Coke profits fell a whopping 55 per cent in the latter part of 2014. PepsiCo’s financials were only slightly better. As the modern consumer is looking for healthier options, soft drinks giants are scrambling for ways to retain their market.
One interesting move from Coke was its recent release of Fairlife, a milk product. Coke intends to make nature’s perfect food even more perfect.
Produced in partnership with a dairy co-operative in the U.S., Fairlife apparently has 50 per cent more protein, 30 per cent more calcium and 50 per cent less sugar than regular milk. And for consumers who are lactose intolerant, Fairlife is lactose-free. It even has a longer shelf-life than regular milk, which provides convenience for distributors and consumers alike. The product is being progressively rolled out right now, and a highly aggressive marketing campaign will start in March.
To start, the partnership itself is interesting – a soda giant teaming up with a dairy cooperative. Coke’s ambitions have been made quite clear by this incentive. It wants to premiumatize milk and increase sales of the struggling commodity. Milk consumption per capita in the developed world is down more than 40 per cent since 1970, and demand is still dropping, even in Canada where supply management reigns supreme.
Even though Coke has been in the business of healthy drinks for years, it has never ventured into the milk business. And the newly launched product is already facing some criticism. In the U.S., the product is expensive compared to standard milk, almost double in fact. Some dieticians have questioned the nutritional merit of the product as well, stating that wholesome milk is good enough for consumers.
But, for Coke, the most concerning statement made so far was related to how the milk is actually produced. Some have suggested that cows may be producing “Franken-Milk”. We have heard this before. Fairlife may represent a mixture of many food-related, consumer-centric issues in one single product. In light of the whole GMO debate, coupled with animal welfare concerns expressed by many interest groups, this can potentially become a significant lightning-rod for Coke if it is not addressed properly.
One company executive was quoted recently as saying that Fairlife will produce rains of money. Perhaps, but overconfidence often leads to market myopia. The “cooperative” aura behind the partnership may not be sufficient enough to offset some the effects of the incredibly well-organized communication strategies deployed by moralistic industry.
Coke’s healthy choices strategy is audacious. Selling healthy drinks is one thing, but selling one of history’s most wholesome, natural products is totally different. For Canadian consumers, it is unlikely this product will reach our market any time soon, but it is a fascinating case nonetheless. It is hard to predict the success of this product and whether or not it will spur PepsiCo to adopt a parallel initiative.
We’ve seen copycatting with these corporation’s investments in energy drinks lately. Coke acquired a stake in Monster Energy last year while PepsiCo opted to focus on its Mountain Dew Kickstart. Despite these efforts, both soda giants need to work on a strategy to rejuvenate sales, and fast. Given that Coke announced a $3 billion cost-cutting program late last year, they may not have much of a choice but to make a bold move, and this may be it.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.