By Sherry Bunting, Farmshine, Friday, Jan. 10, 2020
CHICAGO, Ill. — The Coca-Cola Company announced Friday (Jan. 3) that it has acquired the remaining stake in fairlife LLC from its joint venture partner Select Milk Producers, a 99-member cooperative run and founded by Dr. Mike and Sue McCloskey. Mike McCloskey is also co-founder and chairman of the board of Fair Oaks Farms, and he was chairman of the Sustainability Initiative of DMI’s Innovation Center for U.S. Dairy in 2014, when fairlife was officially launched.
As a result of the recent transaction, Coca-Cola now owns 100% of fairlife, up from its previous 42.5% minority stake, according to company statements.
Financial terms were not disclosed.
According to a company statement, fairlife will continue to operate as a standalone business and will continue to be based in Chicago, where the brand got its start as a joint venture of Select Milk Producers and Coca-Cola, and received partnership grants for research and promotion through the Innovation Center of the checkoff-funded Dairy Management Inc. (DMI).
“We are excited for the next chapter of fairlife’s growth and innovation,” said fairlife CEO Tim Doelman in a press release, emphasizing the strength and scale of the Coca-Cola Company.
“It’s important for fairlife to continue to operate as a standalone business based in Chicago,” stated Jim Dinkins, president of Coca-Cola North America in a press release. “This will continue to give Tim and his team the space and running room they need to innovate and build the fairlife brand in a unique and fast-changing category.”
The fairlife LLC launched in 2012 to make use of a patented cold-filtration process known as ultrafiltration, which removes some natural sugars (lactose) while concentrating milk’s protein and calcium. The launch began with a high-protein milkshake called Core Power and has grown to offer a portfolio of products in what Coca-Cola calls “the fast-growing value-added dairy category in North America.”
In addition to Core Power, the line of products includes fairlife ultrafiltered milk with 50% more protein and 50% less sugar, fairlife DHA with DHA Omega-3 fatty acids, fairlife (drinkable) smart snacks, fairlife nutrition plan (shakes), and the new fairlife creamers for coffee.
Coca-Cola reports fairlife sales have grown by double-digits each year since 2014, playing a big role in what the company sees as steady growth of value-added dairy products in contrast with the traditional fluid milk category. The brand has been supported by the reach of Coca Cola’s distribution, both through the Minute Maid system and Coca-Cola bottlers across the country.
According to IRI data, fairlife’s first-year sales were $62 million, representing 0.36% of market share in 2014. According to Nielsen AMC, fairlife surpassed $500 million in retail sales last year, an 8-fold increase and representing just shy of 3% of market share.
A new fairlife milk facility is under construction in Goodyear, Arizona to expand production beyond its current plants in Waco, Texas and Coopersville, Michigan. In 2018, fairlife launched its products for sale in Canada and will begin local production and sourcing in Ontario this spring.
According to Dinkins, Coca-Cola “will continue to ensure that fairlife has the best distribution possible and will be here to provide resources and expertise in areas such as sustainability and supply chain management to make the brand stronger and better for the future.”
In the same week as the Coca-Cola announcement on acquiring whole ownership of fairlife, a joint public statement was released by fairlife and Fair Oaks Farms announcing their new and evolving four-part animal and worker care platform as their long term response to the animal abuse videos that became public last June involving one of the 12 separate dairies at Fair Oaks Farms. This was also mentioned in the ownership transaction press packet.
“To guide this journey, we’ve assembled a fairlife Animal Welfare Advisory Council to ensure we are both learning and leading for the short- and long-term,” Doelman stated in a public statement. “We’re working with our supplying farmers to outline more detailed animal welfare policies… investing with and in our farmers … And we continue to require that every farm in our supply chain is subject to regular third-party unannounced audits with clear action plans for learning and improvement after each audit.”
DMI officials have indicated funding promotion and exhibits at Fair Oaks Farms’ visitor center an hour south of Chicago in Indiana. However, DMI indicates that its financial grants to fairlife for promotion ended in 2019. To receive DMI promotion funding, companies with approved innovations must spend a comparatively larger amount of their own funds.
Available tax forms for 2017 and 2018 list DMI grants to fairlife of $8 million for promotion in each of those years, and prior support was available from affiliated research and development resources in the Chicago suburbs of Rosemont where DMI and Fonterra are both located.
Ultrafiltration is a process that can vary by dairy product application and is used around the world. A 2018 Transparency Market Research report pegged Coca-Cola among the companies it listed as “key players operating in the global ultrafiltered milk market, along with HP Hood LLC, Idaho Milk Products Inc., Fonterra Co-operative Group, Kerry Group, Tatura Milk Industries Ltd., Darigold Ingredients Company, Erie Foods International Inc., Enka Sut Company, Grassland Dairy Products and others.”
In 2017, the FDA said ultrafiltered milk could be used to make any fresh cheese product.
While fairlife milk is still considered a fresh product with a 90-day shelf-life, some products in the lineup are shelf-stable and aseptically packaged.
Dr. McCloskey confirmed in a presentation on “the road to innovation” at the 2016 Georgia Dairy Conference that fairlife ultrafiltered milk was at that time designated a Class I fluid milk product; however, some of the other beverages in the lineup are Class II.