Dean Kamen Reinvents Coke's Soda Fountain
Why was Kamen busying himself on a soft-drink dispenser? It brings to mind Steve Jobs's reputed question to PepsiCo (PEP) then-president and future Apple (AAPL) CEO John Sculley: "Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?" Kamen falls in the latter camp, but he says he saw in Coca-Cola, and in the innovative Freestyle project specifically, a way to advance two of his change-the-world projects.
One of these—a nonprofit named FIRST, which is aimed at encouraging kids' interest in science and technology—actually forged the initial link, when Kamen asked Coca-Cola about becoming a FIRST sponsor six years ago. (That relationship continues—Coke was one of 14 sponsors of FIRST's 2009 Robotics Competition in April, though neither party will reveal any dollar amounts.) That's how Kamen got to know Nilang Patel, the head of Coca-Cola's research lab.
In early 2005, Patel's team started thinking about how to reinvent the company's fountain business, which controlled 75% of the market but hadn't changed much in decades. Knowing Kamen's reputation as a clever inventor, Patel approached him. Kamen was happy to develop closer ties with a FIRST sponsor, and he saw Coke as a potential future partner in his plan to deliver potable water to kids in the developing world, his other world-changing project.
Adapting Chemotherapy Technology Kamen's immediate assignment, though, was to help re-engineer the fountain. "Measuring fluids, mixing fluids, moving fluids—that's what we do," says Kamen, 58. "Coca-Cola is used to delivering liters, while I was used to working at 10 to the minus ninth"—or 1 billionth—"of a liter, but the problems that Nilang and I work on are similar."
Patel and Kamen's engineering teams put together a rough prototype in February 2005 and presented it to Coke's business development team three months later. "We had seen a growing disconnect between our portfolio of brands and the eight choices we could offer at the fountain," says Gene Farrell, who joined the Freestyle team in mid-2005 and now serves as vice-president of the jet innovation program at Coca-Cola North America. "[Then CEO Neville] Isdell immediately saw the opportunity to reinvent the fountain business and create a dynamic new consumer experience."
Using technology adapted from systems that Kamen's DEKA previously had developed to deliver small but steady doses of chemotherapy drugs, the Freestyle can combine tiny amounts of concentrated ingredients, stored in cartridges, with carbonated water and sweetener to mix a beverage on the spot. Each new machine gives customers a choice of up to 100 different soft drinks, from favorites such as Coke Classic to customized offerings like grape Fanta. That's a 12 1/2-fold increase from the selections at most machines found in fast-food restaurants and movie theaters today.
Instant Feedback Could Boost Sales From Coca-Cola's perspective, the cartridge-based system, for which Coke holds 30 patents, offers several advantages over conventional fountains, which mix pre-made syrup with carbonated water. For instance, the syrup is stored in five-gallon bags that are more expensive to ship and bulky to store.
Whether it's the greater number of choices, the possibility to customize, taste—Farrell insists that these "freshly made" sodas taste better than syrup-based versions—or sheer novelty, retailers testing the Freestyle have reported double-digit increases in beverage sales.
Another advantage: The digital fountains uses wireless communication to constantly report business data back to Coca-Cola headquarters, where marketers can view sales by brand, location, and section of the day. "It's a tremendous new tool for understanding how customers consume our products," says Farrell. He could know, for instance, that while Caffeine-Free Diet Coke ranked a ho-hum 12th in overall sales at a fast-casual burrito joint in Los Angeles, it was the No. 3 afternoon drink.
The platform also allows Coca-Cola to quickly test or roll out new products. "UPS a cartridge to a [retail] customer, download some software to the machine, and within days we could have data on how and where it's selling," says Farrell.
You won't find the Freestyle in every McDonald's anytime soon, but Farrell sees the new fountain as "the biggest single innovation initiative" in the company's history, not least because Coca-Cola owns most of the technology. "We share some patents with our partners and a couple are licensed from Dean, but most we own outright," he says.
Kamen was paid an undisclosed fee, and he may have strengthened Coke's commitment to FIRST. But most important to Kamen is leveraging Coca-Cola's global beverage distribution system for his dream of—"figuring out how to get clean water to every kid in the world," he says.
For years, DEKA has been working on an innovative water-purification machine. And for years, Kamen has been talking about it to people at the United Nations and various non-governmental organizations. "But we realized the NGOs aren't the ones who can help us get the machine into production, scale it up, bring down the cost curve," says Kamen. Which is where the biggest beverage maker on the planet comes in.
The clean-water technology hasn't been integrated into the beta version of Freestyle and might never be. "That's still one of Dean's dreams," says Coca-Cola spokesman Ray Crockett.
But Kamen's fantasy does align with the company in one way: Coca-Cola's business depends on clean water—the single biggest ingredient in the company's products. "We think there is vast opportunity to improve the quality of water around the world and even in the U.S.," says Farrell.