth rates, with CAGRs above 5 percent over 2009-2014, yet Coca-Cola’s presence in these categories is negligible, whilst its presence in stagnant categories such as juices and carbonates is high.”
Van Den Bos says that Coca-Cola could be successful in launching Fairlife considering the demand for products with high nutritional credentials, however the company’s current marketing campaigns are heavily focused on being “being better, bigger and more natural than competing products”.
Van Den Bos suggests that marketing modesty instead may help in convincing the consumer to believe in the purity of the product.
“In terms of turning niche into mass, there is a danger that the high number of product launches claiming increased levels of protein at the moment will turn a unique selling point of today into the industry norm of tomorrow and therefore lose its edge,” she says.
Functional and fortified milk in Australia
Daniel Grimsey, analyst at Euromonitor Australia says that despite declining since 2012, the Australian per capita retail volumes of milk have remained more or less stable, with a three precent compound annual growth rate during 2009-14.
According to data from Euromonitor, Australia is currently ranked 6th globally for per capita milk retail volumes, at 75 litres per head in 2014.
"Across the dairy Australian dairy industry as a whole, there has been a much stronger performance of lactose-free dairy than in the US, with a compound annual growth rate of 17 percent (or a 118 percent entire increase from 2009 to 2014). Reduced fat milk has also registered a stronger performance in Australia," says Grimsey.
Grimsey says that organic milk has performed well across both markets, however fortified/ functional (FF) milk has not performed particularly well in either market over the period, and Fairlife, with claims such as 50 percent more protein and 50 percent more calcium, would most certainly fall into the FF category.
Euromonitor Australia say that Coca-Cola could be successful revitalising the struggling category in the US, however the company has no intention of launching Fairlife in Australia at this stage.
