One giant leap in soda fountains

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: June 2, 2011 - 10:44 PM

Davanni's and Dairy Queen are trying out a new machine that offers more than 100 varieties of Coke products.

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At a Dairy Queen in Edina, Ryan Noah got some instructions from Coke representative Eric Saari about the new Coca-Cola Freestyle machine that can dispense 125 types of drinks. “It’s awesome,” Noah said. Fast-food folks are hoping that the array of choices will draw more customers.

Photo: Richard Tsong-Taatarii, Star Tribune

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Yes, orange and raspberry versions of Coca-Cola actually exist. They're available with more than 100 other Coke offerings on a newfangled, high-tech soda fountain that landed recently at eight Twin Cities restaurants.

Minneapolis-St. Paul is among the latest markets for Coca-Cola's gradual rollout of its Freestyle beverage dispenser, and Dairy Queen and Davanni's are both eager guinea pigs. They've respectively deployed three and five of the machines in the past week or so.

The new dispensers are an expensive proposition for restaurants compared with conventional soda dispensers, which usually serve eight beverages. But Dairy Queen and Davanni's say Freestyle holds great promise to increase customer traffic, and thus boost sales of beverages and food, particularly to the fast-food industry's bread-and-butter -- youth.

"It has a great appeal to the younger crowd," said Mick Stenson, president and co-owner of Davanni's, a pizza and hot hoagie restaurant that has Freestyle in St. Paul, Roseville, Richfield, Edina and Eden Prairie -- almost a quarter of its locations. Stenson's main marketing forum for Freestyle is Facebook and other social media.

The machine has a sleek look. At its center is a computer screen that's dotted with icons for various Coke brands -- both carbonated and uncarbonated -- including Sprite, Barq's, Fanta, Vault, Powerade, Hi-C and Minute Maid.

Customers touch an icon and are greeted with a second set of icons for myriad iterations of each brand: Vanilla Coke, Sprite with grape, Minute Maid Cherry Lemonade, etc. Push the second icon and a beverage pours from the machine's lone spout. Thousands of drink combinations can be made with more strokes on the screen.

Freestyle's variety is possible because it blends a drink in the machine itself, instead of relying on premixed beverages like a traditional soda dispenser does.

"You can mix anything, and that's really the secret of it," said John Gainor, chief executive of Edina-based International Dairy Queen, which is owned by Warren Buffett's Berkshire Hathaway Inc. "It's all about customization."

Beverage innovation has become increasingly important in the fast-food business in recent years. An extensive drink selection has been a key ingredient in the growth of drive-in chain Sonic Corp. Meanwhile, fast-food kingpin McDonald's has pumped millions of dollars into a beverage offensive that includes smoothies, frappes and hot and iced coffee drinks.

Beverages are a key profit center for fast-food restaurants, allowing them to sell various food items at cut-rate prices. "Beverages are where the margins are," said Mac Brand, a restaurant consultant in Chicago with Bellwether Food Group.

Will it draw more customers?

For Atlanta-based beverage colossus Coca-Cola Co., an innovation like Freestyle could create a major competitive advantage. "It's potentially a big deal for Coke," said John Sicher, publisher of Beverage Digest.

Coke launched the machine in Atlanta and Southern California in 2009, but the rollout has gained momentum this year. At the end of 2010, Freestyle was available in 15 major markets; today that number is 51, and Coke expects it grow to 86 by the end of 2011. Coke has deployed 646 of the machines nationwide.

Dairy Queen has been awaiting Freestyle's arrival in the Twin Cities, where DQ will conduct its own market tests. The machine has been installed in Edina at one of its two corporate-owned restaurants. Two more Freestyles, one each in Eden Prairie and Plymouth, are up and running at restaurants owned by Dairy Queen's largest franchisee.

Whether the machine will spread to over 2,000 other U.S. Dairy Queen stores largely depends on whether it drives increased customer traffic into stores, Gainor said.

Coke leases Freestyle to restaurants, and the dispenser is a costly and complicated machine. Neither Coke nor restaurants would talk about costs, but the Atlanta Journal-Constitution reported that the machine and its ingredients can cost restaurants about 30 percent more than a regular soda dispenser.

Expense isn't the only challenge. Dairy Queen has a Freestyle machine dedicated to its drive-through, while Davanni's says it will take Freestyle orders for delivery. But with an order involving blends -- say Fanta grape with Diet Coke and Sprite -- customers must rely on someone else to get the mix right.

And while younger consumers may flock to Freestyle with its iPhone-like display, older consumers might wonder how a machine with just one spout and 125 options will pour them a simple Coke.

"The challenge with consumers is, they are going to have to learn how to use it," Brand said. "There will be a learning curve."

Mike Hughlett • 612-673-7003

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