ATLANTA — Coca-Cola's Freestyle fountain dispenser, which the company launched three years ago, is one of its biggest innovations in years, and many say the machine is a potential game-changer in the ultra-competitive beverage industry.
Dispensing combinations of more than 120 of the company's brands from a touch screen — including Coke Zero, Fanta, Pibb and Dasani — the machines are being credited with driving double-digit sales for many of the restaurant chains that have adopted it.
Despite some anxiety about the reliability of computers and the added costs that come with more choices, the device has been so successful that competitors may soon come up with their own versions. "It's giving consumers the ultimate option — beverage choices that they can customize themselves," said Joe Pawlak, vice president of Technomic, a Chicago-based food research consultant. "It's also driving up food sales by luring in customers who are there just to use the machines."
But it comes at a cost. Traditionally, retailers are given the fountain equipment for free or through some other arrangement, including leases or as a loan from a bottler. For Freestyle, retailers pay a program fee that covers the equipment, installation, service, upgrades and the wireless data connection. Coca-Cola declined to disclose the fee amount. The concentrate that makes the drinks also is more expensive than it is for traditional devices. Operators of several of the chains that offer the machines said they raised drink prices on average by 10 cents to cover costs.
Because of the increased choices, retailers also are buying more concentrate to accommodate consumers who are trying — and sometimes dumping down the drain — the expansive drink selection.
Technology is also a concern, at least at first, for some retailers. The machines are computer-operated, making them susceptible to freezing, crashing or breaking down. Unlike traditional fountain dispensers, which use air pressure to send the soda from plastic bags when customers squeeze or push a lever, a computer sends the drink choice to cartridges stored in the machine.
Coca-Cola said that so far, it has not seen a lot of problems, and that the company has a team of technicians at the ready to fix whatever glitches occur. Many of the problems also can be resolved via updates sent to the machines directly from Coca-Cola, which is connected to all the devices.
There's also a learning curve for customers wishing to use Freestyle. Consumers generally need guidance when the machine is first installed, which can create long lines as they become acquainted with the choices, restaurant operators say. "What often happens is people watch each other and learn how to use it," said Don Fox, the chief executive officer for Firehouse Subs. "But after the first 60 days it works itself out."
Coca-Cola says 97 percent of its customers that have tried Freestyle continue to use it or have added more machines. About 7,200 machines are in operation in 4,500 locations, including in Burger King, Five Guys Burgers and Fries and Noodles & Co., said Susan Stribling, a Coca-Cola spokeswoman.
Freestyle's success is critical for Atlanta-based Coca-Cola. North American sales of its carbonated beverages — its biggest moneymaker — have been declining since their peak in the 1990s. Teas, water, juices and energy drinks have picked up some of the slack, but they don't have the same volume as the company's soft drinks.
The machines, which also are in movie theaters and corporate cafeterias, could lure back customers the company has lost or introduce them and others to drinks not available on the market because of limited space on shelves at grocery and convenience stores.
With that competition in mind, PepsiCo is said to be working on a version of its own that might up the ante by including coffee and smoothies, options Freestyle does not offer. PepsiCo spokeswoman Gina Anderson said in an emailed statement that innovation is key to its "long-term success."
"It's what enables us to continually meet our customers' and consumers' desires for great-tasting, convenient products, unique packaging and differentiated equipment," Anderson said. "It's no secret that as part of PepsiCo's innovation pipeline we have been hard at work on the development of new fountain equipment; and we plan to share more details about it in the future."