Don’t want a cold soda? Try a glass of Coke milk

Refresh Coke?

Coke bets on high-protein, low-sugar milk to beat the real stuff

“We look at milk, honestly, as one of nature’s superfoods”

In its quest to slake the world’s thirst, Coca-Cola is intent on making milk a billion-dollar brand. But not just any kind of milk. Coke has joined forces with a dairy cooperative to create Fairlife, which produces a filtered, high-protein, low-sugar, lactose-free designer milk also called Fairlife. It costs about $4 for a 52-ounce bottle— more than organic milk and about double what the conventional stuff sells for. In its first year on shelves, Fairlife reached about $90 million in sales, giving a sizable boost to the specialty milk category, which includes milk with more calcium or no lactose.

Coke is part-owner of Fairlife through its Venturing and Emerging Brands group, which has backed Zico coconut water, Honest Tea, and Fuze juice drink. Fairlife Chief Executive Officer Steve Jones worked at Coke as chief marketing officer from 2000 to 2003. While there, he played a role in moving the beverage company beyond its Minute Maid frozen orange juice business to highermargin products, such as Simply juice, a billion-dollar brand that’s challenged market leader Tropicana—owned by rival with its clear bottles. “It proved to me you can take a commodity and transform it into a dynamic high-growth category,” Jones says of Simply. “We can do the same to milk.”

Milk is only one of the latest attempts by Coke to offset declining soda consumption with healthier products. “We look at milk, honestly, as one of nature’s superfoods,” says Melanie Kahn, vice president for marketing at Fairlife.

Jones isn’t the only branding executive with Coke on his résumé peddling milk. Dean Foods, the largest dairy processor in the U.S., has put Greg Schwarz, a former brand manager for Coke’s Hi-C fruit drink business, in charge of its marketing.

Dean has co-branded its regional milks under one umbrella called DairyPure. The drinks are hormoneand antibiotic-free. The company is releasing a lactose-free variety this year. Dean has 60 milk-processing plants around the country. “We

can do local better than anybody,” Schwarz says.

Consumers, especially millennials, want animals and workers treated well without compromising taste, convenience, or quality, says Fairlife cofounder Mike McCloskey, a veterinarian turned farmer. He’s long been fixated on the comfort of cows and sustainable farming methods, such as converting manure into methane to power dairies.

The dairy industry has been striking out for decades in its efforts to get people excited about milk, as cereal consumption has slowed and soy and almond milk have cut into sales. Per capita milk consumption in the U.S. fell to about 19 gallons a year in 2015, according to the U.S. Department of Agriculture. At milk’s peak, in 1945, The average American consumed about 42 gallons. Clever advertising and marketing—including the legendary Got Milk? campaign, begun in the 1990s—did little to spur growth.

Since 2011, Dean has targeted kids and adults with its TruMoo milk, which comes in such flavors as cookies and cream and chocolate marshmallow. Parents like it because the milk contains no high-fructose corn syrup. DairyPure, on the market for about 10 months, appears to be building on TruMoo’s momentum. For the 12 weeks ended on Jan. 23, volume sales of Dean’s branded milk rose 1.6 percent, compared with a 7.3 percent decline in the same period the year before, according to Sanford C. Bernstein analyst Alexia Howard. Specialty milk sales jumped 21 percent in 2015, up from 9 percent growth in 2014, largely thanks to “the launch of Coca-Cola’s high-protein Fairlife brand,” Howard says.

Some say Coke’s drive for dairy will be an uphill climb, given Fairlife’s premium pricing. “Somehow you’ve got to build a value-added case that there’s more to this,” says Ian Shackleton, an analyst at Nomura International.

Coke, which holds a minority stake in Fairlife, believes its efforts will pay off. Jones was semiretired when he connected with McCloskey and his wife, Sue, in 2010. He urged them to team up with Coke, which has a vast distribution network and access to hundreds of thousands of supermarket shelves across the country. Two years later, Jones helped broker the joint venture. “We needed the marketing,” McCloskey says. “We had everything except the structure to get it to consumers in every corner of the country.”

Fairlife can also tap Coke for guidance on research and development, chemistry, and marketing. Its board is split between members from Coke and farmers from the cooperative.

The soda giant takes a hands-off approach to the partnership, says Scott Uzzell, president and general manager for Coke’s Venturing and Emerging Brands group. “They know dairy better than anybody,” Uzzell says. “We know consumers.”

The bottom line Specialty milk sales jumped 21 percent in 2015, up from 9 percent in 2014, boosted by Coke’s Fairlife drink.