Coke Freestyle

Coca-Cola is rolling out what looks to be a groundbreaking new drinks dispenser: Coke Freestyle. Your standard fountain machine at any fast-food joint has six or eight different types of fizzy drinks - Coke, Diet Coke, Cherry Coke, Sprite, etc. Instead of trifling 6-8 options, the Coke Freestyle machines will give consumers more than a hundred flavors.

At first blush, this might seem like a new version of the cable TV problem: "Five hundred channels and nothing on." But Coke Freestyle is actually a terrifically innovative development.

First, it offers huge scope for new product development. It is expensive and time-consuming to develop new drinks, pilot them in various test markets, and (maybe) roll them out nationally. Freestyle bypasses this entire process, allowing Coca-Cola to test hundreds - even thousands - of new products simultaneously. The cost of a new drink is minimal - just slap a different bag of syrup in the machine, update the machine's software with the new recipe, and that's it. And because each machine via the Internet to Coca-Cola's IT systems, the results of these experiments are available to managers in real-time.

Second, Freestyle enables regional differentiation. Maybe Peach Coke will be popular in Georgia but a flop everywhere else. Similarly, whilst the nation as a whole might shun Java Coke, it could be a huge hit with Seattlites.

Third, Coca-Cola can observe how tastes change throughout the day. For example, Freestyle has led Coke's managers to discover a surprising, mid-afternoon increase in sales of caffeine-free and sugar-free drinks. This valuable insight will drive some of their marketing decisions, enabling them to better target consumers in the post-lunch lull.

Finally, Coke Freestyle facilitates better inventory management. The dispensers monitor their own inventory levels, signalling store managers when a bag of syrup starts to run dry. In other words, Coca-Cola is applying the just-in-time management philosophy to its drinks machines, which allows the company to tie up less capital.

In short, the new dispenser is a huge advance for the fizzy drinks industry.