Coca-Cola looks for Arctic Coke to help invigorate soda sales
With Coca-Cola facing a market where more people are abandoning soda in favor of healthier beverages, the 132-year old beverage maker has looked for novel ways to make its iconic drinks more appealing to the fickle consumer. Its latest answer came from an unlikely place: researchers who may be more likely to gaze at the stars than help develop the next trendy Coke product.
Coca-Cola has been working for two decades to create a super-cold, slushy drink after research indicated many consumers preferred to enjoy their beverage this way. In most cases, packaged products are generally found as a liquid or frozen, but nowhere in between.
The challenge for the world's largest non-alcoholic beverage maker has been finding a way to bring that experience to the shopper on a more frequent, repeatable scale that also was cost effective. It wasn't until 2013 when Coca-Cola got an idea from ex-NASA scientists who were experts in cryogenics that the soda giant finally found a practical solution — this eventually lead to a machine known as the Arctic Coke that can add ice crystals to a super-cold beverage in a few seconds.
The public "prefers our beverages and enjoys our beverages more when they are cold," Therron Foley, director of cold drink equipment development at Coca-Cola, said in an interview at the company's investor day in Atlanta last November. "(The Arctic Coke) is an attempt to meet up with that consumer preference."
Soda sales lose their fizz
The invention comes as the soda industry grapples with a slowdown in sales as consumers shun sugary beverages in favor of healthier teas, waters, juices and sports drinks. The carbonated soft drink market, which has fallen for 12 consecutive years, was surpassed by bottled water in 2016 as the largest beverage category in the U.S.
"We've taken a pretty focused viewpoint on the experience that it creates, and the fact that the consumer can be part of the experience and really enjoy the visual transformation."
Platform innovation director, Coca-Cola
With the challenges facing the soda industry unlikely to abate anytime soon, manufacturers are cognizant of the fact that they must look for new ways to ignite growth and retain existing customers. Increasingly, they are turning to new flavors, uncovering sugar substitutes and rolling out futuristic devices such as Arctic Coke that enhance the consumer experience.
Coca-Cola first debuted Arctic Coke at 20 Speedway convenience stores around Indianapolis during the summer of 2016, and quickly realized it might have a hit — sales increased between 15% and 20% at locations with the cooler. This initial success gave the company confidence to move forward with further investment and research in the concept. Today, roughly 500 units are in operation domestically, mostly in convenience stores, with plans for another 550 more. As many as 1,000 can be found outside of the U.S.
While coolers remain a staple of the convenience store, there hasn't been much innovation for decades in a way that benefits the consumer, according to the company. Coca-Cola is looking to change that.
The Arctic Coke works like this: A beverage from a rectangular cooler — which is set at roughly 28 degrees compared to 40 to 45 degrees for most refrigerators — is removed by the consumer and placed on an attached platform. With the press of a button, an invisible shiver goes through the bottle, causing ice crystals to form.
"We've taken a pretty focused viewpoint on the experience that it creates, and the fact that the consumer can be part of the experience and really enjoy the visual transformation," Kim Drucker, Coca-Cola's platform innovation director, told Food Dive. "Those were the things that consumers told us were super important to them."
Building brand awareness
Brittany Weissman, an analyst at Edward Jones, said Arctic Coke is another way for Coca-Cola to build brand loyalty and connect with the consumer — in much the same way it does when it airs a commercial on TV or sponsors a local festival or concert. But unlike these initiatives, Arctic Coke takes that connection one step further by allowing the consumer to become directly involved with making the super-chilled beverage.
As a result, she said a shopper would be more likely to buy a Coke or Sprite when they walk into a convenience store on a hot summer day if the machine is there; some people could even make a special stop just for the drink or decide to buy a Coke instead of a Pepsi. While the Arctic Coke is just one part of boosting brand awareness and forming a meaningful, lasting relationship for Coca-Cola, Weissman said it also has other benefits such as making it easier to pass on a price increase.
"It's a cool user experience that helps build the brand," Weissman told Food Dive. "Ultimately, does it directly move the needle significantly on sales, probably not, but it's going to be the same as any other ad campaign in a way where you are just building awareness and you're really trying to build the connection with the consumer."
Even though the cooler is a huge step forward for Coca-Cola, it does have a few obstacles that researchers in Atlanta are working to overcome. It can take up to 12 hours to cool the beverages to the proper temperature, limiting the machine's initial effectiveness. In addition, an Arctic Coke holds about 70 bottles, and with each brand having its own unique temperature that the drinks are cooled to, only a few beverages can be loaded into the device at any time. Early tests have focused on Coke, Sprite, Powerade and most recently, Diet Coke.
"You want to keep that core customer engaged. It's still the most profitable piece of their business and so you want ... to keep the consumers who are currently loyal, loyal going forward."
Analyst at Edward Jones
James Quincey, Coca-Cola's CEO who took the helm in May, has vowed to turn it into a "total beverage company" — focusing more on ready-to-drink teas, water, juices and sports drinks.
But despite these efforts, soda is still responsible for about 70% of sales and remains a lucrative part of the company's business. In its most recent earnings report, Coca-Cola said soda sales were unchanged from the prior year. As a result, it's not a surprise that soft drink manufacturers have aggressively looked for new ways to stoke growth in a category that remains a huge revenue generator despite the recent slow down.
"You want to keep that core customer engaged," Weissman said. "It's still the most profitable piece of their business and so you want ... to keep the consumers who are currently loyal, loyal going forward."
As the soda industry grapples for growth, future success is likely to be paved with smaller ideas such as Arctic Coke, Gary Hemphill, managing director of research with the Beverage Marketing Corporation, told Food Dive. While the space is dominated by Coca-Cola, PepsiCo and Dr Pepper Snapple, it remains an "extraordinarily competitive marketplace" with consumers demanding variety and innovation. Soft drink makers can't afford to cut back on their investments or diminish their aggressiveness in finding new ideas and products, he said.
"I don't think there is a silver bullet for success for carbonated soft drinks per se," Hemphill said. "But just because consumers are by in large moving toward more variety and healthier products doesn't mean that the fun refreshment space of carbonated soft drinks is small. Companies have to remind themselves of that, they have to continue to invest and innovate around the category."
"Keep the surprise and delight going"
To make its concept more valuable to consumers, retailers and the company itself, Coca-Cola is working on a prototype machine where shoppers could instantly select a bottle and have a chilled beverage. There is no timetable for when the device will hit the marketplace, Drucker said, as the company must first solve challenges such as different chilling characteristics and packaging for its brands, which include Honest Tea, Fairlife milk, Simply Orange juice and its iconic sodas.
If the company can overcome some of these challenges, Coca-Cola could find a growing number of supermarkets and convenience stores squeezing the machine next to candy, chips, pizza, hotdogs and, of course, soda.
"Young and old, when they walk up to the cooler and select their favorite beverage ... they take the first sip, their eyes light up, and they are extremely happy and very refreshed," Drucker said. "I think you'll continue to see us focus on (the experience) and think of ways to keep the surprise and delight going."
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