In a country where the average person guzzles 400 cans of Coca-Cola in a single year, who wouldn’t dream of having their own personal soda fountain at home?
At least that’s what the makers of Coke (KO) are hoping. The soda giant announced a $1.25 billion deal last week with Keurig-maker Green Mountain Coffee (GMCR) to put an at-home soda machine in kitchens around the country by 2015. It’s a move that clearly puts a target on the back of SodaStream (SODA), the reigning king of DIY carbonation. SodaStream saw 37% year-over-year revenue growth in 2013, adding $528 million to its coffers.
In an interview with the Wall Street Journal, Green Mountain CEO Brian Kelley said consumers can expect its new soda machine to be similar to Keurig machines, with K-cup pods that will hold Coke-flavored syrups.
"You put a pod in, push a button, and get a drink," he explained.
Given the fact that all it takes to get your Coke fix today is a few quarters and a little fingernail strength to pop the cap, we’re not 100% convinced consumers will buy into the DIY version. A report by research firm Stifel estimates brewing your own Coke with the new Keurig machine could ultimately cost 2 to 3 times more than picking up a can at the store.
Neither company has revealed what the cost of the machine will be (reps for Coca-Cola and Green Mountain turned down requests to comment), but we did a little guestimating on our own to figure out how K-cup Coke might compare to SodaStream and regular old six-packs at the grocery store.
We based all of our estimates on an average American who consumes 400 12-ounce cans (4,800 ounces) of Coke per year.
You can find a SodaStream starter kit, which includes a 60-liter carbon canister and the machine itself, for $80 on Amazon.com. If you drink the average of 4,800 ounces of Coke a year, you’d have to replace the canister about two times, costing $28 ($14 a piece).
Annual machine costs: $108
For the flavoring, SodaStream’s soda mix syrup will set you back roughly $10 on Amazon (prices vary by flavor; we based this on the 'Cola' flavor), with enough syrup to flavor about 192 ounces. You’d need 25 packs to get you through the year.
Annual soda costs: $250
Grand total for the first year: $358 per year
Coke’s Keurig soda machine
Coca-Cola and Green Mountain haven’t released numbers for the soda machine, but it's fairly safe to assume that a Coke system would cost more, given the fact that they will be adding some sort of carbonation mechanism and will need to somehow make the drinks come out cold. For our purposes here, we'll stick with the basic Keurig price for now, since that's what we know. A basic Keurig brewer today will cost you about $97 on Amazon, but unlike SodaStream, there are no extra parts to refill. You load the machine with tap water and the K-cups do the rest.
Machine costs: $97
Since there are literally dozens of varieties of K-cup pod flavors, it’s hard to nail down a specific price-per-pod. You can get a 50-count box of Green Mountain K-cups for 50 cents a pod, so we’ll go with that. Assuming you like a strong cup of Joe and use one pod for every 6 ounces, that’s $1 for a 12-ounce cup.
Annual Coke K-cup costs: $400
Grand total for the first year: $497 per year
Coke by the 12-ounce can
The average price of a can of Coke is 72 cents. But most people probably pick up cases of cokes rather than buy them piecemeal. We found a 12-pack of regular Coke for about $4 most places we looked, making the cans about 33 cents each.
Annual grand total:
$288 (by the can)
$132 (by the 12-pack)
The winner (by a landslide): canned Coke.
Want to save money? Leave the SodaMachines and fancy Keurigs for people who don't mind throwing away a couple hundred bucks each year. Canned coke appears to be the most affordable option on the table. SodaStream came in second, costing twice as much as canned soda and about $139 less per year than the presumed cost of the Coca Cola Keurig, even with the added expense of replacing the C02 canister.
Price aside, what Coke’s Keurig has going for it is sheer novelty, which will no doubt help drive sales. And if they can figure out a way to make the new pods compatible with the millions of Keurig machines already in American homes and workplaces today, then that might at least sway some consumers to try it out. If the machine does take off, it could be a very profitable product for both companies.
Mark Sastrachan, an analyst with Stifel, estimates Coke could see 30 cents of revenue on each pod sold, enough to generate $378 million in pod sales in 2016.
Dan de Grandpre, CEO of DealNews, says Coke’s taking a gamble with its foray into the home-soda machine business.
“It's likely that Coke and Green Mountain are gambling that the Coke brand will create a market for this device even if the math doesn't add up,” he says.
What do you think of Coke’s soda machine? Let us know below.
- Consumer Discretionary
- soda machine