Consumers are already willing to pay a premium for perceived high-quality beverages, including water, coffee, juices, and energy drinks.
Now, Coca-Cola (KO) thinks consumers will embrace the idea of premium milk. The company recently launched a new cold-filtered milk product called Fairlife in select supermarkets.
This product costs a pretty penny, too.
The sleek, 52-ounce bottle sells for somewhere between $4.00 and $4.50. That’s a lot compared to the nationwide average of $2.18 for a half gallon (64 ounces) of regular milk.
Why in the world is Coke doing this? And will consumers cheer this premium milk?
Parched for Growth
That Coke is taking a gamble on this new product line is obvious to anyone watching the market. Carbonated soft drink sales have been on the decline for quite a while, thus the company is searching for new growth avenues.
Between 2004 and 2014, Americans began switching en masse from unhealthy drinks to perceived healthier beverages. During that decade, carbonated soft drink consumption fell by about 20%.
Still the move into milk is a curious one…
Milk has been disappearing from the American diet even longer than soft drinks.
According to data from the U.S. Department of Agriculture, consumers today drink 37% less milk than they did in 1970. The drop is particularly pronounced in the amount of higher-fat or whole milk drank.
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Sales of milk fell 2% in 2013 and another 3% in 2014.
On the other hand, the U.S. milk industry has been salvaged slightly in recent years by China’s growing thirst for milk. Dairy exports to China reached a record $6.7 billion in 2013.
Of course Fairlife isn’t just plain milk. Coke didn’t get to where it is today by just selling the same thing as everyone else.
Reinventing the Wheel
Americans want more from whatever they pour over their breakfast cereal these days. That’s why healthier milk alternatives made from almonds and soy are growing.
According to market intelligence firm Euromonitor International, sales of such products have soared four-fold since 1999. And NPD Research found that 71% of Americans said they want more protein in their diets.
And Coke knows the best way into a consumer’s wallet is by giving them what they want.
Fairlife, which Coke created in partnership with dairy cooperative Select Milk Producers in 2012, says its milk goes through a filtration process similar to that of skim milk.
Except this beverage is lactose free, has 50% more protein, 30% more calcium, and contains 50% less sugar than regular milk types. Fairlife comes in all the familiar varieties, too: whole, reduced fat, fat free, and chocolate.
Yes, Coke expects Fairlife to be its next billion-dollar brand. Some executives have even said that it will “rain money” for the company.
But expectations from these executives may be too high… for now.
Coca-Cola still has to overcome the public perception that it produces unhealthy drinks. In the Twittersphere, Fairlife has already been dubbed “Milka-Cola.”
Some are going so far as to say that Coke has “Frankensteined” milk. Others are simply dismissing Fairlife as nothing more than overpriced “science milk,” and they aren’t willing to pay for it.
Coke will be rolling out a nationwide advertising campaign for Fairlife in late March or early April. The campaign will likely try to distance the corporation from the product.
But still, it had better be a doozy of a sales campaign. The corporation has to overcome its own unhealthy public image before consumers accept this product.
And the chase continues,