Coca Cola is about to launch “Fairlife”, a premium milk brand in the USA this time. In a market characterized by falling demand and fierce competition among on-the-shelf competitors, Coke’s move raised many questions as to why it has to move into this market at this time.
Coke has invested into dairy business for some years, and currently not expecting any profit from this category. However, the company has priced the brand almost twice the average price of regular milk brands that are currently available in the market, and expecting to earn high profits in later years. The premium milk is produced through a proprietary technology using high-tech filters that yield high protein, high calcium, yet low sugar (lactose) contents in the processed milk. Interestingly, this “healthy” milk requires no addition of protein or calcium powder to increase its proportion in the milk, rather the proprietary filter does the job! Presumably, this is expected to reduce the costing part of the production that already gives Coke an advantage over competitors in this category. Making sure that the brand comes in popular flavors, this is expected to “storm” the market after an already successful test-marketing campaign in different US cities. Coke is not currently planning to roll-out the brand elsewhere in the world, which seems to be a cautious move to “wait and see” how the real-time marketing goes at home.
It appears that Fairlife may not attract new customers who would start consuming milk just because Coke has launched something new, rather make some customers switch to its brand on the plea of “healthiness”. Now it is time to see whether a high-tech and low cost advantage can be transformed into a profitable venture in a falling market.