Monday, September 14, 2009

The Fountains of the Future: Coke’s Freestyle Machines


If you’ve ever craved a Caffeine-free Lime Diet Coke but the vending machine only offered the standard Coke and Diet Coke, then look no further because Coca-Cola’s “Freestyle” machines are here!  Coke's introduction of the “Freestyle” vending machine eliminates the limited selection problem by offering more than 100 drink flavor options.  Referred to as the “fountain of the future” by Coca-Cola, the “Freestyle” offers everything from standard sodas and energy drinks to flavored waters and natural water. 

With the recent release (July 2009) of the new machines, I think Coca-Cola is introducing an interesting new business model in the soft drink industry – a process innovation that could disrupt and revolutionize the market.  Physically, the Freestyle is about the same size of a standard vending machine but features several new innovative features, such as a large touch screen interface.  The user navigates through a selection of 100+ drink flavoring options and then the machine uses small doses of flavor from built-in flavor dispensers to mix up the perfect drink.  The Freestyle is more than a simple drink vending machine: it is a market researcher, customer service tool, and an inventory and supply manager – all in one.  The integration of these functions and their information streams offers Coca-Cola a unique opportunity to sustain their current products while simultaneously revolutionize the soft drink market. 

I think the Freestyle innovation will offer several Coca-Cola several advantages over competitors.  On the first hand, the wider array of drink choices will undoubtedly satisfy many consumers who were once disappointed by a limited selection of drinks.  Secondly, the Freestyle will likely expand Coke’s customer base by attracting new consumers who typically select water or no drink offered by their vending machines.  Both of these competitive advantages will allow Coke better capitalize on their drink products.

All in all, the Freestyle is both a product and process innovation.  Moreover, I think the Freestyle’s revolutionary potential lies in its market data, rather than its drinks.  Prior to the Freestyle, product testing was a time-consuming and expensive process.  By having access to a constant stream of consumer behavior, Coca-Cola can more easily test new drinks and respond quicker to current and emerging market trends.  As soon as preferences emerge in the consumption data, Coke can begin designing new drinks that better meet customers’ preferences.  

I also think the Freestyle will allow for better geographical differentiation as well.  Based on the machines’ market data, Coke can better identify geographical differences in consumers’ taste preferences.  For example, suppose the company discovers that energy drinks are much more popular in New York City than elsewhere.  Coke can use this information to advise client restaurants in New York to better stock their inventories with energy drinks.  Likewise, the machines will allow Coke to observe how drink tastes change throughout the day.  For instance, perhaps Freestyle data reveals a post-lunch peak in sales of caffeinated drinks.  Coke can use this valuable information to guide their marketing campaigns and better target their post-lunch consumers.  Ultimately, the Freestyle will shorten or eliminate the time period between preference/ trend identification and capitalization. 

Questions for you:

How do you think the Freestyle will change the soft drink and vending machine industry?

How do you think the purchase decisions will vary between high schools, office buildings, malls, etc.?  How can Coke best respond to these consumer differences?

Do you think the Freestyle innovation could change any other industries as well?  How about the fast-food industry, particularly the drive-thru element? 

4 comments:

  1. Tried to make a comment this afternoon before going to class, but not sure if it properly appears~So here I post it again.Sorry if you see it twice...

    Very interesting.I think the potential success of this new kind of vending machine hinges on the quality of the drinks it instantly produces, or rather, consumers' perception of its quality.Traditionally, coke consumers are not invovled in the production part. I guess they may be more used to ordering pre-concocted soda than seeing the soda being concocted right before them, which may take away part of the myths around the classic Coca-Cola recipe.I've been to the Coca-Cola World in Atlanta, where I watched an interesting animation about the production of coke. It begins with a coin being inserted to the slot of a coke vending machine.What happens after that?The animation tries to convey the idea that the production of a single coke is a miracle.

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  2. Is Coke putting these machines all over the world or just within the US?

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  3. Just within the U.S. for now, but potentially all over the world.

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  4. What will the offering of 100+ drink flavors do to speed of service in the drive thru?

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