April 17, 2006 5:50 pm

Coke’s machine to claw back pocket money

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Anyone slotting money into a Coca-Cola vending machine in Dublin may find a lot more on offer than fizzy drinks.

Visitors at Ireland’s Dublin Airport, for example, will also be able to top up credit on their mobile phone or buy a mobile ringtone, logo or game to enjoy with their beverage.

The 30 souped-up vending machines are part of a little-publicised six-month trial that Coca-Cola has been running in Ireland, as the soft-drinks company looks for new ways to get more value out of 2.8m vending machines installed around the world.

If they take off, the machines – known as “urban digital vending terminals” – could prove a novel example of how to regain part of the spending by 18- to 25-year-olds that traditional “youth” companies have been losing to digital media content.

“The early results have been very encouraging, allowing [us] to recapture some of the ‘share of pocket’ spend previously going to soft drinks but recently lost to mobile phone top-ups, ringtones, games, music and other digital content,” says Clyde Pereira, chief information officer at Coca-Cola HBC, the company that bottles and distributes Coca-Cola in Europe.

So far, revenues have on average doubled at the new vending machines, from both the sale of the new mobile entertainment products and an increase in the number of drinks sold.

The Dublin trial was recently expanded, with the new vending machines being placed in more prominent locations, and Coca-Cola HBC is considering introducing them to other countries in Europe, such as the UK and Italy.

The technology for the project is provided by Inspired Broadcast Networks, the digital arm of the UK’s Leisure Link Group, in return for a share of revenues from the machines.

Inspired, which has spent about £1m ($1.8m) on developing the new vending machines, is best known for providing networked fixed-odds betting terminals for bookmakers such as William Hill and gaming machines for Gala Group, the bingo hall operator.

It uses a similar technology to connect a network of Coca-Cola machines to a central server over a broadband connection, which allows them to be used to distribute mobile content.

This is not Coca-Cola’s first attempt to revamp its vending machines. In the late 1990s and the early years of the new millennium the company introduced a number of “Dial a Coke” machines that allowed customers to pay for drinks by sending a mobile phone text message rather than slotting in cash.

However, the machines failed to take off, as Coke was forced to charge a premium for the service to cover the cost associated with sending the text message and consumers proved reluctant to pay.

This time, payment is done the old-fashioned way with coins and credit cards. The digital content is transferred to mobiles via text messages, but Coca-Cola and Inspired are absorbing this transaction cost and plan to keep the price of ringtones down to around £1 each.

Norman Crowley, chief executive of Inspired, says so far the most popular items have been mobile phone top-ups, followed by ringtones.

Downloads of full music tracks are also possible through the machines but Coca-Cola HBC and Inspired have yet to negotiate the licensing deals with music companies. Music labels want to be sure that music sold through the vending machines will have adequate piracy protection.

Although the trials show a clear increase in sales, the business model for the digital vending machines is still being worked out. On a basic level, it makes sense for the company to seek more value from its vending machines. They sit in busy prime locations such as airports and train stations but are underused. Even a busy vending machine is in use for only an estimated 60 minutes a day.

There are also cost efficiencies that Coca-Cola HBC could reap from networked machines. Inventory control, for example, could be streamlined if the machines used the broadband connection to notify a central distribution point when they needed restocking.

However, it is the machines’ marketing potential that most excites Mr Pereira. Digital content could be used to promote sales – for example, by offering customers a free ringtone with a can of soft drink.

“The marketing spin-offs made possible by these technologies are very considerable,” he says.

“In addition to broadening the footprint of existing promotional campaigns, these machines can also bundle digital content with physical product, which inevitably drives sales of both.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
Enter job search