Roughly half of Americans drink soda daily

A new Gallup poll finds that 48 percent of U.S. adults say they drink at least one glass of soda a day.

The poll is the first from Princeton, N.J.-based Gallup to measure daily soda consumption.

Among those who drink soda, the average daily amount is 2.6 glasses, with 28 percent drinking one glass a day, on average, and 20 percent drinking two or more glasses.

Meanwhile, 52 percent said they normally drink no soda.

The survey found that there is essentially no difference in the self-reported weight situation of Americans who drink two or more glasses of soda compared with those who drink none. About four in 10 of each group says they are either very or somewhat overweight. Those who drink one soda per day are slightly more likely to classify themselves as overweight. This might be explained by heavier soda drinkers consuming more diet soda than those who drink only one soda per day; however, the current survey question did not specify the type of soda consumed.

Soda consumption was higher among young adults, with 56 percent of 18- to 34-year-olds reporting they drink at least one glass of soda per day, compared with 46 percent of people ages 35 to 54.

While soda consumption is high, it is not as high as coffee consumption: 64 percent of U.S. adults say they drink at least one cup of coffee daily. This percentage has stayed about the same since 1999, despite the increase in coffee stores and coffee products available to consumers in recent years.

The results are based on telephone interviews with a random sample of about 1,000 U.S. adults, conducted between July 9 and 12. The findings are weighed so they are nationally representative.

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Pepsi/Billboard Concert to Honor Michael Jackson

This year marks the 25th anniversary of Michael Jackson’s Bad album and Pepsi has committed to celebrating the milestone for a full year.  On August 29th, which would have been the King of Pop’s birthday, there will be an extra special event.

The Pepsi and Billboard’s 2012 Summer Beats Concert Series will wrap up with a tribute to Michael Jackson at New York City’s Gotham Hall and will include performances by Swizz Beatz, Ne-Yo, Melanie Fiona and music from DJ Cassidy.  The artists will also perform some of their current hits as well.

This isn’t the first major celebration of the anniversary of the incredible album.  There was a pretty cool campaign earlier this year when Pepsi released 1 billion limited-edition cans that featured Michael Jackson’s instantly recognizable silhouette.  The cola giant also sponsored giveaways with great prizes like jackets that resembled the ones worn during Jackson’s Bad tour and tickets to Cirque du Soleil’s Michael Jackson The Immortal World Tour.

It’s too bad that this outpouring of love and support didn’t come until after Michael Jackson’s death but it’s better late than never.  It is interesting to consider, though, whether this anniversary would have been recognized if he was still alive.  We will never know. 

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Honest Tea gives cities honesty rankings

Washington is the nation’s 10th most honest metro area — right on par with Sin City, according to a recent “honesty experiment.”

The rankings come from the Bethesda-based company Honest Tea, which for the third year set up unmanned beverage stands nationwide, asking people to leave a dollar for each bottle they took.

Undercover observers used a digital tracking application to monitor which passersby took a drink without paying.

In the District, four stands were set up between Aug. 12 and 19 at the Dupont Farmers Market, Nationals Park, K Street NW and Capitol Hill.

According to Honest Tea, 95 percent of Washingtonians paid for their drinks that day. Las Vegas also scored 95 percent on the so-called National Honesty Index.

Nationwide, 93 percent of Americans left $1 per drink. Oakland, Calif., and Salt Lake City, Utah, tied for first place with 100 percent compliancy, while only 79 percent of Los Angelenos ponied up.

When the experiment was first conducted in 2010, the District received a honesty rating of 93 percent, enough to score second-place among the “participating” cities.

Now, as the pool of cities has grown, an improved honesty rating of 95 percent is just enough to keep the nation’s capital in the top 10.

“Though our experiment might not pass muster with a social scientist, the results present fascinating and fun insights about the American population,” Honest Tea president Seth Goldman said.

In that spirit of “fun,” Honest Tea also found that:

— Men on Capitol Hill were 94 percent honest.

— Women on Capitol Hill were 93 percent honest.

— People who were dressed in suits were 95 percent honest.

— Bald men in D.C. were 75 percent honest.

— Guys with beards in D.C. were 94 percent honest.

— In Capitol Hill, a mailman opted not to pay.

— At Dupont Farmer’s Market, someone paid with a $1 wooden coin.

— People on K St. were less honest (91 percent) than people on Capitol Hill (93 percent)

— The suburbs of D.C. were 94 percent honest.

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American Idol judge drama! Coke and Pepsi rumored to be at war over Nicki Minaj

As the next phase of "American Idol" auditions draws near -- specifically, the part we see on television where pop star hopefuls perform for a panel of celebrity judges -- some behind-the-scenes drama is brewing among the top brass at the FOX show. You could even say it's fizzing over.

According to a source with close ties to the show, longtime rivals Coke and Pepsi are at war again, but not about market share. The fight is over hit-maker Nicki Minaj. The rapper and singer, whose colorful, cartoon-like style has made her among the most successful new acts of the past three years, is at the top of the list for the open seat on Season 12 of "Idol." But as the new face of Pepsi, an endorsement deal that includes commercials along with touring and album promotion, "Idol" sponsor Coke is none too thrilled at the prospect. The leading soda company has been an "Idol" partner since Season 1, at a cost of $26 million per year, according to reports. The show ran into a similar problem when longtime sponsor Ford got wind of judge Jennifer Lopez's commercial deal with Fiat.

If FOX and FremantleMedia execs have their way, this year's panel would consist of Minaj, previously announced judge Mariah Carey, a country star (the leading candidate is Keith Urban, says an insider) and a Latin artist (Enrique Iglesias is believed to be the No. 1 choice). In March, Minaj showed genuine empathy toward those who compete on "Idol," telling The Hollywood Reporter special correspondent and "Idol" alumna Didi Benami, "It's very difficult to be picked apart. That rejection thing is heavy."

With the show's many production partners, "Idol" has been prone to insider squabbling and indecision. A source tells The Hollywood Reporter the latest judge shuffle is no different, only this time, it's 19 Entertainment's Marc Graboff, former West Coast head of NBC and now president of CORE Media (launched in May as a newly branded version of the former CKx), who's being shut out. Mike Darnell and Cecile Frot-Coutaz "are not consulting Graboff," an insider says of the FOX alternative programming chief and CEO of FremantleMedia.

Curiously, the big unknown is the show's longest-sitting judge, Randy Jackson. As Carey's co-manager and longtime collaborator, he's not going anywhere, but his role could be diminished, as others have reported. In fact, The Hollywood Reporter has learned that he might step into a mentor role instead of Jimmy Iovine. But mainly, he'll be around to serve as a sort of "comfort blanket" for Carey. A source close to production says reports of an Iovine exit are "not accurate."

Reps for Jackson and Iovine have not responded to THR's request for comment. FOX and FremantleMedia declined comment.

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Coca-Cola puts major marketing push behind FUZE

Coca-Cola isn't used to trailing the competition. Yet that's the position the beverage giant is in when it comes to the fast-growing ready-to-drink tea category–and it's gearing up to do something about it.

Beverage Digest

First half 2012 take-home data.

Its weapon is Fuze, the juice-and-tea brand Coca-Cola acquired in 2007 for an estimated $250 million. The marketer is planning a major first-quarter marketing campaign for Fuze, which is also getting a new-product infusion. This summer Fuze rolled out five new flavors that will be available at fountains and in a variety of packages by year's end.

Still, Coca-Cola has its work cut out for it. Fuze had less than a 0.1% share of the tea category in the first half of 2012, according to Beverage Digest. And Coca-Cola will get weaker before it gets stronger. Come New Year's Eve, Coca-Cola and Nestle's licensing agreement for Nestea will be terminated in the U.S., though the companies will continue to partner outside the U.S.

Even with that 20-year arrangement in place, Coca-Cola still lagged as the No. 4 player in the space as it focused on larger categories such as soft drinks, sports drinks and juice. When partner Nestea becomes foe in January, Coca-Cola will slide to the No. 5 slot, according to Beverage Digest figures, behind Arizona, PepsiCo, Dr Pepper Snapple Group and Nestle.

"The Fuze initiative is critically important for Coke," said John Sicher, editor and publisher of Beverage Digest. "Tea, because of its health and wellness imagery, and because it works well with diet sweeteners, has huge potential over the next five years."

According to Beverage Marketing Corp., the ready-to-drink tea category grew almost 5% last year to $5.5 billion in retail dollar sales. It's expected the category will experience rapid growth in the next few years, something Coca-Cola hopes to capitalize on.

This summer, Fuze rolled out five new flavors that will be available at fountains and in a variety of packages by year's end. And a major campaign is planned for the brand in the first quarter of 2013, though the company isn't ready to discuss details.

"We have pretty lofty awareness goals," said Chris Johnston, director-tea at Coca-Cola North America, of the company's planned investments in Fuze. "It's fair to say the tea segment is increasingly important on the radar screen of the company."

Coca-Cola's tea business in the U.S. has been weak for years, prompting the Coca-Cola system to long call for the company to address the issue. Seeing Arizona, an independent company, skyrocket to prominence in recent years has been a wakeup call for the industry, Mr. Sicher said. The 20-year-old brand now controls 40% of the ready-to-drink tea category.

Mr. Johnston admits that, from an outside perspective at least, it does appear Coca-Cola is late to the game. He argues the company has been "choiceful, patient and deliberate" when it comes to the tea category, however, highlighting the recent success of its homegrown Gold Peak brand and the acquisition of Honest Tea. Now, he says, the company is turning its attention to building the Fuze trademark.

Fuze has had a relatively small marketing budget for a Coke brand. In 2011, the brand launched its first TV campaign, boosting measured spending to $8 million from $3 million the two years prior, according to Kantar Media. Then again, Arizona's budget has hovered in the tens of thousands each of the last several years.

Fuze has already brought several agencies on board, including Ammirati and Engauge. The brand is also working with David, an agency that launched in January and is backed by Ogilvy & Mather. David is billed as a global shop born out of the creative strength of Latin America, with offices in Sao Paulo and Buenos Aires.

"Unlike other brands in the segment, we'll have a stronger multicultural approach to marketing," Mr. Johnston said. He noted that there are plenty of "white spaces" in the category. He said he sees opportunities for new price points and packages. And he indicated there's an opportunity to target consumers interested in "active energy" beyond caffeine.

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Diet Coke makes permanent it's limited edition packaging

Diet Coke is making a permanent change to its packaging for the first time in more than five years.

Beginning Sept. 1, the brand will switch to a design introduced last fall as a limited-edition package. The design, created by Turner Duckworth, features a section of the Diet Coke logo, cropped to prominently feature the "D" and the 'k.' The can's color scheme, red and black on a silver background remains the same. The packaging design only impacts the brand's cans, not bottles.

Kerry Tressler, a spokeswoman for the brand said the cropped logo is coming back "by popular demand."

The bold design goes hand in hand with the brand's efforts to align itself with the fashion community. This fall, a T-shirt designed by Miami International University of Art and Design student Gustavo Alonso will be sold in Target stores nationwide as part of Diet Coke's Young Designer Challenge. The T-shirt features the cropped logo.

The fall season has become an important marketing period for the brand, which typically focused its efforts around the first quarter. In 2010, Diet Coke inched past Pepsi to become the No. 2 soda in the country. And since then, it has sought to push its advantage, in part by ramping up marketing in the second half of the year. Historically, Diet Coke's marketing was weighted toward the first quarter, given its Academy Awards sponsorship and the Heart Truth campaign, which ties in with New York Fashion Week.

Ms. Tressler declined to comment on the brand's marketing plans or on how it would be sharing news of the permanent packaging change with consumers. She said there would be more news in the coming weeks.

Last fall, David Turner, a partner at Turner Duckworth, told Ad Age that the brief and clear objective of "Stay Extraordinary" -- Diet Coke's ongoing campaign -- lent itself to "really clear and bold work." Still, Mr. Turner joked about the age-old desire of marketers to "make the logo bigger."

Coca-Cola tested the cropped logo design extensively beginning in August and September 2010. In a trial with Target, the test market saw volume growth outpace the rest of the country. "It wasn't an accidental design or something that we just happened on," said Katie Bayne, Coca-Cola's president-sparkling beverages, at the time.

Cherry Lime Rickey is new Arizona flavor, voted on by fans

Following a three month campaign in which the company enlisted its Facebook fans and beverage media professionals to help choose its newest flavor, AriZona announced today that Cherry Lime Rickey would join its formidable cadre of tea and juice drinks.

The campaign, created in celebration of AriZona’s 20^th anniversary, asked AriZona’s nearly 3.1 million Facebook fans to choose between three contending flavors – Orange Creamsicle, Chocolate Fudge Float, and Cherry Lime Rickey – and culled the opinions of a variety of people, including food and beverage writers, chefs, and randomly chosen consumers, to taste and write about the flavors in order to help fans decide on the winner.

Here’s AriZona’ press release on the contest and its new Cherry Lime Rickey:

NEW YORK, NY— After an exciting three month long, never-been-done-before, 20th anniversary contest initiative, AriZona is proud to announce that its Cherry Lime Rickey design has been chosen by fans and will be sold exclusively at 7-Eleven stores as soon as September 2012.

The 20th anniversary flavor was consumer-chosen and its label was voted based on international submissions from designs submitted to AriZona’s microsite, arizona20years – Powered by Creative Allies, during the contest. Of the final five designs, fan Kenny Vidinich’s OneVibe design received the most fan votes for the winning label.  Vidinich is the creator of OneVibe creative studio located in Honolulu, HI, other finalists included: Ricky Linn of Pasadena, CA; Satchel Vestil of Cebu, Philippines; Manuel Peón of Mexico; and Tin Bačić of Croatia.

This is the first AriZona beverage to be completely created by fans and AriZona is proud to partner with 7-Eleven to make Cherry Lime Rickey’s debut on the market. With more than 6,700 stores in the United States, the convenience store king is the ideal partner making this 20th Anniversary flavor available across the country.

“The 20th Anniversary Contest is our way of thanking AriZona’s loyal fans, as well as allowing their voice and creativity to come to life. It is from them that we, as a brand, have always drawn our inspiration from and we want to make sure they know that we are fans of theirs as well,” explains Jackie Harrigan, AriZona’s Global Communications Director. “7-Eleven was a natural choice for us to debut and exclusively sell the Cherry Lime Rickey flavor. Just like AriZona products, 7-Eleven is American founded with stores accessible worldwide and has the same loyal consumer following.”

Cherry Lime Rickey will not only be available in 7-Eleven stores nationwide, but each can will feature a QR code that will unlock more prizes when scanned. The QR capability is another “first” for AriZona, and the brand hopes that it will demonstrate its gratitude to the fans for making it the number one ready-to-drink tea in the country with exclusive AriZona swag including a grand prize fully-wrapped all American vehicle.

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New Territory for Tea

It wasn’t slowed by the downturn, it has benefitted from health and wellness trends and has been the category into which many exciting new brands have launched and grown. For each of those reasons, RTD tea is a category that remains at a rolling boil: total sales of RTD in the U.S. were up by 7 percent in 2011, according to Euromonitor International – and have moved from just over $5 billion to just under $8 billion since 2006.

And things aren’t expected to slow down: the category is expected to grow another 24 percent by 2016, according to the research firm.

With its variety, its ability to adapt to packages from cans to bottles and to formats like carbonation and blending, the growth of RTD tea has been Americanized to the farthest degree: what have been the brews of native cultures have been studied to determine ORAC count and caffeine levels, while new brands have risen and fallen with little overall impact on the category’s continual growth.

Take January’s news that Coke and Nestle were letting a longstanding agreement to produce and market Nestea together lapse. Rather than lament the downfall of a strong brand, both companies looked to growing portfolios of other brands (Honest Tea, Sweet Leaf, Fuze, Tradewinds, Gold Peak, etc.) to fill the distribution void.

So what has kept the momentum going? Look at the following four trends, which encompass new varieties, external forces, pricing strategies and what we call the Killer G’s.

PUCKER UP

Lemon Blends continue to win. In the past year, with new “half-and-half” formulations either arriving or in planning from companies as diverse as Inko’s (best known for its white teas) and Ito En (best known for all manner of pure Oolong and other Japanese variants).

“We decided to do our twist by using premium green tea instead of the classic black tea,” said Ito En’s Rona Tison.

From energy to relaxation, everyone has been getting in on the mix: Monster Rehab came out as — you guessed it – a tea/lemonade mix on one side, while Marley’s Mellow Mood has a Half & Half as well. Organics haven’t escaped the siren call of the Arnold Palmer, with Sweet Leaf and Honest Tea launching Half & Half blends, along with all-natural Xing as well.

Even companies that have been well-known for their own lemon tea, like Snapple, have pushed into the Half & Half zone.

Marketers say that consumers like the idea of cutting calories of lemonade with the caffeinated strength of tea. Plus, it’s just plain trendy. About the only company failing to benefit from the ongoing Lemonade boom is New Leaf, which helped launch the craze before it fell off the pace due to ongoing supply and cash issues.

Meanwhile, AriZona, the company that started it all, is running the table with its call-brand “Arnold Palmer” varieties of Half & Half, which now accounts for well north of $200 million annually, according to Symphony IRI, which probably isn’t the best measure given the number of independent accounts and foodservice locations where AriZona reigns supreme.

CHEAP IS KING

While upscale tea shops and fine cultural associations may have driven some of the lift behind RTD Tea in the past, it’s value pricing that is truly running the category right now.

Just as with the Arnold Palmer, AriZona’s products, driven by its value-priced $.99 cans, lead the category.

But other companies are learning to appreciate cheap as well. Peace Tea is riding the coattails of parent company Monster’s distribution deal with the Coca-Cola Co. to move its own $.99, 23 oz. cans, and has taken big steps in circulation: the brand is at about $75 million, according to Symphony/IRI, which doesn’t count Wal-Mart, where Coke practically has its own office. During an earnings call in May Monster CEO Rodney Sacks announced that the brand was up nearly 85 percent over the same quarter for the previous year – it “has really started to come into its own and we think that also can develop into a very nice brand for the company going forward,” he told the audience.

Even the AriZona foe Snapple has gotten into the cheaper-is-better game with its own cans of printed-on $.79 iced teas. And here’s a crazy wild-card: Snapple might have a shot at grabbing market share from AriZona in the Big Apple for one simple – but bizarre – reason: under Mayor Michael Bloomberg’s proposed anti-supersizing initiative, the 16 oz. can of Snapple would still be allowed. The 24 oz. AriZona? That would draw a fine.

ON-PREMISE IS EVOLVING

Tea is booming on-premise as well, with iced teas getting a lot of momentum. From on-tap kombucha to McDonald’s selling millions of dollars in $.99 sweet tea, the availability of RTD tea on tap is contributing to the overall momentum mentioned in the introduction.

Slick operations like Teavana, Tea Forte, and Canadian import Davidstea are helping create a tea-only branch of the Starbucks family tree. Meanwhile, Starbucks itself is rolling out its first retail tea concept behind the Tazo line (even as that line begins to decline a bit in the Pepsi system) and even Guayaki has a Mate Bar in its Sebastopol offices.

There are 3,500 retail tea locations in the U.S., compared with more than 25,000 coffeehouses, according to World Tea Media.

GUAYAKI, GUAYUSA, GT, AND GOLD PEAK: WATCH OUT FOR THE KILLER G’s

While Cheap is King, there are some brands that are showing growth from exotic places: in the old school, Guayaki, which makes RTD yerba mate drinks and has long been a natural foods standby, is showing strong expansion in mainstream accounts, with sales nearly doubling this year. Guayusa, an Amazonian tree leaf imported from Ecuador by the makers of Runa, fills out the new school; the organic, fair trade product has a low calorie profile and is starting to gain traction in natural and specialty accounts. Meanwhile, GT’s Kombucha, which has recovered after the 2010 “kombucha fermentation crisis” to regain its market leader position, is the grand old brand of the kombucha movement, which shows little sign of slowing as interest in probiotics grows.

Joining those three emerging companies is a big beverage company-produced brand, Gold Peak, which has succeeded to the point that Coke wasn’t afraid to let its partnership with Nestea dissolve in the U.S. After a slow start, Gold Peak has given Coke a growing set of facings in both the refrigerated multi-serve section of the store – where it’s up more than 40 percent this year – as well as the grab-and-go box.

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Pepsi, NFL, team up for hometown team anthems

"Only Texas has it all," Kelly Clarkson bellows in her punchy new tune. "You know we're coming when you see the star."

She's proudly referring to the royal blue logo of the Dallas Cowboys, her fixation since childhood.

"When you're born in Fort Worth, you come out of the womb loving the Cowboys," she says. "In Texas, people love football more than anything. Once they find out about this, I'll be golden."

The 2002 American Idol winner is one of four platinum pop stars drafted by Pepsi and the National Football League to craft anthems for their hometown teams. The Pepsi NFL Anthems campaign launches today with the release of Clarkson's Get Up (A Cowboys Anthem), a free download at PepsiAnthems.com.

Coming up are Ice Cube's not-yet-titled ode to the Oakland Raiders and Kid Rock's In Detroit for the Detroit Lions. Starting today, Travie McCoy's All In, a New York Giants anthem, will be offered exclusively through download redemption codes on specially marked 24-pack Pepsi products at Wal-Mart. After Sept. 3, it's a free download without the code. The songs will be available on the site until Feb. 28.

The program also touts a remix of Wiz Khalifa's Black and Yellow, the 2010 hit that boosted Pittsburgh teams and spawned remakes.

The anthems quest "was born from this insight that sports and music are intersecting in more ways than ever," says Todd Kaplan, Pepsi Sports Marketing director. "We wanted to partner with top artists, and a critical piece in the process was authenticity. We chose artists with a true passion for their favorite NFL teams and their hometowns.

"Few can match the pep of Clarkson, who wrote Get Up hours after the Pepsi/NFL proposal.

"I'm stoked," she says. "It's a really cool thing, and I've never done anything like this in my career. What a cool way to reach another audience. I can't wait to hear it in the stadium."

Clarkson catches the Cowboys on TV, in bars and live when possible. If she misses a game, she relies on detailed accounts from older brother Jason, "who's way more hardcore."

The team is simply iconic, she says. "People overseas know the Dallas Cowboys. They don't know the Denver Broncos or the Philadelphia Eagles. The Dallas cheerleaders are more famous than some of the NFL teams. I know I sound biased."

She's determined to sing Get Up at Cowboys Stadium this season: "That'll be awesome. The 10-year-old in me is flipping out."

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Coca-Cola Freestyle fountain is all about variety

ATLANTA -- Coca-Cola's Freestyle fountain dispenser, which the company launched three years ago, is one of its biggest innovations in years, and many say the machine is a potential game-changer in the ultra-competitive beverage industry.

Dispensing combinations of more than 120 of the company's brands from a touch screen -- including Coke Zero, Fanta, Pibb and Dasani -- the machines are being credited with driving double-digit sales for many of the restaurant chains that have adopted it.

Despite some anxiety about the reliability of computers and the added costs that come with more choices, the device has been so successful that competitors may soon come up with their own versions.

"It's giving consumers the ultimate option -- beverage choices that they can customize themselves," said Joe Pawlak, vice president of Technomic, a Chicago-based food research consultant. "It's also driving up food sales by luring in customers who are there just to use the machines."

But it comes at a cost. Traditionally, retailers are given the fountain equipment for free or through some other arrangement, including leases or as a loan from a bottler. For Freestyle, retailers pay a program fee that covers the equipment, installation, service, upgrades and the wireless data connection. Coca-Cola declined to disclose the fee amount.

The concentrate that makes the drinks also is more expensive than it is for traditional devices. Operators of several of the chains that offer the machines said they raised drink prices on average by 10 cents to cover costs.

Because of the increased choices, retailers also are buying more concentrate to accommodate consumers who are trying -- and sometimes dumping down the drain -- the expansive drink selection.

Technology is also a concern, at least at first, for some retailers. The machines are computer-operated, making them susceptible to freezing, crashing or breaking down. Unlike traditional fountain dispensers, which use air pressure to send the soda from plastic bags when customers squeeze or push a lever, a computer sends the drink choice to cartridges stored in the machine.

Coca-Cola said that so far, it has not seen a lot of problems, and that the company has a team of technicians at the ready to fix whatever glitches occur. Many of the problems also can be resolved via updates sent to the machines directly from Coca-Cola, which is connected to all the devices.

There's also a learning curve for customers wishing to use Freestyle. Consumers generally need guidance when the machine is first installed, which can create long lines as they become acquainted with the choices, restaurant operators say.

"What often happens is people watch each other and learn how to use it," said Don Fox, the chief executive officer for Firehouse Subs. "But after the first 60 days it works itself out." Coca-Cola says 97 percent of its customers that have tried Freestyle continue to use it or have added more machines. About 7,200 machines are in operation in 4,500 locations, including Burger King, Five Guys Burgers and Fries, and Noodles & Co., said Susan Stribling, a Coca-Cola spokeswoman.

Freestyle's success is critical for Atlanta-based Coca-Cola. North American sales of its carbonated beverages -- its biggest moneymaker -- have been declining since their peak in the 1990s. Teas, water, juices and energy drinks have picked up some of the slack, but they don't have the same volume as the company's soft drinks.

The machines, which also are in movie theaters and corporate cafeterias, could lure back customers the company has lost or introduce them and others to drinks not available on the market because of limited space on shelves at grocery and convenience stores.

And the restaurant fountain business, which uses most of the Freestyle machines, has been extremely competitive over the past year. In May, longtime rival PepsiCo ousted Coca-Cola as the exclusive provider of non-alcoholic beverages at IHOP and Applebee's restaurants. A month earlier, Coca-Cola replaced PepsiCo products at Dunkin' Donuts and Baskin-Robbins. Papa John's Pizza announced in November that it was ending its exclusive 25-year relationship with Coca-Cola, and it started serving PepsiCo beverages in U.S. stores in January.

With that competition in mind, PepsiCo is said to be working on a version of its own that might up the ante by including coffee and smoothies, options Freestyle currently does not offer.

PepsiCo spokeswoman Gina Anderson said in an emailed statement that innovation is key to its "long-term success."

"It's what enables us to continually meet our customers' and consumers' desires for great-tasting, convenient products, unique packaging and differentiated equipment," Anderson said. "It's no secret that as part of PepsiCo's innovation pipeline we have been hard at work on the development of new fountain equipment; and we plan to share more details about it in the future." Under current conditions, experts say Freestyle could tip the balance in Coca-Cola's favor if the company can demonstrate sales improvements to retailers, especially those looking to differentiate themselves from competitors, such as Atlanta-based Moe's Southwest Grill.

After testing the machines for two months in its four company-owned stores, Moe's expanded Freestyle to locations in Atlanta, Jacksonville, Orlando, Raleigh and Tampa. Half the stores in those cities got a machine, the others didn't. Those who did saw comparable sales jump 9 percent, Moe's President Paul Damico said.

"We have a lot of water-only customers who come in and just ask for a cup," said Damico, adding that the chain would eventually offer the machines to all stores and has mandated them for new franchises.

"We were successful in converting 11 percent of those customers over to Freestyle." Coca-Cola plans to expand beyond chains and offer the machines to independent restaurants and mom-and-pop operations in the coming months, said Jennifer Mann, vice president and general manager of Coca-Cola Freestyle. Coca-Cola also is testing the ability of customers to interface with the machines through mobile phones and has an app that helps them locate the nearest Freestyle device.

But the company is not stopping there. Because the machine can download how much of a particular drink is being dispensed at any given time, it could let Coca-Cola know whether there is a drink that needs to be offered in bottles and cans in grocery stores.

"We will certainly have the ability to bring a new brand to store because of the data collected," Mann said.

Most of the early adopters said they took the plunge to separate themselves from competitors. While Coca-Cola is adding retailers at a brisk clip, Freestyle's footprint remains tiny compared with the thousands of outlets it could be in.

Some were initially reluctant.

When Coca-Cola pitched Freestyle to leaders at Taco Mac more than two years ago, Fred Crudder, the restaurateur's beverage director, was skeptical.

While the machine sounded intriguing, he worried about relying on computers and the impact the machines could have on wait staff. Taco Mac, which is based in Atlanta, is one of a handful of sit-down restaurants using Freestyle. Instead of customers making their own drinks, they order the different combinations, which wait staff supply by using the machine in the kitchen.

Initially, Taco Mac gave customers a large menu containing all the Freestyle choices. That was later stopped, to cut down on the numerous trips some wait staff were making for customers experimenting with combinations -- say Coke Zero Grape mixed with Minute Maid Cherry Lemonade and diet Barq's Vanilla -- only to send it back or ask for another.

But using the machines overall has been a breeze, he said.

"When we first brought the machines in, there were moans and groans that this is going to put everybody behind," Crudder said. "That did not happen." Taco Mac is also piloting a test for Coca-Cola mixing Freestyle choices with drinks such as rum, vodka, tequila and Jack Daniels.

In addition to increased drink sales, many operators report takeout business shifting in-store because of Freestyle. That's significant because consumers tend to add items to their order the longer they stay in a store.

Part of Freestyle's appeal, they said, is the diet or caffeine-free products that aren't in stores. That has attracted families trying to give kids less calorie-laden or sugary drinks than typically offered, said Shawn Hooks, an area representative for Firehouse and a franchisee of one of the chain's stores.

"We have had people come in the store asking for a miniature Freestyle machine," she said. "That's how popular it is."

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