Coca-Cola needs to diversify. Its way in may be milk
When James Quincey became CEO of Coca-Cola in 2017, soda had broadly been in decline over its health effects. The beverage giant was embarking on an effort to diversify its reach beyond the sugary drink.
A key move? Ditching the carbonation and sticking to the basics: cow milk.
Launched in 2012, Fairlife — originally founded as a joint venture between Coca-Cola and wholesale dairy producer Select Milk Producers — used whimsical, minimalistic packaging that fits with the influx of niche almond, protein and even pistachio milks, outperforming large-container beverages in the dairy aisle.
In 2020, Coca-Cola fully acquired Fairlife for an initial $980 million — an acquisition that has far exceeded the soda giant's expectations due in part to social media popularity in the health and wellness space. While Americans face higher food prices and a pullback in their spending, they're still drawn to Fairlife's ultra-filtered system that draws out lactose and sugar but doubles the protein.
In 2022, Coca-Cola announced that Fairlife's sales surpassed $1 billion.
The success is driven by Fairlife's Core Power protein shake brand, which remains a popular staple at many grocery stores and does not have many direct market-leading competitors.
But in its latest earnings call last week, Coca-Cola projected some moderation of Fairlife's growth in 2025 while it builds a facility in New York and carbonated beverages still make up the overwhelming majority of sales for Coca-Cola (its competitor, Pepsi, on the other hand, leans on its Frito-Lay snack brand). And when compared to Coca-Cola's other big acquisition in the non-soda space — Costa Coffee in 2018 — Fairlife has far outpaced it.
'The expectations were never for Fairlife to be this successful, I think even for Coke,' said Kaumil Gajrawala, an analyst for finance firm Jeffries.
The acquisition was structured so there would be an earn-out — meaning the amount paid will ultimately be based on the milk brand's success. In deals like this, the buyer could pay less than buying outright if they're not sure a product will be successful, Gajrawala said.
The total payment for the acquisition is now looking to be $6.2 billion, plus the $980 million Coke initially paid, according to Coca-Cola's latest earnings report. That would make it among Coke's priciest acquisitions to date.
'Dairy has been tricky for Coke to get into,' Gajrawala said. 'Nothing will ever be as important as a Coke trademark, but this is a nice contributor to growth.'
The North American market has shown it will invest in health, whether it's Vital Farms' free-range eggs or Fairlife's protein-dense milk. Coca-Cola entered the right category at the right time, Citi analyst Filippo Falorni told CNN.
'You had a more health-conscious consumer in the United States, and particularly with a bigger focus on protein intake over the last couple of years,' Falorni said.
Protein shakes are a $6 billion market, according to Beverage Digest, a global non-alcoholic beverage industry trade publication.
Grocery items in the middle-priced range are often what Americans decide to stop buying, Gajrawala said. Consumers are either looking for the lowest-priced product or are willing to pay a lot more for something that's differentiated.
Fairlife, with its successful branding, has managed to pull off the latter, Gajrawala said. And it also benefits from Coca-Cola's behemoth distribution system, which Falorni said is arguably the best in the world.
TikTok users frequently post themselves drinking Core Power before a workout or making a healthier morning iced coffee using Fairlife's milk.
But just as quickly as items go viral on social media, they can also fall out of trend, especially in the health and wellness space.
Additionally, in 2022, Fairlife and Coca-Cola agreed to a $21 million settlement in a class-action lawsuit over allegations of inhumane treatment of its cows. The lawsuit claimed consumers were falsely charged a premium because Fairlife promoted well-treated cows.
Last year, Fairlife broke ground on a massive production facility in New York state, but Coca-Cola 'is going to look for more categories' to expand its offerings, Falorni said.
Coca-Cola is 'very focused on Fairlife because it's going very nicely. But I don't think they're going to stop there in terms of the portfolio diversification,' he said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
San Francisco Chronicle
33 minutes ago
- San Francisco Chronicle
Asian American income inequality: Here are the highest and lowest earners in the Bay Area
When Jagtar Singh Kang immigrated with his family to the U.S. from the Indian region of Punjab in 1997, he was paid $8.50 an hour at his first job: working on an assembly line making catheters. It was just a few dollars above minimum wage at the time. 'When I came here, my financial situation was not very good. It was very hard to survive,' said Singh Kang, who lives in Fremont. Today, as an insurance and financial services agent, he makes about $300,000 annually. 'I'm a lucky man.' Singh Kang has experienced the kind of explosive income growth that has led Asian Americans to have the highest median income of all racial groups in the U.S. But he's also encountered many barriers that have kept wages largely stagnant for the lowest-paid among Asian Americans, who experience the highest income inequality of all U.S. racial groups, a 2018 report from Pew Research Center found. He's part of the Asian American ethnic subgroup — Punjabi Americans — that has the highest income inequality of all Asian ethnicities in the Bay Area, a new Chronicle analysis of 2023 U.S. census data found. The region more broadly has one of the highest levels of income inequality in the U.S. The diversity of the Bay Area's two million Asian Americans, who number among their ranks refugees and truck drivers, healthcare workers and software engineers, shows how the 'model minority' stereotype of Asian success doesn't capture the full experience of that racial group. It also offers insight into what helps and hinders upward economic mobility in the country's most expensive region. U.S.-born Asian Americans tend to do better economically than immigrants, research shows, while those who migrate with higher education, access to wealth and resources, English language abilities, family networks and social connections have greater odds of economic success. Nationwide, the income gap among Asian Americans has almost doubled from 1970 to 2016, the Pew report found, with the top 10% of Asian American earners making almost 11 times that of the bottom 10%. In the nine-county Bay Area, that disparity was even more pronounced as of 2023, with the highest-earners making almost 12 times that of the lowest-earners, a Chronicle analysis of U.S. census data found. 'It's not that those who make less are making much less than before,' said Ziyao Tian, a Pew Research Center sociologist. 'It's about the rich people getting a lot richer,' pointing to the Pew study that showed while the incomes of the top 90 th percentile of Asian Americans earners have more than doubled since 1970, those of the lowest-earning 10th percentile grew by only 11%. In the Bay Area, it's a similar story, with top earners' incomes supercharged by the tech industry boom. Income disparity among Asian groups often splits down ethnic lines in the Bay Area, the Chronicle found, with Indian and Taiwanese Americans seeing the highest median household incomes and Afghan, Tongan, Laotian, Hawaiian and Vietnamese Americans seeing the lowest. That economic diversity is reflective of the wide variety of immigration experiences. For instance, Vietnamese, Laotian and Cambodian refugees and their children who fled war and genocide in the 1970s and '80s started on a financial backfoot compared to immigrants who came with college degrees post-1990, when the H-1B visa for high-skill workers was created. ' When you think about the Laotian community, you have to think about the fact that it left during the aftermath of war,' said Somdeng Danny Thongsy, who came to the U.S. as an infant with his family in 1981. 'When we did resettle in the U.S., we're forced to live in an area that's historically stricken with redlining, with poverty.' His parents, who were rice farmers in Laos, found work on a farm, sewing clothing and working in a grocery store in Stockton, where they settled. 'Because of their limited English, they weren't able to get a full 9 to 5 job,' he said. Thongsy became influenced by those around him and dropped out of school at 16. After his brother, who'd been a mentor, was killed, he fell into depression, committed a crime and was incarcerated. In prison, he found Christianity through a chaplain and began a journey of healing that led him to get his GED. After being released, he enrolled in UC Berkeley in 2021, becoming the first and only person in his family to graduate from college. 'When people say, 'You got to bootstrap,' I mean yeah, you do the work, but it's also people that support you along the way,' Thongsy, who now lives in Alameda, said. He credited some of his success to the help he received from free mental health treatment at the Oakland nonprofit Center For Empowering Refugees and Immigrants. Within ethnic subgroups, there are also varying levels of inequality. Punjabi Americans in the Bay Area have the highest income inequality, with the top 10 th percentile of earners making almost 22 times that of bottom earners, followed by Chinese Americans, the Chronicle analysis found. Meanwhile, Indian and Filipino Americans see far less income inequality than average. University of Kansas sociologist ChangHwan Kim, who studies Asian American economic stratification, said a possible explanation is that Chinese and Punjabis have a much longer immigration history in the U.S. than their other Asian counterparts. Chinese migration to the Bay Area dates to the 19 th century Gold Rush while Punjabis fleeing British colonialism in the late 1890s settled to work in California farms and on railroads. 'With that kind of pattern of migration, the population could be more diverse,' he said, as many migrate not for job opportunities or higher education but to reunite with family. In the Bay Area, low-income Chinese immigrants have strong cultural, social and familial reasons to stay here, even when their job prospects aren't good. Nu Huynh, a Cantonese-speaking refugee from Vietnam, arrived in Oakland in 1986 with her family. She eventually enrolled in training to become a childcare worker but took two years instead of the normal one to graduate because she struggled with the English-language instruction. She worked for 12 years at a daycare in Oakland, earning $8.50 an hour, before retiring. She now lives in affordable housing managed by East Bay Local Development Corp. She said she doesn't know how she'd afford rent otherwise. 'The cost of living has gone up, but wages have not,' Huynh said in Cantonese. The 'model minority' stereotype is 'harmful' for advocacy efforts, said Joyce Lam, political director of the San Francisco-based organization Chinese Progressive Association, which advocates for low-income workers. 'You think the Chinese community doesn't need as much help as other communities because of those stereotypes,' she said. The most highly paid Asian Americans tend to also have the highest levels of educational attainment. In the Bay Area, 89% of Indian Americans have a bachelor's degree or higher. 'Asian Americans become successful through education,' said Kim, the sociologist. 'Contrary to this, the lowest-earning Asian Americans are those who came without much education.' But even for highly educated immigrants, not speaking English can place a ceiling on their upward mobility. Khatima Tamiz worked a well-paying job as a field data collector for a USAID contractor when the Taliban seized control of Kabul in 2021. She fled with her family, arriving in the U.S. in 2023 on a Special Immigrant Visa for Afghans who'd helped the U.S. in its war. Employers did not recognize her bachelor's degree in biology, she said. Juggling childcare and learning English, she also enrolled in a medical assistant licensing course. Her husband — who had a master's in human resources — started working as a security guard. He got laid off three months ago and has been driving Uber overnight since, making about $3,000 a month, while studying to be a nurse. 'We're in a bad situation,' she said. As a career coach for business executives, San Francisco resident Joyce Guan West spends a lot of time thinking about how to help people maximize their income. West immigrated as a baby with her parents from Shanghai in the 1980s. Her parents didn't speak English. Her dad's first job, in a factory, paid $3.33 an hour. 'I was literally thinking about it because I charge between $400 to $650 an hour for my coaching,' said West, who now makes about $400,000 a year. 'It's over 100 times more.' Although her parents were working class, her maternal grandparents had immigrated in the 1940s, attended UC Berkeley, had master's degrees, and owned rental properties and 'a nice house' in the El Cerrito hills, she said. 'Even though my immediate family was more of an immigrant experience, seeing the wealth my grandparents had raised my own level of what I expected out of life,' she said. She started her first business in college and sold her most recent one, a snack and beverage distributor called Buyer's Best Friend, in 2017 for several million dollars. When she married her now-ex-husband, a new world opened for her, she said. He grew up in Westchester County, a wealthy New York City suburb close to hedge funds and family offices, she said. 'I feel like that was just a training in how to develop executive presence, being around people who were used to a certain amount of wealth,' she said West acknowledged that her success is hard to replicate because of the advantages she had through her grandparents' privilege. But she said, 'My wish for more Asian Americans is that people get off the treadmill and tap into 'who am I?' when I'm not cranking it out.'
Yahoo
an hour ago
- Yahoo
5 Social Security Changes Experts Predict Could Come in the Next Decade
Social Security has long served as a financial safety net for millions of Americans, but the program faces increasing pressure. Read More: Trending Now: 'Social Security is at a bit of a crossroads,' Paul Miller, managing partner and CPA at Miller and Company, LLP, wrote in an email. According to the latest projections from the Social Security Trustees, the trust fund that helps pay benefits is expected to be depleted by the mid-2030s unless changes are made. 'Now, that doesn't mean Social Security will disappear, but it does mean that if nothing is done, future benefits could be reduced by roughly 20% or more,' Miller added. 'That's a big deal, especially for retirees who rely heavily on these payments.' Here are some Social Security changes experts predict could come over the next decade. Full retirement age (FRA) is the age at which you'll receive your full Social Security retirement benefit you've earned based on your work history. According to the Social Security Administration, the current full retirement age is 67 for those born in 1960 or later. 'We may see the FRA increase from 67 to 68 or beyond for younger workers,' Miller claimed. 'This would reduce long-term payouts without cutting current retirees' benefits directly.' There have been proposals to raise the FRA, but nothing has been enacted into law, at least as of yet. One option analyzed by the Congressional Budget Office would gradually raise the FRA from 67 to 70 by increasing it two months per birth year for workers born between 1964 and 1981. Under this proposal, anyone born in 1981 or later would have an FRA of 70. Workers could still choose to claim benefits as early as age 62, but doing so would result in a steeper reduction in monthly payments than under current law. Find Out: 'Higher-income earners might face increased payroll taxes or see more of their benefits taxed,' Miller wrote. 'Currently, only wages up to $168,600 (in 2024) are subject to Social Security tax. Congress could raise or eliminate that cap.' This cap, known as the taxable maximum, means that any wages above the threshold aren't taxed for Social Security purposes. One proposed solution is to raise that threshold or remove it altogether so that top earners contribute more to the system. Another option is to increase the Social Security tax rate. 'Increase the SS tax rate from 6.2% (which applies to employers and employees) to a higher amount,' Ash Ahluwalia, managing director and head of Social Security planning at OneTeam Financial, wrote in an email. 'This increase in taxes could generate an immediate increase to SS tax revenue.' The SSA uses a specific formula to calculate your benefit amount based on 'average indexed monthly earnings' and age at retirement. 'Lawmakers could revise the benefit formula to be less generous for high earners, while preserving or even enhancing benefits for lower-income retirees,' Milled noted. Each year, the SSA increases Social Security benefits by a certain percentage to counteract inflation. For 2025, the SSA announced a COLA of 2.5%, translating to an average increase of $48 per month. 'There may be changes to how COLAs are calculated, possibly switching to a different inflation measure, like the chained CPI, which typically grows more slowly,' Miller remarked. According to Ahluwalia, Social Security could save millions of dollars by eliminating ongoing increases in Social Security benefits due to COLA. The agency could also make changes to other parts of the Social Security system, such as the reduction or elimination of spousal benefits, ex-spousal benefits, child benefits and child-in-care benefits or other Social Security benefits. 'Similar changes have happened in the past,' Ahluwalia noted, such as the elimination of filing and suspending, which was a strategy where a worker voluntarily suspends receiving benefit payments at or after their full retirement age. 'So it's possible that SS could reduce what some people may perceive as 'loopholes' in the SS code,' he added. More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy This article originally appeared on 5 Social Security Changes Experts Predict Could Come in the Next Decade Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
an hour ago
- CNBC
'Forgotten' 401(k) account fees can cost workers thousands in lost retirement savings, report finds
With more Americans job hopping in the wake of the Great Resignation, the risk of "forgetting" a 401(k) plan with a previous employer has jumped, recent studies show. As of 2023, there were 29.2 million left-behind 401(k) accounts holding roughly $1.65 trillion in assets, up 20% from two years earlier, according to the latest data by Capitalize, a fintech firm. Nearly half of employees leave money in their old plans during work transitions, according to a 2024 report from Vanguard. However, that can come at a cost. More from Personal Finance:Average 401(k) balances drop 3% amid market swingsThe average 401(k) savings rate hit a record highOn-time debt payments aren't a magic fix for your credit score For starters, 41% of workers are unaware that they are paying 401(k) fees at all, a 2021 survey by the U.S. Government Accountability Office found. In most cases, 401(k) fees, which can include administrative service costs and fees for investment management, are relatively low, depending on the plan provider. But there could be additional fees on 401(k) accounts left behind from previous jobs that come with an extra bite. Former employees who don't take their 401(k) with them could be charged an additional fee to maintain those accounts, according to Romi Savova, CEO of PensionBee, an online retirement provider. "If you leave it with the employer, the employer could force the record keeping costs on to you," she said. According to PensionBee's analysis, a $4.55 monthly nonemployee maintenance fee on top of other costs can add up to nearly $18,000 in lost retirement funds over time. Not only does the monthly fee eat into the principal, but workers also lose the compound growth that would have accumulated on the balance, the study found. Fees on those forgotten 401(k)s can be particularly devastating for long-term savers, said Gil Baumgarten, founder and CEO of Segment Wealth Management in Houston. That doesn't necessarily mean it pays to move your balance, he said. "There are two sides to every story," he said. "Lost 401(k)s can be problematic, but rolling into a IRA could come with other costs." When workers switch jobs, they may be able to move the funds to a new employer-sponsored plan or roll their old 401(k) funds into an individual retirement account, which many people do. But IRAs typically have higher investment fees than 401(k)s and those rollovers can also cost workers thousands of dollars over decades, according to another study, by The Pew Charitable Trusts, a nonprofit research organization. Collectively, workers who roll money into IRAs could pay $45.5 billion in extra fees over a hypothetical retirement period of 25 years, Pew estimated. Another option is to cash out an old 401(k), which is generally considered the least desirable option because of the hefty tax penalty. Even so, Vanguard found 33% of workers do that. While leaving your retirement savings in your former employer's plan is often the simplest option, the risk of losing track of an old plan has been growing. Now, 25% of all 401(k) plan assets are left behind or forgotten, according to the most recent data from Capitalize, up from 20% two years prior. However, thanks to "Secure 2.0," a slew of measures affecting retirement savers, the Department of Labor created the retirement savings lost and found database to help workers find old retirement plans. "Ultimately, it can't really be lost," Baumgarten said. "Every one of these companies has a responsibility to provide statements." Often simply updating your contact information can help reconnect you with these records, he advised. You can also use your Social Security number to track down funds through the National Registry of Unclaimed Retirement Benefits, a private-sector database. In 2022, a group of large 401(k) plan administrators launched the Portability Services Network. That consortium works with defined contributor plan rollover specialist Retirement Clearinghouse on auto portability, or the automatic transfer of small-balance 401(k)s. Depending on the plan, employees with up to $7,000 could have their savings automatically transferred into a workplace retirement account with their new employer when they change jobs. The goal is to consolidate and maintain those retirement savings accounts, rather than cashing them out or risk losing track of them, during employment transitions, according to Mike Shamrell, vice president of thought leadership at Fidelity Investments, the nation's largest provider of 401(k) plans and a member of the Portability Services Network.
