Coca-Cola is testing "smart" vending machines that can adjust drink prices based on weather. On hot days, prices will be higher to maximize profits. Media reaction was negative, calling it exploitative. While it could earn Coca-Cola $328.5 million annually, problems include perceived unfair price discrimination and lack of communication about the changing prices. Recommendations include a better promotion strategy and emphasis that drinks will be cheaper in cold weather.

1. COCA COLA’S NEW
VENDING MACHINE
A case analysis by,
Abhijit Kumar Sah -302
Abhishek Singh -303
Antima Tiwari -365
Bikash Pandey -315
Ravi Tiwary - 335

2. Objectives of The Case
About Coke
Vending Machine
Benefits of VM
Media Reaction
Mechanics of Coke
The Number Game
Problems in VM
Recommendation

3. ABOUT COCA-COLA COMPANY
 The Coca-Cola Company is an American multinational
beverage corporation.
 The company is best known for its flagship product
Coca-Cola, invented in 1886 by pharmacist John Stith
Pemberton in Columbus, Georgia.
 Coca-Cola currently offers more than 500 brands in over
200 countries or territories and serves over 1.7 billion
servings each day
 The company is headquartered on Atlanta, Georgia,
United States.

4. VENDING MACHINE
 Coke’s testing of vending machines that could
change price according to the weather. The smart
Vending machine could automatically adjust prices.
If the temperature is high then price
will be high
If the temperature is low then price
will be low.

5. BENEFIT OF VENDING MACHINE
 Boost sales by providing discount in off season or when
there’s less traffic.
 Facilitates Micro- Marketing and understanding the local
customers.
 Help companies in managing logistics and capture real
time data for analysis.
 Increase profit as it has been untouched by discount war.
 Improve product availability, promotional activity and even
offer consumers an interactive experience when they
purchase a soft drink from a vending machine.

6. MEDIA REACTION
 “A cynical ploy to exploit the thirst of faithful
customers”
(San Francisco Chronicle)
 “Lunk-headed idea” (Honolulu Star-Bulletin)
 “Soda jerks” (Miami Herald)
 “Latest evidence that the world is going to
hell in a handbasket” (Philadelphia Inquirer)
 “Ticks me off” (Edmonton Sun)

7. MECHANICS OF COKE’S STRATEGY
 Price Discrimination
 Selling the same product to different groups of
buyers at different prices.
 “Hot” day v.s. “Cold” day prices
 Economic Rationale
 Higher price (hot) higher profit
 Lower price (cold) induces sales higher profit

8. THE NUMBER GAME
Normal Vending Machines
Expected price is 70 cents per can.
Expected profit is 5,000 cents per machine.
“Smart” Vending Machines
Price on a HOT day is 85 cents per can
Price on a COLD day is 55 cents per can
Expected profit is 5,450 cents per machine.

9. THE NUMBER GAME………..
 Incremental profit per day per machine
= 5,450 – 5,000 = 450 cents
 Assuming 200,000 “smart” vending machines,
Annual incremental profit
= 450 * 200,000 * 365 days
= $328.5 million

10. PROBLEM IN COKE’S VENDING MACHINE
The new vending machine concept might seem
unfair to a thirsty person. The main problems
are:-
 Price discrimination- The company segmented
group of buyers by the outside temperature.
 Communication:- Coke based its strategy
purely on demand and supply.

11. PROBLEM CONT………
 Perceived price :- For product like coke
people have an idea about its price
 Emotional Bonding:- Iconic brand has a
very strong emotional attachment.
 Competition:- Speech form Pepsi.. “ we
believe that machines that raise prices in hot
weather exploit consumer who live in warm
climates”

12. RECOMMENDATIONS
 Promotion Strategy is not good by sudden public
announcement.
 Strategic placement of machines
 High traffic areas with few repeat customers
 Examples: Rest areas, tourist traps, theaters etc
o Emphasis that coke will be cheaper in cold weather
 Highly profitable strategy if:
 Executed with extreme caution
 If increase perceived value of product.