Killer app?

Source: Keurig

Keurig Kold Makes Great Soda, But It's an Expensive Habit

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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The dream of home soda-making is persistent, but elusive. If you drink a lot of soda, it sure would be convenient to be able to buy the syrup and make the stuff yourself -- no more lugging home cans from the grocery store that are mostly water. Unfortunately, for those of us who are addicted to a brand name concoction (Diet Coke, in my case), none of the home seltzer machines have really offered an acceptable substitute. So we put up with the inconvenience of buying and storing cans or bottles.

Enter the Keurig Kold. The company that pioneered single-serve home-brew coffee has now attacked the problem of cold drinks at home. It hasn’t been an easy one to crack. Flash-cooling water is a harder problem than flash-heating. And once you’ve done it, you still have to figure out how to carbonate it. SodaStream, the market leader in home soda machines, uses a bulky carbon dioxide cylinder that has to be recycled (or, in our case, piled up in a drawer on the theory that we’re really going to get around to sending them back, one of these days). Keurig wanted something that was truly one-touch and low maintenance, just like its coffee makers.

The result is a technological marvel. It looks pretty much like a Keurig machine, except that it seems a bit deeper. It needs a couple of hours to get to temperature the first time you plug it in, but after that, you simply fill the reservoir with water, pop in a pod, and press a button. A minute to 90 seconds later, you have eight ounces of your favorite sparkling beverage. Including, to my glee, 100 percent authentic Diet Coke. There’s a moment when you don’t think that you’re going to have Diet Coke, because the machine dispenses seltzer first, then mixes the syrup in at the last moment. But at the end of the cycle, you’ve got something that looks like it came straight out of a soda fountain.

And it tastes, to my shock, better than what you get in the can. When I talked to the Keurig Kold team, they said their test users talked a lot about the freshness. I confess I was skeptical; “fresh,” like “natural,” is not a word I really associate with Diet Coke. But then I tasted it. Specifically, I had my husband arrange a blind taste test, so that I could see whether there was any detectable difference between this and the can. There is, and Keurig Kold’s product is an improvement. It just tastes … fresher. And very well carbonated, thanks to Keurig’s innovative new approach, which uses pellets that carbonate on contact with the water, rather than forcing you to fuss around with cylinders.

That taste improvement, along with the savings on storage space, is the major value proposition for the device. You can fit at least eight pods into the space that would be taken up by four cans of soda. For those of us who live in smallish spaces, and drink more soda than is good for us, that’s a real benefit. As is the fact that you can get the pods delivered in the mail.

That space saving, Keurig points out, allows you to enjoy quite a bit of variety. Along with branded sodas, they’ve rolled out a sizeable line of other drinks, which they’ll undoubtedly be looking to expand: cream sodas, cocktail mixers, flavored waters. I tried their ginger ale (as good as the Diet Coke), raspberry passion fruit iced tea, flavored seltzer, and two cocktail mixers. Since my husband is the kind of cocktail snob who makes his own Aleppo-pepper-infused mezcal at home, we’re not really the target market for the mixers. But the other drinks were great, and I’m already missing the iced tea, even though I’m not much of a tea drinker.  

The drawbacks of the machine are three -- two minor and one major. The first is that it takes a minute or more to dispense the drink, which is a lot slower than grabbing a can from the fridge. However, while I went into the review period thinking this was going to be a major annoyance, it turned out I didn’t care. I stuck a glass under the dispenser, pushed the button, and then grabbed a snack or checked my phone while I waited.

The second is that it does take up quite a bit of counter space. If you’re in a small apartment -- as the folks who will get the most value out of the trim storage requirements for the pods will be -- then that’s a drawback. In our medium-size rowhouse, I didn’t find that fatal either; I’d be willing to give over the space on the counter in exchange for the improved taste. (And longtime readers know I don’t say that lightly; here at the McSuderman household, aka the Appliance Museum, countertop space is a scarce and tightly rationed commodity.)

It’s the third issue that will prevent us from buying one, and I think it may represent a real market issue for Keurig. That’s the price of the pods, which clocks in at around a dollar for an eight ounce drink. That’s three to four times what Peapod charges per ounce to deliver cans of soda straight to my door.

The machine itself is pricey, currently selling for almost $300 on Amazon. But given the amount of soda I drink, I could probably justify laying out the money for the appliance. We could certainly use the space that’s currently being used to store 24-packs of Diet Coke -- and my husband’s ginger ale, and bottles of seltzer, and stray other sodas we keep on hand for guests.… The problem is those pods. I can’t justify tripling or quadrupling the cost of my daily soda habit.

And that’s the rub for the market: the folks who most benefit from this are households that drink a lot of soda, to defray the cost of the machine itself. Those households would have to be pretty affluent to absorb the extra cost of the beverages.

I love everything about this machine except the price of the pods. The technology is impressive, the device itself is good-looking, and the output is great. If they could get the consumables price down to, say, 40 to 50 cents a pod, the McSuderman household would make space for a machine right now. As it is, I’ll be sending this test model back to the company, and re-enthroning the slow cooker in its former position on the countertop.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor responsible for this story:
Philip Gray at philipgray@bloomberg.net