Frozen Coke marketing test rigged

By Harry R. Weber
Associated Press

ATLANTA — Coca-Cola Co. admitted yesterday that employees rigged a marketing test of Frozen Coke at Burger King Corp. stores three years ago, one of a series of allegations in a whistleblower lawsuit under investigation by the Securities and Exchange Commission.

Burger King said it was disappointed by Coke's actions in the test and is continuing its own probe. The fast-food chain is among Coke's largest customers.

An auditing committee, investigating several allegations by a former Coke manager, also found that the company's fountain division had improperly valued some equipment. The company will take a $9 million pretax writedown to correct the value.

The former manager, Matthew Whitley, also said he was fired for raising his concerns to president and chief operating officer Steve Heyer.

The Atlanta-based company has said Whitley was fired after Coke refused a demand to pay him $44.4 million. He lost his job as finance director for supply management at the fountain division in March, amid a reorganization that eliminated 1,000 jobs.

The fountain division handles sales of fountain-dispensed beverages to restaurants, movie theaters and other venues.

The Frozen Coke promotion was conducted at Burger King outlets in Richmond, Va., in March 2000. An internal company document filed as part of the lawsuit said the tactic was to hire an outside consultant to spend up to $10,000 to buy value meals at Burger Kings in Richmond, boosting demand for Frozen Coke and other frozen drinks.

The suit says the Richmond promotion resulted in a $65 million Frozen Coke investment by Miami-based Burger King.

Coke said yesterday its investigation confirmed that some members of the Coke fountain division's account team improperly influenced the marketing test results, and said the employees were disciplined in 2001. The statement was the first time Coke acknowledged the issue publicly.

Burger King officials are reviewing the facts of the case, and want to determine whether they had been informed of the rigged marketing test before the lawsuit was filed, spokesman Rob Doughty said.

Coke spokesman Ben Deutsch said the SEC recently opened an informal inquiry of Whitley's allegations and has requested documents from Coke.

Todd Stender, an analyst with Crowell, Weedon and Co. in Los Angeles, said the flap with Burger King harms Coke's image.

"The No. 2 player, Burger King, really adds a significant amount of volume for Coke, and something like this really doesn't bode well for their image," he said.