This is how not to reinvent soda

Roberto A. Ferdman
August 6, 2015
The Washington Post
The maker of the wildly successful K-cups is getting ready to introduce its latest invention. In as little as a month, Keurig will begin selling a new machine called the Kold, a device manufactured in partnership with Coca-Cola, which will dispense single serving cups of soda in the comforts of one’s home.
It’s a sleekly designed little gadget, as evidence by the photo above. And if all goes according to plan, it will be a lucrative one, too.
But the truth is that the success of Keurig’s slick new toy is hardly guaranteed. In fact, it’s pretty hard to imagine.
Keurig’s new Kold machine is, firstly, a puzzling bet on soda. Americans have been drinking less soda every year for more than a decade. The challenges have become as broad as they are substantial—even diet soda sales are now disappointing. Why should anyone expect a new way to consume an increasingly unpopular drink to catch on?
“There are serious challenges in the U.S. soda market that are going to make it difficult to sell the machine,” said Duane Sanford, who is the editor of industry trade publication Beverage Digest.
The machine is also pretty pricey. The Kold will cost a cool $300, nearly four times as much as SodaStream’s base level machine, which costs $79. Keurig’s apparatus does more than carbonate water; it also quickly cools room-temperature water and makes soft drinks. But sipping on a single serving of Coca-Cola won’t come cheap, even after procuring the machine. Each soda pod will cost about $1, half the price of a six-pack currently being sold at Wal-Mart.
A major problem with this approach is that soda these days is much less popular among the affluent. People who have the level of disposable income necessary to buy the machine are precisely the ones who have turned away from drinking the beverage.
It’s possible that Keurig’s strategy is to win over a niche group of customers rather establish the sort of mass appeal that it did with its now ubiquitous coffee brewers. Selling fewer machines at a higher price point isn’t a lost cause—it might even allow the company to create the sort of buzz that helps sell more machines once Keurig can sell them at lower price-points.
“In some ways, it’s not that far off from what they did with the coffee brewer,” said Sanford. “The hope is that you appeal to people who like the technology and convenience, and then over time you broaden it out.”
“If what they expect is broad appeal right away, though, well I think that’s a mistaken prediction,” he said.
But Keurig’s coffee brewer capitalized on a beverage with momentum—coffee. And so people didn’t mind paying more per cup than they would for traditional drip coffee. The trajectory of soda is a completely different story.
The launch of the Kold is seen as a pivotal moment in Keurig’s life. Many experts believe that the machine, which has been in the works for more than six years, will help define the company’s future.
At the moment, that outlook isn’t quite as bright as it once was. Keurig’s stock is down more than 40 percent this year, after an unsuccessful launch of the Keurig 2.0, the company’s updated coffee brewer. Sales fell five percent last quarter; profits tumbled by 27 percent over the same period.
It’s hard to see how a DIY soda machine for people who are increasingly keeping soda out of their homes will fix any of that. Just ask consumers: a survey released earlier this summer by brokerage CLSA found that interest was only lukewarm at best.