Jody Serrano
Editor in chiefEditor in Chief at Xataka On. Before joining Webedia, I was a tech reporter at Gizmodo and The Messenger. While I've covered all sorts of things related to technology, I'm specialized in writing about social media, Internet culture, Twitch, and streamers.
There’s a closely guarded secret inside Coca-Cola, though it’s probably not the one you’re thinking. Yes, the company is fiercely protective of its formulas for Coke and other fizzy drinks, but that’s not the one I’m talking about.
I’m talking about the secret behind Fairlife milk, the company’s most recent success story. And while we may never know how Coca-Cola makes its milk, there’s plenty to be said about how it become of the jewels of the company’s kingdom.
What is Fairlife milk? As you may have guesses, Fairlife isn’t just regular milk. In fact, ads call it “milk with a flair.” Using soft filters, the company removes the lactose and most of the sugar from the milk. It also increases the protein and calcium. Fairlife milk initially took off in the health and wellness space on social media, despite being more than three times more expensive than regular milk.
Coca-Cola buys Fairlife. Coca-Cola bought Fairlife from Select Milk Producers, one of the largest dairy co-ops in the U.S., for an initial $980 million in 2020. However, there was a catch. The deal was structured as an earn out, which meant that Coca-Cola would have to make performance-based payments to Select Milk Producers over a set period.
As explained by CNN, this meant that the final price tag would be based on the brand’s success. In the worst-case scenario, it would mean that Coca-Cola would pay less for the acquisition overall than it would if it paid up front.
The new billion-dollar brand. A Coca-Cola executive once described Fairlife as the “premiumization of milk” and predicted that it would “rain money,” according to Bloomberg. They weren’t wrong.
Fairlife announced that it had surpassed $1 billion in retail sales in 2022. The success was driven by its Core Power protein shake brand, CNN reported, which has quickly become a staple in grocery stores.
A much bigger price tag. Coca-Cola would soon realize that success wouldn’t come cheap. As mentioned earlier, the company’s Fairlife acquisition included performance-based payments that were calculated based on the brand’s success.
While the performance payments were initially calculated to total $320 million, Fairlife has done so well that the company’s price tag has skyrocketed. In the end, Coca-Cola is expected to pay about $7.4 billion for Fairlife.
Milk as the savior. The Fairlife acquisition will be the most expensive in Coca-Cola’s history, though if I had to take a bet, I don’t think Coca-Cola cares. Consumption of soft drinks in the U.S. has decreased 37% since 2000. The decease has been driven in part by government concerns over obesity and subsequent taxes and restrictions.
In recent years, Coca-Cola has been on a mission to diversify its offerings. Instead of being laser-focused on soda, it’s also acquired coffee and soft drink brands. The gem, of course, has been Fairlife.
“The product is fantastic, the marketing work has been done, the innovation work is done, the capacity is coming online,” Coca-Cola CEO James Quincey said at an investor conference in December. “It's got tremendous growth prospects.”
Images | Taras Chernus (edited) | Fairlife
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