Can Premium Milk Be a Cash Cow For Coca-Cola?

National Campaign Breaks for Fairlife Joint Venture

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From craft beer to fancy sodas, high-end beverages are growing in popularity. But are drinkers ready to swallow the idea of premium milk?

A joint venture between Coca-Cola Co. and a dairy co-op is testing that proposition with a new ad national campaign expected to break today for Fairlife, an upscale milk brand that began a national rollout in early February.

The product uses a patented cold-filtered system that the brand says produces a milk that is lactose-free and contains 50% more protein, 30% more calcium and half the sugar of regular milk. It also costs about twice as much as regular milk, according to published reports.

Production and marketing is handled by Select Milk Producers, which calls itself the fifth-largest dairy cooperative in the U.S. Coca-Cola is overseeing distribution via its Minute Maid division.

Fairlife executives declined to discuss the camapign. But the marketer's PR agency, Edelman, confirmed that the spot is by Condon & Root, a small shop based north of Chicago. The ad (above) is full of farm imagery and declares that "from grass to glass, we promise high-quality real milk."

The approach is a far cry from an earlier campaign that ran in test markets that used a lifestyle approach. Ads showed shapely women wearing what appear to be dresses made of milk with copy urging, "Drink What She's Wearing." Critics derided the ads as sexist.

The new campaign's use of farm imagery is consistent with broader marketing trends in the food and beverage industry. Brands are increasingly running product-focused ads that seek to portray goods as authentic and natural.

Fairlife might have some work to do in that regard, considering that the product was mocked a few months ago by Stephen Colbert, who called it "extra-expensive science milk." He added: "It's like they got Frankenstein to lactate."

Fairlife describes the product as "milk, pure and simple, without any protein powders or nutritional supplements added," according to a press release issued in February. The co-founders are husband-and-wife team Mike and Sue McCloskey. They are co-owners of the Fair Oaks Farms dairy in Indiana, a popular tourist stop along Interstate 65 between Chicago and Indianapolis.

Coca-Cola has high hopes for the milk. "It's basically the premiumization of milk," Sandy Douglas, president of Coca-Cola North America, told analysts last year. "Our ambition there is to create the Simply of milk," he added, alluding to Simply Orange, the company's premium orange juice line.

The dairy milk category could use a boost. Sales have stagnated as a result of competition from a range of beverages, including plant-based milk like almond milk, said Virginia Lee, an analyst with Euromonitor International. Euromonitor projects that fresh/pasteurized milk sales will fall 10.8% from 2014 to 2019.

But "there is definitely potential" for Fairlife, Ms. Lee said, noting that its high-protein message is on-trend. "Fairlife is better than traditional lactose-free milk since it offers the benefit of more calcium and more protein," she said.

But Ms. Lee cautioned that the higher price could prove to be a deterrent. Also, the brand's association with a big corporation like Coca-Cola could be a negative, she said, because consumers are increasingly interested in smaller, independent brands.

Fairlife execs appear to be distancing themselves from the Coke association. "People keep referring to this as 'Coke Milk' and it's not," Fairlife CEO Steve Jones told USA Today last month. "Coke is not making any milk here," he said in the interview, adding that Coke's only job is to "distribute the milk and make sure it gets on the shelf."

But the product could help Coke further diversify its beverage portfolio. "I think it's smart for Coke to link up with a product like this. Consumers clearly are looking for more health and wellness products," said John Sicher, who covers Coca-Cola as the editor and publisher of Beverage Digest. But he added that he expects Fairlife to remain a niche offering.

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