Is at-home carbonation set to be the next battleground for the soft drinks industry? Tom Vierhile from Datamonitor looks at the sides being taken.

Are new gadgets the key to turning around the fortunes of the long-suffering CSD market? That is certainly possible with “gadget fever” beginning to sweep through the market on the heels of Coca-Cola Co’s recent purchase of a 10% stake in Green Mountain Coffee Roasters (GMCR) and the expected roll-out of the firm’s new Keurig Cold machine.

The actual debut of Keurig Cold is not expected to happen until next year, but the revolution won’t wait. Green Mountain Coffee Roasters sold nearly 5m units of its Keurig branded single-cup coffee makers in its most recent fiscal quarter, and single-cup coffee pods have taken over a huge amount of shelf space in the packaged coffee market. The prospect of a machine unleashing a similar frenzy in CSDs is irresistible, and Coca-Cola is acting like Keurig Cold is a long-term game changer.

The Green Mountain Coffee Roasters agreement is for ten years, and reaches across Coca-Cola’s global brand portfolio. On the collaboration, GMCR CEO Brian Kelley said: “We believe there is significant opportunity to premiumise and accelerate growth in the cold beverage category by empowering consumers with an innovative,  convenient way to freshly prepare their favourite cold beverage at the push of a button.”

The mechanics of Keurig Cold are believed to be somewhat different from SodaStream’s eponymous machine. SodaStream, actively used in over 6m homes worldwide, uses a cartridge-based system, with carbon dioxide provided in a separate cartridge. Drink flavours are added manually to the carbonated water in a second step during the beverage-making process, although SodaStream has recently launched SodaStream Caps flavour concentrates that make the process more hygienic.

Keurig Cold reportedly does away with the carbon dioxide cartridges and also appears to boil down the process into a single step, something that should please the less technically-inclined consumers. Aside from this, and the fact that Keurig Cold has the potential to be used for a variety of beverages from CSDs to juices, sports drinks, waters and teas, few technical details are known about Keurig Cold.

Little is being said about the ability to customise drinks, a discussion that has come up organically with SodaStream. Already, consumers have found ways to 'hack' SodaStream units to create custom cocktails. Aside from warning that the use of anything beyond water in a SodaStream unit may “gunk things up”, SodaStream is not necessarily trying to throw cold water on the practice, and may have actually stumbled over its next great innovation opportunity. SodaStream’s recent collaboration with the popular Skinnygirl cocktail mix brand and a planned mid-2014 launch of Skinnygirl flavours tacitly endorses the concept.

That’s not to say that Coca-Cola itself hasn’t also figured out that customisation carries huge potential. Coca-Cola’s own Freestyle vending machine concept capitalises on customisation to deliver over 100 different soft drink flavours from a single machine. 

The key is the use of small cartridges of 'micro-dosed' ingredients that can create a multitude of flavour choices - a number of which are only available in the Freestyle format. Freestyle-only flavours like Coca-Cola Raspberry, Sprite Peach, Coca-Cola Cherry Vanilla and Barq’s Vanilla would most likely be non-starters in the packaged arena, given shelf space issues, distribution headaches and production challenges. This may prove to be the real opportunity with Keurig Cold – the ability to become your own soft drink mixologist from the comfort of your own home.

Home-based gadgets could prove to be the 'sweet spot' in this coming wave of innovation.

One development to watch is Samsung’s new SodaStream Refrigerator. Launched last year, the refrigerator comes with its own built-in SodaStream-branded sparkling water dispenser. The fruit of a partnership between the two companies, the unit dispenses sparkling water right from the refrigerator door. The dispenser uses a standard SodaStream 'carbonator' that rests in a small, concealed area inside the refrigerator. This solves the countertop space issue that Keurig Cold may run into. Saving space is not cheap, though: The Samsung SodaStream Refrigerator carries a retail price of just under US$3,000. And, this fridge does not yet make flavoured soda, but SodaStream says that the ability to do so is “on the horizon.”

SodaStream isn’t putting all of its technological eggs in the Samsung basket, as development on an “all-in-one” water solution called the AquaBar shows. AquaBar is a “plumbed-in, plugged-in” countertop unit that caters to a range of home water needs and completely eliminates the need for plastic bottles. Designed by Stefano Giovannoni, the unit dispenses double-filtered purified water as well as sparkling, hot, cold, and ambient water on a single-serve basis. Not yet available to consumers, despite a flashy 2012 preview, AquaBar opens the door to potentially producing flavoured soft drinks right from the tap, something that could leapfrog Keurig Cold and almost any other at-home carbonation concept.

This collective outbreak of gadget fever presages what Coca-Cola believes could mark a significant shift in consumer markets. The company clearly believes that home is not only where the heart is, it is also where future profits will come from. Indeed, consumers are spending more time at home; between 1999 and 2010, the US Census Bureau logged a 35% increase in American consumers working at least one day from home. 

In a BusinessWeek magazine interview, Coca-Cola CEO Muhtar Kent recently said: “When you look at how beverages are consumed at home, and when you look at trends in the next ten years, people are going to spend more time at home.” In that context, Keurig Cold, Samsung’s SodaStream refrigerator and AquaBar may prove to be just the first wave of soft drink gadgets for the home.