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Coke’s freestyle machine lets customers craft their own beverage.

More Sodas, Fewer Problems

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Could extreme beverage-customization machines—and their nearly endless product variety—be the key to turning soft drink sales around?

By Mary Avant January 2016 Non-Alcoholic Beverage

When it comes to the state of beverage sales in the restaurant industry, it’s a case of good news and bad news. On the positive side, non-carbonated beverage and water sales are trending up, growing by 1.7 percent in 2014, according to research from the non-alcoholic beverage analysts at Beverage Digest. However, the story reads much differently when it comes to the state of carbonated soft drink sales.

Between 2011 and 2014 alone, carbonated soft drink sales dropped 3.6 percent, according to global market research firm Mintel, with 2014 marking the 10th consecutive year that soft drink sales have dipped.

And though there is no be-all-end-all reason that consumers are turning against sodas when dining out, many industry experts agree that this downward trend has less to do with a desire to save money than it does with the fact that increasingly health-conscious customers see carbonated soft drinks as an unhealthy option. A Top Ten Trends report from the food research group IFT shows that consumers are increasingly apprehensive about zero-calorie sweeteners, sugar, and high fructose corn syrup—which are the main ingredients in many soft drink options.

Unsurprisingly, beverage giants Coke and Pepsi have suffered most from consumers’ decision to distance themselves from carbonated beverages, with a report from Beverage Digest showing that Coke and Pepsi saw a drop in sales of 1.1 percent and 1.4 percent, respectively, from 2013 to 2014. Perhaps that’s why both brands have turned an increasing amount of attention over the last handful of years to their respective touchscreen beverage-customization machines, known as the Coke Freestyle and Pepsi Spire.

Coke’s Freestyle system launched in 2009 and offers more than 100 flavor options, while Pepsi’s Spire came to market in early 2014, giving customers the option to customize their drink in more than 1,000 ways, with the ability to add up to three flavor shots (such as cherry, vanilla, or cherry) to their Pepsi product of choice.

The Freestyle machine is used by a number of prominent quick-service brands, from chains like Firehouse Subs to Schlotzsky’s, while Pepsi Spire has partnered with concepts like Buffalo Wild Wings and Arby’s, among others.

“We’re in the middle of an exciting evolution of personalization, and the ‘maker movement’ has influenced the way people relate to brands,” writes Gina Anderson, spokesperson for PepsiCo, in an email to RestaurantBev. “What better way to empower consumers to make their own personalized drinks than by giving them the chance to create more than 1,000 beverage combinations?”

It’s this customization factor within the Freestyle and Spire machines that analyists point to as the driving factor for consumers’ interest in the flavors and innovation they provide.

Virginia-based concept Elevation Burger was one of the first brands in the DC metro area to experiment with the Coke Freestyle machine in 2010. The better-burger brand—known as one of the healthier, more sustainable burger concepts with a focus on organic, free-range beef and olive oil–fried french fries—was searching for a way to distance itself from “unhealthy” carbonated soft drinks, founding partner and vice president of supply chain Michael Berger says.

“We always had some mixed emotions about Coke taking such a center place in the restaurant, with high fructose syrup being a big ingredient,” he adds.

However, Berger says Coke approached the brand with a desire to market its low- and no-calorie options—as well as products that are naturally flavored and free of artificial sweeteners—that were available via the Freestyle machine. This allowed Elevation Burger to continue selling Coke products without having to question the beverages’ alignment with its brand values, Berger adds.

Although Elevation Burger doesn’t require its franchisees to use Freestyle machines in their units, Berger says they’ve been installed in all corporate locations. In addition, nearly 75–80 percent of its U.S. restaurants use the machines and are seeing positive results from doing so. Since incorporating the beverage-customization equipment, some units have experienced roughly 15 additional cup sales each day—a significant figure for a high-margin offering like soft drinks, Berger says. “The guests definitely like it,” he adds. “From a qualitative standpoint, I think we’re getting some mileage out of it.”

Darryl Lewis, a Tin Drum Asiacafé franchisee based in Atlanta, recently installed the newest version of Coke’s Freestyle Machine: a portable, countertop unit that offers about half the number of flavors as the original machine, but far more options than customers would have access to with the typical soda dispenser, Lewis says. While it’s too soon to know how the machine will impact his unit’s sales, Lewis expects the restaurant’s beverage sales to spike by 10–20 percent, based solely on the Freestyle machine’s variety and the brand recognition Coke has with customers.

With or without a proven sales increase, more brands are expected to begin using these or similar customization machines in the future. As of 2014, there were more than 20,000 Coke Freestyle machines on the market, while Pepsi projected that it would have 2,000 active machines by the end of last year.

Similarly to trends in the culinary—and especially the fast-casual—world, providing ease of consumer customization is the demand of the present and the expectation of the future.

However, it seems that the customization machines themselves aren’t expected to turn around beverage sales; rather, it will more likely be the introduction of a product that’s healthy, tastes good, and allows guests to feel they’re doing themselves good by consuming it.