Coca-Cola Co. has agreed to pay up to $21.1 million to Burger King Brands Inc., one of its most important customers, to settle a dispute over a falsified marketing test for Frozen Coke.
While it's not a significant amount of money to the soft-drink giant, the agreement with Burger King, which has 7,978 locations in the United States, is an obvious relief to both companies and their investors.
"We see this as a benefit because now they're able to move forward with their relationship," said Nathan Lewis, an analyst with Atlanta-based Jackson Securities Inc., which does not have investment-banking relationships with either company.
The dispute erupted when a former Coke employee filed a wrongful-termination suit against Coke in June, in which he alleged various financial and marketing wrongdoings by the company. Among them was his allegation, which Coke admitted was true, that company employees had tampered with the results of a marketing test for Frozen Coke at Burger King restaurants in Richmond in 2000. Other allegations in the suit are still being investigated on several fronts.
Advertisement
The relationship between Coke and Burger King was strained both by the marketing deception itself and the fact that Coke hid the problem from Burger King. Management had known about the problem and punished some employees but didn't tell Burger King about the testing fraud until the lawsuit was filed. At one point, Burger King had said it would stop selling Frozen Coke completely at its restaurants, but now it plans to keep the slushy drink on the menu.
Share this articleShare"We are very pleased to have this resolution, and now we are focused on driving traffic and customers to our restaurants, and strengthening our relationship with the Coca-Cola Company to make it even stronger," said Rob Doughty, a spokesman for Burger King.
A letter Burger King sent to its restaurants yesterday outlines the main facets of the agreement, which has to be ratified by 80 percent of company franchisees. Each restaurant with a Frozen Coke machine installed as of May 2000 will get a $1,000 payment from Coke. Coke will also shoulder some of the repair expenses to those machines for the next three years.
Advertisement
Additionally, franchisees who lost money on their Frozen Coke investments through June will be made whole by Coke. And finally, the soft-drink giant will pay $6.4 million to Burger King, which will spend the money on advertising.
"We're pleased that our companies have resolved the issue, and we are now focused on strengthening our partnership and growing our businesses together," said Coke spokesman Ben Deutsch.
ncG1vNJzZmivp6x7uK3SoaCnn6Sku7G70q1lnKedZK6zr8eirZ5nkqrAqrrErKpoamBlgHB8l2hobGeTpLCiecKoo5plkqq%2FqLHRZqKippdisq%2BwjJ2grKilqbJwgpRubWlrYG16cq7DcmRtmWhsenl9kJ9kmm6WmYZ6gpRvbHCZXw%3D%3D