Coca-Cola ups dairy ante with stake in Core Power

Tue Dec 4, 2012 1:29pm EST

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(Reuters) - Coca-Cola Co (KO.N) is taking an ownership stake in the maker of the Core Power protein drink as the world's largest soft drink company increases its bet on milk-based beverages.

The move, announced by Coke on Tuesday, is the latest proof that the battle between Coke and PepsiCo Inc (PEP.N) has expanded into the dairy arena, which has attracted soft drink makers looking to add nutritional drinks to their portfolios.

Coca-Cola said it and Select Milk Producers Inc, a cooperative of dairy farmers, were taking equal stakes in the Core Power maker, which will now be known as Fair Oaks Farms Brands LLC.

Coke started distributing Core Power in select areas earlier this year. Made from milk, Core Power is marketed as a high-protein muscle recovery drink meant to be consumed after a workout. It competes with Muscle Milk, which is distributed by PepsiCo.

Coca-Cola spokeswoman Kerry Tressler would not say how big the stakes are, but said the investment, by the company's Venturing and Emerging Brands unit, could increase over time. Like a venture capital arm, that unit has invested in, and helped grow, other small brands including Honest Tea and Zico Coconut Water.

In addition to Core Power, Coke said it wanted to create "an innovative portfolio of brands and products that feature the value-added nutrition of dairy."

Dairy has been in the spotlight lately, as Dean Foods (DF.N), the nation's largest dairy company, breaks up. The company said on Monday that it would sell its Morningstar unit to Canada's Saputo Inc (SAP.TO), and is spinning off another business into WhiteWave Foods Inc (WWAV.N).

In July, PepsiCo started selling yogurt in the United States though a joint venture with Germany's Theo Muller Group. PepsiCo also owns Wimm-Bill-Dann, Russia's largest dairy company, and has a joint venture with Saudi Arabia's Almarai.

Coke shares were up 3 cents at $37.41 on the New York Stock Exchange.

(Reporting by Martinne Geller in New York; Editing by John Wallace, Lisa Von Ahn and Andrew Hay)

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