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Coca-Cola's latest gambit: A new kind of milk

Americans have been cutting back on soda for years, and that's dealt a blow to sales and profit at Coca-Cola (KO).

Now, the company is making a bold move into a completely different beverage: milk.

Coca-Cola is planning to bring a new kind of milk to stores nationwide in late December. The milk, called Fairlife, has 50 percent more protein and 50 percent less sugar than regular milk. It also has 30 percent more calcium.

"It's basically the premiumization of milk," Sandy Douglas, a senior vice president at Coca-Cola's North American operation, said last week at an investor conference. "Our ambition there is to create the Simply of milk." He was referring to the company's Simply juice line, which has seen strong growth even as the overall fruit juice industry has been in decline. Coca-Cola advertises its Simply juices as healthier, never frozen and never sweetened, which plays well with grocery shoppers.

Americans have taken a keen interest in products with higher levels of protein and lower sugar, especially in the mornings. That's why the yogurt aisle is endlessly expanding and why fast-food chains have rushed to put high-protein meals on the breakfast menu.

"Protein is the fastest-growing segment of the beverage category," Mike Saint John, president of Coca-Cola North America's Minute Maid business unit, told the Dairy Today trade publication recently.

This won't be an easy sell for some Americans. One out of every two adult Americans doesn't drink milk at all, Dairy Today reports. And milk sales have declined about 8 percent over the last decade.

Coca-Cola will be emphasizing how Fairlife is different than traditional milk. Fairlife producers say the milk is cold-filtered to concentrate the protein and calcium while removing the fat and sugar. It doesn't have any lactose or added proteins.

Coca-Cola already had a relationship with some of the milk's producers through its distribution of Core Power, a protein shake brand it began delivering to stores in 2012. Core Power is made with some of the same filtration processes.

Fairlife launched earlier this year in Minnesota with some racy ads depicting women in dresses made out of milk. "Drink what she's wearing," said one ad.

Fairlife is being marketed as a premium milk, and it will undoubtedly have a premium price to boot. Coca-Cola has dreams of big milk profits in the future.

"Now to be clear, we're going to be investing in the milk business for a while to build the brand so it won't rain money in the early couple of years," Douglas said at last week's conference. "But like Simply, when you do it well, it rains money later."

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.