How a mistake turned this milk product into over $1 billion in retail sales
Agriculture has a dirty secret, and it's keeping most farmers broke.
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Story: Fairlife LLC
Framework: Innovate or Stagnate
Writing Prompt: Where can you add value to create your niche-within-a-niche?
Inspiring Quote: read to the end to find out!
The Fairlife company has been on one hell of a ride the past few years.
And not all of it a smooth one.
At its launch, the brand of ultra-filtered milk was heralded as a long-needed innovation in dairy products and packaging. But in 2019, undercover videos allegedly showing animal abuse tarnished its reputation and almost shuttered its parlor doors forever.
What started as a filtration mishap, has turned into a $500M+ per year business, surpassing $1 billion in retail sales in 2021 — in a sector most in the agriculture industry would say is dying a slow and painful death.
Who would be dumb enough to try and market a new type of milk product in light of the annual decades-long decline in milk consumption?
Well friend, I’m glad you asked…
📕Story: Fairlife LLC
In February 2020, right before the world shut down, I had the chance to attend the Pennsylvania Dairy Summit at my alma mater (WE ARE PENN STATE!), and listen to a talk from Sue McCloskey, co-founder of the brand Fairlife.
During the session, Sue shared her unconventional start to a love of dairy, and how a mishap prompted her husband Mike to experiment with the filtration of milk.
As they say, invention is the mother of necessity.
Brad Pitt and A Fortuitous Mistake
McCloskey grew up in a small town in northern New Jersey near milk distributor Van Peenen’s Dairy.
She joked, “The Van Peenen brothers were kind of like Brad Pitt hot, so I had a very early love of dairy.”
Same girl, same.
As fate would have it, Sue ended up marrying a veterinarian, who later converted to a dairy farmer.
Sue met Mike McCloskey in California. They moved to New Mexico, took over a dairy there, and in 1994, Mike helped form the Select Milk Producers Cooperative to increase the amount of money local dairy farmers were receiving for their high-quality fluid milk.
Life was busy, but uneventful for the couple.
But as all farmers know, Lady Luck is a finicky mistress.
One day, the McCloskey’s noticed their farm’s well had collapsed. They had someone repair it, but afterwards noticed their milk production dropped off a cliff.
After some digging (literally and figuratively), Mike discovered the rebuilt well had been outfitted with the wrong filter.
That mishap prompted Mike to begin experimenting with the milk filtration process. He started mixing different amounts of fat and proteins, and eventually came up with a lactose-free, reduced-sugar product that actually tasted good.
When I first started seeing Fairlife’s ultra-filtered milk product on my local grocer’s shelves, my initial thought was they were adding protein concentrate.
But no, this explanation from their website clarifies the process:
“We filter our milk into its five components (water, butterfat, protein, vitamins & minerals, lactose) and then recombine them in different proportions. So we never need to add protein or calcium powders – it’s already in the milk!”
The milk is made using extra filters to remove lactose, and concentrate protein and calcium. Once the process is complete, the milk has 50% more protein, 30% more calcium and half the sugar. The technology is not much different than that used to remove fat from whole milk to make skim, with that fat then being added back to whole milk to make cream.
And while some commentators were quick to call the result “franken milk” and suggested it was nothing more than a laboratory experiment, the McCloskeys (and their bank account) got the last laugh.
Innovation Breeds Success
Proving the new “high nutrition milk” in two test markets — Minneapolis and Denver — and getting positive feedback, it was Sue who saw a golden opportunity to market the drink to health-conscious consumers - specifically parents.
“If you could put this in a bottle, I guarantee you I can sell this to every woman in America,” she told Mike one night at the kitchen table.
Challenge accepted.
The new milk found success in a fiercely competitive beverage market where coffee and bottled water options historically reigned supreme.
Sue attributes Fairlife’s success to hitting major consumer product benchmarks:
Targets a market with more discretionary income (health-conscious consumers)
Tastes good
Makes the consumer feel good
Game set and match.
Keeping with the innovation theme, Fairlife was soon launched as a joint venture between Select Milk Producers, and branding titan The Coca-Cola Co.
Because if you want to turn your product into a household name, who better to help than the company that essentially wrote the book right?
Coke launched the product nationwide with a splashy marketing campaign — literally — ads featuring women wearing (almost) nothing but milk splashes — and modern-looking bottles that departed from the staid jug mold.
Coke became the full owner of the brand in January 2020, buying up the remaining 57.5% stake, though Fairlife continues to operate as a standalone business.
As one of the few bright spots in the fluid-milk category, volumes of value-added milk — including lactose-free, health-enhanced or organic — rose 15.5% in 2021 vs. 2019, while traditional milk values declined 7.7% over the same time period, according to top line sales data from The Milk Processors Education Program (MilkPEP).
Throughout the pandemic years, Fairlife achieved double-digit sales growth week after week, and (according to the company) currently holds the top spot in the milk category on Instacart.
Which is ironic as Fairlife considers themselves a nutrition company first, and a milk company second.
This critical distinction is what’s allowed them to solidify their place in the value-added product market — a niche many other dairy operations struggle to break into or survive.
While other agriculture businesses have folded in the face of ongoing global supply chain issues, the Fairlife team has remained committed to making the best business decisions they can, while still being able to meet consumer demand
All Press is NOT Good Press
The good times were challenged in the summer of 2019 when an animal welfare group released undercover videos seeming to show animal abuse at Fair Oaks Farms, Fairlife’s flagship farm in Fair Oaks, Indiana that the McCloskeys founded in 2004.
Three former employees were charged, and one was sentenced to a year of probation.
In a statement, Mike McCloskey said the three workers responsible for most of the abuse were terminated after co-workers reported them, and the fourth employee was canned in response to the videos.
The McCloskeys also announced several measures to ensure animal welfare on the farm.
At the Dairy Summit, Sue apologized for the Fair Oaks abuse, saying it put a black mark on the entire dairy industry.
“When something like this happens to one of us, it happens to all of us,” she said.
The farm created an animal welfare advisory board and within six months, 21 of the farms that work with Fair Oaks were audited.
The McCloskeys also took steps to show they shared consumers’ environmental values.
Each farm under the Fair Oaks umbrella has a manure digester and uses the methane to generate electricity. The farm also has 42 tractor-trailers running on biofuel created by the digester.
In these types of situations, most businesses would either call it quits, or be forced to by public opinion.
But because Fairlife was open and honest about what happened, and took visible steps to self-correct, the public embraced the brand again, and they’ve been able to continue their upward trajectory.
📝Framework: Innovate or Stagnate
Agriculture’s Dirty Secret
The agriculture industry has a dirty secret. It’s resistant to change, and it has a limiting belief that poverty is commendable.
Yes, I said it.
The stereotypical vision of the American farmer — sunburnt, raggedy baseball cap atop his head, wearing coveralls with an inch of dust on them, trudging out of the house before the sun’s up and not returning before it sets.
Constantly worried about money, hasn’t taken a vacation with his family in decades, drives around equipment straight out of Johnny Cash’s “One Piece At A Time” song, and falls into bed every night bone-weary with exhaustion.
Rinse and repeat for the next 30-40 years.
I mean, yeah — what kid wouldn’t be raising their hand saying, “sign me up for that!”
I chose to highlight Fairlife in today’s newsletter because they’ve done an amazing job at breaking the mold of what it means (and looks like) to be a farmer. Giving the next generation of agriculturalists a benchmark by which to measure what’s actually possible, and that they need not be doomed to a life of repetitive servitude, where joy is tamped down as hard as the soil in the middle of August.
Fairlife’s Growth Levers
Premiumization.
Yes, that is a word — look it up.
It was Coke who helped coin this phrase for the company, and it’s genius.
At almost double the price of regular milk, some initially said Fairlife’s price point was too high and consumers wouldn’t buy it.
However, if there’s anything I can tell you about running my own business, and studying countless successful others — people will pay for what they want.
Calling itself a “premium milk brand”, Fairlife almost singlehandedly contributed to the “rebirth of milk,” with the goal of its product reaching “every fridge in America,” according to former Fairlife CEO Steve Jones (as of the date of this article, the company’s current CEO is Tim Doelman).
At a time when milk consumption was plummeting in the U.S. due to a “lack of innovation” in the industry, the McCloskey’s knew, if you excite consumers with something new, where there’s a real benefit that they see as vitally important to their life, then they’ll come back again and again.
Something as simple as coining a name — “premium milk” can be enough to make people pay attention and open their wallets.
A Diversified Product Lineup
Fairlife knew they couldn’t be a one-hit wonder — it doesn’t pay the bills (just ask Vanilla Ice).
Ok, cringe reference, but you get what I’m saying.
Even if the value-added fluid milk took off, they knew it wasn’t a guarantee how long the ride would last. So the company decided to expand and diversify its product line into new, but adjacent verticals.
Introducing — Core Power and Yup! Low-FatUltra-Filtered Milk.
With these protein-packed, and lower-fat premium products, Fairlife expanded their audience to capture urban, and more contemporary consumers.
In 2021, the company introduced Good-Moo’d, a line of delicious lactose-free milks bringing real dairy taste back to consumers with issues digesting milk. Made with Fairlife’s patented ultra-filtration, the new brand gave the smooth, creamy rich taste milk lovers remembered and contained 25% less sugar than the leading lactose-free milk.
It’s not like they didn’t have a market for it — an estimated 30-50 million consumers in the U.S. are lactose intolerant.
And while lactose-free milk has been around for 40 years, there are (still) very few choices for consumers looking for dairy milk.
Further, a consumer study found that when asked to describe today’s lactose-free options, 40 percent of consumers describe them as “too sweet.”
And although this line, along with their line of creamers was discontinued to “focus on optimizing production”, the diversification of products has allowed the company to develop its Fairlife Nutrition Plan and blog.
Edu-Tainment & Agri-Tourism
Another brilliant move by an organization that has built a dairy empire, is educating and entertaining visitors about cows, farming, manure management, and modern agriculture.
Mike McCloskey and his partners in Fair Oaks Farm created an international attraction that hosts tens of thousands of visitors each year. According to their website: “Fair Oaks Farms is an escape to the country with acres of great outdoor fun, food and learning where you can explore family farms and reconnect with nature, animals and our planet.”
There’s truly something for everyone:
guided pig and dairy tours
interactive exhibits and museums
exclusive farm-to-table dining
a wedding venue
outdoor summer entertainment series
enrichment classes and workshops…
…and of course merchandise!
This is dairy innovation at its pinnacle.
And you’ll be anything but “roughing it” at their onsite Fair Oaks Farms Hotel — a Fairfield Inn & Suites by Marriott.
The hotel features 99 guest rooms, including 31 specialty suites like the Family Suite and Bridal Suite. The hotel is also equipped with a pool, water slide and fitness center.
At $22 per person per day for a base ticket, not including food, lodging, and other interactive add-ons like The Pig Adventure ($5), and Mooville ($3), they’re bringing in a lot of MOO-LAH (sorry, I had to)!
According to RocketReach.com, the agri-tourism portion of Fair Oaks Farm alone brings in $32.9 million, with some sources I found reporting as much as $45.5 million.
Either way, what would your business do with that much extra cash?
Sponsorships
To survive, all businesses need eyeballs. And Fairlife has utilized strategic partnerships to their advantage to get them.
Core Power has been the official protein drink of Team USA for quite some time. And in 2024, you couldn’t turn on the TV without seeing ads of 10-time US Olympic medalist Katie Ledecky chugging back a bottle, claiming it was the perfect post-workout recovery drink.
It’s collaborations like these that keep Fairlife’s products front and center in consumer’s minds — which directly translates to more sales.
The Future?
The Fairlife company has taken a traditionally dying sector of the dairy industry (fluid milk) and turned it into their biggest revenue driver.
And while prolonged success is never a given for any business, the company’s obsession with innovation, I believe, is what will allow them to create new products, and keep them on grocery shelves for a long time.
At the PA Dairy Summit talk, Sue McCloskey said they have a current customer satisfaction rating of 90%, with 69% saying they will buy the product again.
I don’t know about you, but I’d take those numbers any day of the week.
With plans to increase their offerings under their bestselling Core Power protein drinks, award-winning cheese products sold direct to consumer from the farm, and an emphasis on cow health and public education, the future looks bright for the largest dairy operation in the United States.
I’ll end with a quote from Sue:
“Real business people understand that there is still room for growth in milk and innovation in milk.”
Amen.
How You Can Replicate Some of Fairlife’s Success
Even if your business resides in a very traditional sector of agriculture, there can still be ways for you to add more value, or make your products and services more appealing to your target audience.
The Fairlife company takes a very forward-thinking approach to their dairy empire — emphasizing health, taste, natural nutrition, family farms, vitality, quality, sustainability and animal comfort – all the good things in dairy agriculture.
Take a hard look at your own offerings — which of the things above can you iterate on to come up with something new and different?
Find Your “Niche Within A Niche”
It can be easy to look at Fairlife and say, “they had a major partner helping them skyrocket their success”. And that’s true.
But before Coke got involved, the co-founders were the ones that came up with the ultrafiltration process. They were the ones that looked at a mistake and saw an opportunity.
Look at your market — what questions is your audience asking you on a regular basis? What are they telling you they’d like to see?
If you don’t know, you need to ask them.
Send a survey to your email list. (don’t have a list? Let’s talk, I can help!)
Create a poll on social media.
Put a suggestion box at your place of business.
Once you’ve collected the data, think of ways you can carve out a “niche within a niche”.
This is where the real riches are.
If You Sit Still, You Die
Don’t be that farmer or business stuck in the self-imposed poverty cycle.
Agriculture can be innovative, sexy, and on the cutting-edge. You just have to believe it.
Mike and Sue could’ve looked at their tanking milk production and thought, “well, guess that’s it. God’s punishing us and we’re just going to have to grit our teeth and bare it”.
Stop thinking that way.
Stop letting life happen TO you, and be proactive about making life work better FOR you.
Sure there are things we can’t control. Most things to be honest. But that doesn’t mean we can’t look at them as an opportunity instead of a punishment.
Just because that’s the way something’s always been done, doesn’t mean it’s the best way.
Remember the “franken milk”?
The McCloskey’s embraced it and kept going. Kept believing in their creation until others did too.
What product or service can you put out this year, that a decade from now everyone can’t imagine their lives without?
Hopefully, I’ll get to write out it!
✍️Writing Prompt:
Write down at least 3 new angles for a product or service in your current business. Where can you add value to create your niche-within-a-niche?
🗨️One quote to finish your week strong:
“The master’s eye is the best fertilizer.”
Pliny the Elder
The importance of your dedication and vigilance in nurturing your “crops” is utmost for a fruitful harvest.
Have a great week!
Enjoy the ride,
Charlie
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I was scrolling back to find out what tragedy happened a year ago and discovered this piece. I am dedicated to Fairlife brand. Other lactose free milk has an odd taste to my pallet. I wasn’t seeking healthier milk per se, just lactose free that tasted good. I used to drink a gallon a milk a week easily but paid the price. Still scrolling back to see what happened last year.