Coca-Cola Leans on Fancy Milk to Grow Past Soft Drinks

As consumer preferences shift away from sugary drinks, Coca-Cola has found a surprising growth driver: premium dairy. The company’s investment in Fairlife, an ultra-filtered milk brand, has exceeded expectations, proving that a move beyond carbonated beverages can be highly profitable.

Originally launched in 2012 as a partnership between Coca-Cola and Select Milk Producers, Fairlife gained traction with its high-protein, lactose-free milk and sleek packaging that appealed to the growing health-conscious market. By 2020, Coca-Cola fully acquired Fairlife for $980 million, a deal that has since paid off immensely as sales surpassed $1 billion by 2022.

Fairlife’s Core Power protein shakes have been a major contributor to its success, standing out in a $6 billion protein drink market that has relatively few dominant competitors. Social media has also played a role, with TikTok users frequently showcasing Core Power shakes in their fitness routines and coffee recipes.

A Game-Changing Investment

Coca-Cola’s latest earnings report revealed that the total acquisition cost of Fairlife is expected to reach $6.2 billion, making it one of the company’s most expensive purchases. Analysts suggest that even Coca-Cola didn’t anticipate how successful Fairlife would become.

“The expectations were never for Fairlife to be this successful, even for Coke,” said Kaumil Gajrawala, an analyst at Jeffries.

Unlike previous non-soda acquisitions like Costa Coffee, which has struggled to gain the same momentum, Fairlife has leveraged Coca-Cola’s distribution power to dominate the premium dairy segment. However, the company anticipates slower growth in 2025 as it builds a new production facility in New York State to meet rising demand.

Riding the Health and Wellness Wave

Coca-Cola’s success with Fairlife aligns with a broader consumer trend toward high-protein and health-focused products. Citi analyst Filippo Falorni noted that Coca-Cola entered the right market at the right time, as U.S. consumers increasingly prioritize protein-rich diets.

Fairlife has also managed to break into the premium grocery space, where shoppers either look for the cheapest option or are willing to pay more for a differentiated product. By positioning itself as a high-quality alternative to traditional milk, Fairlife has successfully capitalized on the latter.

Potential Risks and Future Expansion

Despite its impressive growth, Fairlife is not without challenges. The fast-changing nature of health trends means that viral social media products can quickly lose relevance. Additionally, in 2022, Coca-Cola and Fairlife settled a $21 million lawsuit following allegations of inhumane treatment of cows, which raised concerns about the brand’s ethical positioning.

Looking ahead, analysts expect Coca-Cola to continue diversifying beyond soda, using Fairlife’s success as a blueprint. While the company remains focused on expanding Fairlife’s reach, industry experts believe it will explore new categories to strengthen its foothold in the evolving beverage market.

“Fairlife is doing exceptionally well, but Coca-Cola isn’t stopping here,” Falorni said. “They are looking for more opportunities to expand their portfolio.”