Coca-Cola’s jump into the milk market

Divided_by_escapism

By Author and Contributor

Jascha Romanski

The demand for sweetened soft drinks is steadily decreasing. Therefore, soft drinks companies have to come up with something new. While Pepsi is very successful in selling snacks, Coca Cola ventures into uncharted territory: milk.

The evergreen time for sweet sugar dinks is over, sales of sugared soft drinks are falling. While Pepsi has successfully established a second pillar with snacks, Coca-Cola plans to venture into the milk business. Fairlife, that’s the name of Coca-Cola’s new milk drink.

Of course, what we get from the beverage companies is not the same as what comes out of the cow. The farm delivered product is divided into five parts water, vitamins and minerals, lactose, protein and fat. The lactose gets eliminated completely, fat is reduced to two percent, the proteins are doubled and sugar gets halved. Reassembled like this, the “premium milk” brand “Fair Life”, available with different flavors, costs around twice as much as regular milk in the US and nearly as much as bio milks. After test sales in three cities, Coca-Cola is now launching in the US market.

Does it pay off? Coca-Cola aims to establish a business that can be expanded globally. This would be a big competitive advantage for the world’s largest beverage company: First, that strategy promises billions of revenues, compared to other leading milk producers.  Fairlife could align with the top 20 existing brands of Coca-Cola, each generating sales over a billion dollars. Second, the distribution network is already established and Coca-Colas refrigerators, where they can offer their products in retail, are already in thousands of stores.

Such large new incomes would be very helpful for Coca-Cola but also for the competitor. In its last shareholder meeting, Coca-Cola announced a net profit fall by 55 percent to 770 million dollars. Also, Pepsi presented disappointing results as their net income for the quarter reached $ 1.31 billion, far away from last year’s level of 1.74 billion. Nevertheless, investors reacted positively: they actually expected worse numbers. In addition, Coca-Cola started to buy back shares, worth about three billion dollars. Pepsi also plans to buy back shares, even up to twelve billion dollars by 2018.

The trend toward designer milk does not affect Pepsi’s strategy. They still continue to expand and strengthen their snack empire (mostly potato chips and tacos).  However, that doesn’t keep Pepsi fans to create their own Pepsi milk. Popular in American households: A glass with ice cubes, two-thirds milk, filled up with Pepsi-Cola. That was the favorite drink of a famous TV actress in the ’70s, and apparently it still works.

Santé!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s