Coca-Cola had already launched their 125 flavor fountain machine three years ago in some US test markets. Named “Freestyle”, this fountain unit stores up to 125 flavors of soda, juice, sports drinks, and flavored waters – and sends consumption information directly back to Coca-Cola headquarters. Data analysts at the headquarters can then tell you which flavors are most popular at each location, at a specific time of the day, and see which flavors are mixed together most often. Ad Age’s Natalie Zmuda has more information on this machine and its success in the test market as well as some upcoming advertising media support for the unit (link here).
However, I’m more interested to see what the market impact of this fountain machine will be. Will this fountain unit show up in all quick service restaurants? As is the case in a duopoly type of industry, will the other competitor (Pepsi) react or do anything? Since this machine is so successful in the United States, will this be launched worldwide; or to quench my curiosity, will this unit make its way to Canada?
Given that the machine stores up to 125 flavors and has been tested in high traffic on-premise (quick service restaurants) locations, its safe to say that it will not appear at your location Joe’s Diner. With the technology involved for the Freestyle, it’s likely very expensive and the argument to have it at a local restaurant that may not sustain high trafic levels will come by quite often. Coca-Cola would like to launch this machine across the United States so they can mine data on consumers in every state to find out how their consumption habits differ, so if the traffic levels justify having a Freestyle fountain unit, they will undoubtedly install one there.
Will Pepsi react to Coca-Cola? The restaurant channel for both Coca-Cola and Pepsi are enormous, and with Zmuda’s Beverage Digest statistics indicating that Coca-Cola (70%) and Pepsi (19%) market shares for this channel so far apart, it’s very likely that Pepsi will react and strike back. If the technology is not patented by Coca-Cola, Pepsi may try to develop a fountain unit that holds numerous beverage flavors as well. If the technology itself is patented and there’s no workaround, then Pepsi will explore some other options to gain market share in this channel. During the time that Pepsi lost the No.2 cola position to Diet Coke, Pepsi had been actively promoting their Pepsi Refresh project, as well as other beverages in their portfolio like Pepsi Max. By focusing efforts on Pepsi-cola and specifically on fountain, Pepsi may be able to re-gain some lost momentum.
However, at the end of the day, the most profitable channels for beverages involves bottles so losing in fountain does not mean you lose overall. If Pepsi were to gain strong market share in the convenience, grocery supermarket and drug store channels then losing in the restaurant may not seem as important (less important overall but not as important – restaurant market share is a component to their overall market share).
As to whether the Freestyle will make its way up north or elsewhere, it seems like a distant possibility. Again working on the belief that Coca-Cola would like to understand how consumption habits differ from state to state, it is also important to understand these habits country by country. The insights from understanding how consumers may choose some flavors more often than others may enable Coca-Cola to save money on launching future beverage offerings (ie. Cherry Coke Zero, Raspberry Nestea, etc). My belief is that once the Freestyle has gained enough publicity and momentum in the United States, other countries will start asking for this machine and support. And since Canada is similar to the United States in demographics and geography, this makes Canada a very likely second country to implement the Freestyle.
For the readers that are in the United States where the Freestyle machine is tested, have you seen the Freestyle? If you have, please leave a comment on which flavors you’ve mixed together. 🙂