Are Cup Soft Drinks The Next Real Thing?

Posted On: 3/29/2014

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TAGS: Vending Times, Vending Times editorial, vending industry, coin-op, vending machine, coin machine business, office coffee service, vending machine operator, micro markets, Alicia Lavay, Keurig, Coca-Cola, single-cup cold drinks, postmix soft drinks, coffee culture, K-Cup, Green Mountain Coke deal

Alicia Lavay, vending

I recently provoked a lively discussion on LinkedIn that generated a lot of interest. The topic: "Coke buys stake in Green Mountain to develop soft drink brands for single-cup use."

It will be interesting to see whether Coke can pull it off this time. Its previous home/office venture, Breakmate, was a great idea, but a shift in the global economy and what many saw as flawed marketing kept it from sweeping the nation. But that was then and this is now. Full-line vending operators always have known that postmix soft drinks offer better value and better margin. Much will depend on the product and the pricing.

I don't think that the vending industry in Europe has the same perception of postmix carbonated beverages as ours does, and it might be interesting to learn why. The soda fountain culture that started here a century ago never took shape overseas. That may account for some of the skepticism among the LinkedIn group participants.

While it is true that many young people can be seduced by really cool packaging, I believe that most consumers who must spend their own money may prefer a more economical solution, especially in the workplace and at home. The operator can also sell the concept as a great contribution to reducing the solid waste stream (all those cans and bottles) and, reducing the "carbon footprint" (driving all that water around in trucks rather than just delivering the flavors).

Those who remember the valiant effort of the Cup Coalition to revitalize postmix cold drink vending will recall the argument that packaged soft drinks deliver more consistent quality than those made by a fountain or a vending machine. It's true that the operator of a postmix system must pay more attention to cleaning and maintenance, but it's also true that packaged drinks are susceptible to variations in local water supply and to variables like storage temperature and shelf-life. A well-maintained postmix vender will deliver a quality drink; the Coca-Cola fountain sales department had an effective quality assurance program for operators five decades ago. A good portion-pack system that gets the syrup out of the packet cleanly and that controls temperature, carbonation and dosing should be able to do an even better job of delivering consistency.

It is an interesting subject, with a lot of facets. Here's a summary of what some LinkedIn discussion participants had to say:

» These large companies don't understand consumer behavior. They are competing with bottles that are an efficient distribution concept, while providing a high-quality drink with strict, centralized recipe control. This is impossible with hot, fresh coffee, which is the only reason why coffee machines exist. And it allows for the immense recipe fragmentation in the global coffee culture.

» Coke has been in the business of consumer sales for decades and they understand consumers. Even if it is not the next insightful marketing concept, they are giving the consumer more choice, and choice drives consumption.

» It's clear that a pod can't challenge a two-liter bottle. The coffee pods' success is not based on saving money, but on user experience, the environments, less logistics consumption and less storage volume.

» Operators across the globe are reluctant to offer these machines due to high depreciation cost. If cold beverage machines can be offered at reasonable pricing, then it might be a great revolution in many developing markets.

» You can't bring emotion, an experience or convenience in a cold-drink pod. With coffee you have different brewing technologies, different blends and different cup sizes. The emotional experience of any cold drink is nowhere near that of coffee. That's the reason why coffee shops are booming, whereas soda shops don't exist.

» It's a huge success at home in the U.S. because they have the top leading brands in the K-Cups and choice is a major contributor to consumption. I wonder what the plan is in the UK and if they will they license local UK brands?

» If it is a standalone Keurig machine that just dispenses Coke, then it is limiting. But if they are able to pull off a system that is small enough, low cost, that can do coffee and branded carbonated drinks, then range drives consumption and it could work.

» There is a huge emotional differential between hot and cold beverages. Consumers have an attachment to coffee variation that is rarely there with cold beverages. No one pays $6 for a cup of multi-flavored Coke crafted by a soda bistro.

These are all points worth discussing, and there were more that space did not permit my including. One that was not made, but that may be important, is that previous portion-pack ("pod") soft drink systems did not have access to the tremendous branding power of Coca-Cola (or Pepsi Cola). In any case, the market will decide.