While at-home soft drinks systems have been available globally for some time, the recent Coca-Cola/Keurig Green Mountain strategic partnership, coupled with PepsiCo’s announcement that its own brands would be available on the Bevyz Fresh Machine have put at-home carbonation (and soft drinks creation) under the spotlight. As consumers await details surrounding the respective systems, machine and beverage manufacturers still have several obstacles to overcome. With both Coca-Cola and PepsiCo making their iconic brands available in capsule form, flavour, formulation, price and distribution represent just some of the many challenges that await.
Taste Comparisons will Naturally be a Focal Point
The most effective positioning for at-home soft drinks systems is to correlate the machines with consumer demand for diversity. Across the globe there is an extremely wide and expanding variety of soft drinks available to consumers who can afford a Keurig Cold or Bevyz Fresh system. The advantage of owning an at-home soft drinks maker is bringing the variety of a convenience store cooler to one’s kitchen countertop. However, because of the pairing with Coca-Cola and PepsiCo, the first thing the machines will be judged on is their ability to replicate the companies’ flagship cola brands.
Doing so presents several challenges. For one, historic consumption of both Coca-Cola and Pepsi has created hard-core consumers (these being the likely targets of the first wave of machines) capable of discerning any changes in taste. This is one of the principal reasons why private label colas in the US have never truly challenged Coca-Cola or Pepsi. Furthermore, both initial mouthfeel and entire-can consumption can illicit strong consumer reaction. Simple blind taste tests of one sip of cola versus another do not take into consideration a customer drinking an entire bottle or can. Coke learned this the hard way when it used New Coke to emulate Pepsi’s sweeter initial taste, only to quickly switch back to “Coca-Cola Classic” amidst a strong consumer backlash. And finally, whether fairly or unfairly, early reports about taste will impact the perception of all other beverages that the machines create. Unlike the Keurig coffee brewer, which for many replaced often-stale occasionally-burnt coffee at home or at the office, perfectly suitable, high-quality sodas are available to consumers in both the off- and on-trade. A failure to replicate, if not improve upon, the flavour of these brands could represent very real setbacks for machines intended to slow the decline in soda consumption.
Complicating the flavour equation is the reality of product formulation. As anyone who has sipped a cola from a malfunctioning on-trade fountain machine can attest, the proper ratio of sweetened syrup and carbonated water is vital to flavour. Ensuring that this ratio is maintained in a beverage pod requires a carefully considered combination of ingredients –ingredients which have also been subject to intense scrutiny in recent years. Will the new pods use high fructose corn syrup (HFCS) as their sweetener amidst a consumer backlash? Will replacing HFCS with a low-calorie, high intensity artificial sweetener impact flavour? And, perhaps more importantly, what impact will changing the format or formulation have on product flavour? These are just some of the questions that product development experts at Keurig Green Mountain and Bevyz are undoubtedly pondering as the launch date approaches.
Will Consumers Pay a Premium?
Furthermore, there is speculation that the capsules will come at a much higher price than packaged ready-to-drink sodas. When Keurig first launched its pod coffee machine, many scoffed at the high unit price of the pods when compared with the price of brewing a cup of coffee at home. However, given the amount of money consumers spend on single-serve coffee from specialist coffee shops, consumers compared prices, not with economy brands like Folgers and Maxwell House, but rather with the cost of a brewed cup of coffee at Starbucks or Dunkin’ Donuts.
The soda category has no equivalent to coffee premiumisation as Coca-Cola and PepsiCo have long operated under a model of discounted pricing. Whether manufacturer or retailer driven (or both), promotional pricing of carbonates still features sales of 2-litre bottles for as little as US$0.88. When examining single-serve options, 20oz plastic bottles can be found for US$1.75 and 12oz cans can often be found for US$1, even in vending machines. While these at-home machines offer a “premium” product in that consumers can make a variety of beverages at home, coming in at a higher price per ounce than even vended soft drinks could deter sales. This is especially true when consumers consider the fact that carbonates manufacturers are cutting costs by removing middlemen bottlers and distributors.
The Path to Purchase
Aside from the benefit of increasing beverage diversity at home, another advantage to an at-home soft drinks maker is in the grocery bag. In the UK, Coca-Cola replaced its 2-litre bottles with 1.75-litre bottles, citing the shift of consumers to smaller basket shops. One advantage of an at-home soft drinks system is to minimise the load in grocery carts, removing the unpleasant experience of lugging various 2 litre bottles, 12-packs, or juice cartons home. Instead, consumers can purchase soft drinks pods – perhaps in variety packs – freeing up space in their kitchen cabinets or refrigerators while also offering more variety to family and friends than ever before. Unfortunately, with the removal of bottlers and distributors, partnering the right retailers to sell the pods will be important in reaching those consumers. The online channel, which was once impractical given the cost of shipping high weight, liquid products, presents an ideal market for growth – similar to how Keurig first started distributing its K-Cup coffee pods.
However, the K-Cup path to consumer purchase received a major boost from channels less helpful to soft drinks manufacturers – offices. The penetration of Keurig machines in the institutional channel provided a perfect platform to showcase K-Cup coffee as superior to stale office coffee. Unlike free coffee at work, however, most offices have little reason to invest in a soft drinks machine. Furthermore, most consumers own coffee machines at home, but soft drinks makers are far less common. Without this exposure and demand, consumer adoption may be very slow without further incentive.
Overcoming the Obstacles
All this said, at-home soft drinks makers still offer much potential. The demand for beverage diversity is a consumer trend unlikely to abate given the plethora of new products and the popularity of single-serve packaging. While the use of established and popular brands such as Coca-Cola and Pepsi give immediate legitimacy to these new machines, the need to replicate flavour, compete on price and ensure adequate distribution creates a pressure-filled environment where first impressions could have a lasting impact. The advantages of at-home soft drinks machines lie, not in replication, but in easier and more diverse production and consumption. Crowded fridges and countertops amidst personal and family driven demand for variety have arguably driven at-home consumption down due to the inability to reconcile the two trends. A campaign focusing on the ability of an at-home soft drinks machine to serve multiple beverages at a single dinner table would better demonstrate the machine’s benefits.
Instead of focusing on the flagship carbonate brands of their new partners , it may be best for both Keurig and Bevyz to focus on new flavours and beverages that do not immediately draw comparisons to the packaged versions of these drinks. Fruit-infused, naturally healthy, low-calorie sparkling beverages, for example, will avoid the this-for-that type of analysis that consumers will make. The focus will thus be on “is this a beverage I enjoy” rather than “does this beverage taste like the original”. By launching these machines with new beverage flavours in mind, the flagship brands can later be brought in as part of variety packs – further highlighting the true star of at-home soft drinks – beverage diversity.