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While specialty drinks such as coffee, tea and smoothies have skyrocketed in sales, and buoyed a beverage evolution in the restaurant industry, soft drink sales have remained relatively flat.
Mintel Menu Insights’ 2009 Menu Innovation Report studied why consumers are increasingly demanding more than traditional soda and a majority answered that they simply want a greater selection.
The Coca-Cola Company has responded by deploying its proprietary Freestyle equipment, a fountain dispenser that features 106 varieties of beverages, including derivatives of the classics. For example, consumers can get a Sprite with raspberry in a creation that only exists on this platform, and they can do it all via touch screen technology.
The Freestyle project has been in the works for at least five years with a basic objective of fulfilling a need.
“Coca-Cola recruited a small group of engineers and some business people to solve a problem. If you look at our company’s portfolio, self-service is a big share. We went from having one brand in 1986 to more than 3,000 products around the world now. But on the self-service side, our dispensers went from having one brand in ’86 to six now. We had to change that,” said Gene Farrell, vice president of Coca-Cola’s jet integration program.
Testing phase makes way for pilot phase
Once the planning and creation phases came to fruition, the equipment moved to its “Beta Market Test” phase last year - deploying 72 machines in 43 locations around Southern California and Atlanta.
This year, Coke has moved on to the “Pilot Phase” with more than 125 locations in four markets currently testing the equipment, including Taco Bueno, Schlotzsky’s Deli, Cici’s Pizza, Wendy’s, Stevi B’s Pizza, Popeyes Louisiana Kitchen, Five Guys Burgers and Fries, Burger King, Subway, Qdoba, McDonald’s, Jack in the Box, El Pollo Loco and many more.
The company’s goal is to have the Freestyle in 15 markets by the end of 2010.
“Beyond that, in 2011, we’re planning for continued expansion and broader geographic reach. The number one question we get is ‘when is it coming to my town?’ So, our consumers seem to really have fun with the experience,” Farrell said.
Quantifying that consumer enthusiasm is the Freestyle’s Facebook page, which has generated more than 11,000 fans without any product advertising. Many of those “fans” have been actively engaged, sharing their favorite flavor combinations and coming up with names for their concoctions.
In addition to the social media buzz, restaurants that have incorporated the Freestyle technology have reported increases in traffic and double-digit increases in total beverage sales, according to Farrell.
The biggest draw is the exponential increase in beverage choices. Whereas traditional fountain drink stations offer an average of 10 drinks, the Freestyle features 106 options. Or, where there is usually one or two diet or caffeine-free drink choices, the Freestyle includes 60 and 65, respectively.
“The typical unit doesn’t give you a breadth of the continually expanding tastes of consumers. When we looked at what consumers wanted, we saw that other beverage categories were offering variations with the exception of soft drinks. This was a consumer need. It’s a dramatic expansion, which allows for a very broad appeal, across demographics,” Farrell said.
Consumers aren’t the only ones who benefit from the technology. The equipment measures its use every day and reports back to Coca-Cola so the company is better able to understand, and respond to, demands.
“We know what is sold by daypart every day, which is a huge value. We learn from that information and we can plan to use it to better market our customers’ beverages and identify trends,” Farrell said.
An example of this response is with the Freestyle’s caffeine-free choices. Most traditional fountain units do not have a caffeine-free option. However, in restaurants with Freestyle equipment, caffeine-free drinks move from the No. 12 top seller during the day to the top three during the late afternoon/evening daypart.
“There is a big use occasion for caffeine-free drinks, and we are able to offer more choices because we know it now,” Farrell said.
Other favorite flavor combinations include Cherry and Vanilla Coke; mixing orange and vanilla for a “Creamsicle” taste; and Sprite with flavor options such as grape. The Freestyle also features eight varieties of Fanta, lemonade varieties, a broad range of flavored Dasani water and more.
Another benefit for operators is the equipment’s ease of maintenance. Traditional dispensers require a 5-gallon bag-in-the-box for each flavor, but Freestyle uses high concentrate ingredients, which allows for precise control of liquids.
“The only thing in the back room is the nutritive sweetener, which uses 40 percent less space than the current six- to eight-valve fountain,” Farrell said.
Overcoming growing pains
A positive fan response and long list of operator benefits do not mean the testing phases have gone without hiccups.
“Just like any new product development, we have had challenges. You can do the research, but you can never get a full read until you put it out there. We still have some things to learn and improve upon, which is why we’re bullish on the opportunity, but have taken our time in expansion,” Farrell said.
One of the biggest changes thus far has been with the ice receptacle.
“The way consumers use ice with the Freestyle versus the traditional dispensers is something we didn’t consider initially. There is a big difference,” Farrell said.
For example, most consumers simply refill their drinks with traditional dispensers. But with Freestyle dispensers, they want to try something new each time.
“They pour out their ice and get fresh ice much more, so we had to alter the design of the equipment to accommodate a larger dumping point. It was a phenomenon that didn’t previously exist,” Farrell said.
As Coca-Cola continues to roll out this equipment at more restaurants, it is also in the fledgling stages of testing a similar piece of equipment that can be managed by restaurant crews. The goal is to have Freestyle equipment available in drive-thru components.
Any flavor discrepancy concerns are remedied by the equipment’s technology.
“If a crew member is mixing up a drink by adding shots by hand, it creates a different composition each time, and consumers know the difference. But this machine will get it right every time,” Farrell said.
Coca-Cola is also figuring out its marketing approach for the Freestyle, knowing brand mixes are going to be different for each customer.
“We’re not ready to talk about our advertising plans yet, but there is a lot of marketing potential with this,” Farrell said. “If you think about the capability this presents, it can get exciting. (Restaurants) can do menu pairings or integrate flavor combinations with consumer experiences. They can really have a lot of fun with this.”
To offset increased costs of the equipment, Coca-Cola is suggesting restaurants sell drinks for 10 cents more.
“In our research, we’ve found that consumers will gladly pay 10 cents more for this,” Farrell said. “They’re going from six options to 106 – they’re getting a great experience and a major increase in variety.”
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