Health into beverage industry trends Large soda companies switch to dairy market
Nowadays, healthy drinks are more popular with consumers than carbonated drinks. Due to the current state of the beverage industry, both Pepsi and Coca-Cola have begun to focus on dairy products. Since the first two years, the two large companies have made related measures such as acquiring dairy companies and investing in dairy brands.
PepsiCo is currently bidding for Brazilian dairy company Vigor S.A., with an offer of up to 6 billion reais (about 13.13 billion yuan), but Vigor S.A.'s largest shareholder, private equity fund J & F Investimentos not satisfied with the offer, so it did not agree to the deal.
Vigor S.A. is the sixth largest dairy company in Brazil, selling products such as yogurt, yogurt drinks and cheese. Headquartered in São Paulo, Brazil, it has seven processing plants in four Brazilian states.
PepsiCo has launched Toddy brand chocolate milkshake products in the Brazilian market. If the Vigor deal is completed, PepsiCo will further enhance its voice in Brazil's dairy industry.
As of now, PepsiCo said it would not comment on rumors and speculation, and representatives of J & F funds did not respond.
In recent years, PepsiCo has made frequent moves in dairy products. In 2010, PepsiCo bought a 66% stake in Russian dairy giant Wim-Bill-Dan (Wimm-Bill-Dann) for US $3.8 billion. In 2011, PepsiCo entered into a joint venture with European dairy company MullerQuakerDairy to produce cheese foods for sale in the Northeast and Mid-Atlantic states of the United States. In 2015, Pepsi's Quaker High Fiber Oat Milk Beverage was unveiled at Jingdong Shopping Mall and entered the Chinese market.
Now, PepsiCo's "daily nutrition products" (products containing grains, fruits, vegetables, protein, water and sugar-free tea) accounted for 25% of PepsiCo's net revenue in 2016, while PepsiCo accounted for only 12% of PepsiCo's net revenue last year.
Pepsi began to pay attention to dairy products for a reason, mainly because carbonated drinks can't sell.
Today's consumers are moving away from fizzy sodas in favor of healthier drinks. According to the latest report, sales of carbonated soft drinks in the United States have fallen for 11 consecutive years, falling by 1.2 per cent in 2015, up from 0.9 per cent in 2014. Sales of all three giants in the industry have declined. At the same time, per capita consumption of carbonated soft drinks fell to 153.7 litres in 2015, the lowest in 30 years since 1985.
Large soda companies are also aware of the shift in consumer preferences, so they are choosing to invest in more promising dairy products.
Like PepsiCo, Coca-Cola is interested in the Latin American dairy market. Its Brazilian partner Leão Alimentos e Bebidas reached an agreement in December 2015 to acquire dairy company Laticínios Verde Campo. Laticínios Verde Campo, based in the Brazilian state of Minas Gerais, makes cheese and yogurt, and is best known under the brand of lactose-free dairy LacFree.
In 2014, Coca-Cola and its partners jointly launched the high-end milk brand Fairlife. Compared with ordinary milk, the product has 50% higher protein content, 50% lower sugar content, 30% higher calcium content, and does not contain lactose, which may cause allergies. The price of Fairlife is also higher, almost twice that of regular milk brands, and even slightly higher than organic milk. In February this year, Fairlife launched another product "Superkids (Super Child)" for children, featuring 125mg DHA Omega-3, no added sugar, high calcium and protein, etc.
In addition to Fairlife, Coca-Cola has invested in high value-added dairy brands around the world, such as Toni and Santa Clara in Latin America, Minute Maid Pulpy Super Milky in Asia, and milk drinks such as VIO, which are customized for the Indian market.
In addition to animal-derived dairy products, Coca-Cola is also investing in plant-derived protein drinks to diversify its products.
In April 2015, Coca-Cola bought the beverage business of China Coarse Grain King Beverage Holdings Co., Ltd. for $0.4 billion, thus getting involved in the rapidly growing grain beverage market. Last June, Coca-Cola also bought Latin American soy milk company AdeS from Unilever for $0.575 billion.
Now, Coca-Cola's investment in dairy products has seen the effect. Coca-Cola's 2016 financial report shows that in 2016, the company's sales were $41.863 billion billion, down 5.49 percent year-on-year; net profit was $6.527 billion billion, down 11.25 percent year-on-year. However, in the North American market, the Fairlife of high-end milk brands has allowed Coca-Cola's dairy product category sales to achieve double-digit growth, which is very eye-catching.
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