Coca-Cola Enters Dairy Industry By Investing in Core Power

The Coca-Cola Co., Inc. completed its fast-moving courtship of the dairy protein drink Core Power, bringing former Coke employee Steve Jones’ two-year-old brand into the fold.

The purchase came just two months after the company revealed that it would begin distributing the entrepreneurial brand on a national basis, and only six months after it began to deliver the brand to stores in the Midwest.

Core Power, a branded beverage venture that was spawned by one of the country’s largest dairy cooperatives, will be run independently while under Coke’s ownership, according to Jones, a former marketing executive with the soda giant.

He said the acquisition represents the first major move into the $12 billion dairy industry by either Coke or rival PepsiCo. Pepsi’s “Blue System” currently distributes Muscle Milk, an independently owned whey protein beverage that ushered in a new era of direct-store-distribution (DSD) protein drinks several years ago. (note: earlier versions indicated that Muscle Milk is made with whey protein; it is not)

With an innovative protein-isolating manufacturing process in hand, Jones said he believes that Core Power can provide a new level of milk-based functionality to the Coke portfolio, one that he believes may ultimately catch Muscle Milk, which exceeds $250 million in sales.

“We think we can broaden the protein platform beyond the weightlifter and the athlete,” Jones said. “I would love to launch a product that meets so many consumer need states where they are.”

For a milk-based beverage, the category Core Power – originally called “Athlete’s HoneyMilk” – wants to dominate what Jones called “milk-plus.” In that area, soy, hemp, and nut-derived milk substitutes have become nearly a $1 billion business, according to recent sales figures from the Symphony/IRI Group, which tracks retail sales.

“It’s all in the promise” of the milk filtration system, Jones told BevNET. “It’s a big story, Coke getting into the dairy world.”

Indeed, the lack of branded dairy products is a business opportunity that has been raised in the past; 18 months ago, investment firm Rabobank released a study indicating that dairy held underserved potential as a branded category.

Jones remains the largest existing  shareholder in Core Power, although its newly-acquired parent company will soon occupy board seats and help begin to guide strategy, Jones said. The initial ties to the company came through Coke’s Venturing and Emerging Brands (VEB) group, although Core Power leapfrogged that entity somewhat when it entered into a national distribution agreement with Coca-Cola Refreshments (CCR), Coke’s distribution arm. Following the acquisition, both CCR and independent Coca-Cola bottlers will have the opportunity to distribute the brand.

Deal terms were not revealed and the occupants of the board seats have not yet been determined, according to Jones, who said he had worked largely with VEB to sell Core Power’s potential to the larger company.

Coke released an announcement concerning the deal this morning in the following press release:

ATLANTA – Over the past several months, Core Power has been the delicious new choice for those seeking a high protein milk shake to support their active lifestyle. Today, The Coca-Cola Company and Select Milk Producers, Inc. (Select) are announcing the acquisition of equity stakes in the newly-created Fair Oaks Farms Brands, LLC to drive growth and expansion of Core Power and to create an innovative portfolio of brands and products that feature the value-added nutrition of dairy.

“At The Coca-Cola Company we strive to provide people with a wide range of beverage choices that meet every occasion and lifestyle need. This new investment led by our Venturing & Emerging Brands group is another great example of our ambition to be the best brand, sales and customer service system in North America,” said Steve Cahillane, President and CEO, Coca-Cola Refreshments.

The investment validates the potential both parties see in offering higher quality value-added health and wellness beverages. “Our leadership in technology, innovation and sustainability within the dairy industry, combined with The Coca-Cola Company’s brand development and distribution capabilities will enable a new portfolio of nutritional beverages with strong growth potential,” said Mike McCloskey, Co-Founder and CEO of Select, an independent group of 87 American family farmers.

According to Steve Jones, CEO of the new Fair Oaks Farms Brands, LLC, “Our initial launch of Core Power® is off to a great start and this new partnership agreement with VEB will help us realize our vision of becoming a leading health and wellness company and the most trusted brand leader in dairy nutrition.”

Core Power is currently distributed by Coca-Cola Refreshments and available in 26g and 20g protein versions and comes in 11.5 ounce recyclable plastic bottles. It is aseptically packaged so it can be distributed in a shelf stable environment until chilled before consumption. Its great taste profiles are enhanced through the addition of natural sweeteners and high quality flavors. All five drinks are lactose- and gluten-free. Simple and great-tasting, Core Power flavors add energizing refreshment to any occasion.

About The Coca-Cola Company

The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Led by Coca-Cola, the world’s most valuable brand, our Company’s portfolio features 15 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, POWERADE, Minute Maid, Simply, Georgia and Del Valle. Globally, we are the No. 1 provider of sparkling beverages, ready-to-drink coffees, and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy our beverages at a rate of 1.8 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that reduce our environmental footprint, support active, healthy living, create a safe, inclusive work environment for our associates, and enhance the economic development of the communities where we operate. Together with our bottling partners, we rank among the world’s top 10 private employers with more than 700,000 system associates. For more information, visit Coca-Cola Journey at www.coca-colacompany.com, follow us on Twitter at twitter.com/CocaColaCo.

About Venturing and Emerging Brands

Venturing and Emerging Brands (VEB) is a dedicated operating unit of Coca-Cola North America charged with identifying high-potential growth brands in the North American beverage space for investment or ownership by The Coca-Cola Company and exploring potential synergistic relationships with these investments. With direct access to the global resources and industry expertise of The Coca-Cola Company and its system, VEB is uniquely positioned to develop emerging beverage brands of The Coca-Cola Company to their full potential. VEB’s portfolio of brands currently or has previously included FUZE, NOS, Honest Tea, Zico Coconut Water, Cascal, and illy issimo. For more information, visit www.vebatcoke.com

About Select Milk Producers, Inc.

Select Milk Producers, Inc. was formed in 1994 by a group of large dairy producers with high quality milk and efficient dairy farm operations. The Select common goal is to provide the highest quality product in the market place and do so with the highest level of service. At the same time our objective is to operate our cooperative of 87 family owned dairies in a very efficient manner to achieve the optimum pay price for our membership. Select membership is based in three primary geographic areas: Texas, New Mexico, and the Midwest. All together Select produces and markets over 6 billion pounds of milk annually.

About Fair Oaks Farms Brands, LLC.

Fair Oaks Farms Brands, LLC is a health and wellness company that produces and markets premium quality, value added nutrition products that start with the best milk from independent American family farmers committed to sustainable and traceable agriculture. The company’s flagship farm, located in Fair Oaks, Indiana, is open to the public and is recognized as an innovator and leader in sustainable agriculture. Fair Oaks Farms Brands, LLC owns and operates Core Power, the high protein milk shake that is the first in the line up of our value added nutrition products, and is currently being distributed in select regions of the US, with a national distribution rollout underway. For a directory of retailers, visit www.corepower.com/stores.