Coca-Cola has admitted that its employees tampered with a marketing test conducted with Burger King.
The revelation follows an external investigation ordered by Coke into allegations made last month by former executive Matthew Whitley [WAMN: 21-May-03].
Whitley, a finance director for supply management at the fountains division before he was laid off this year, filed two lawsuits against the beverage behemoth, alleging accounting and marketing fraud as well as racial discrimination.
Coke responded by calling in accountants Deloitte & Touche and law firm Gibson, Dunn & Crutcher to investigate the accusations. This probe, said the company, found “no evidence” to support the bulk of Whitley’s claims.
However, the inquiry did confirm allegations that in March 2000 Coke executives fixed a marketing trial implemented by Burger King, the company’s second largest customer of fountain drinks.
The test involved BK’s Richmond (Virginia) outlets giving away coupons with value meals for a free slushy drink called Frozen Coke. It was hoped traffic to the burger chain would increase and the promotion would be taken nationwide. According to Whitley’s lawsuit, the executives in question paid $10,000 (€8,538; £5,956) to an external consultant to buy thousands of value meals and make the experiment appear successful.
Coke did not go into details, but admitted that “members of the fountain division’s account team for Burger King improperly influenced the test results.” However, it added that when the Richmond promotion was launched Frozen Coke was already available in over 75% of BK restaurants.
Burger King ceo Brad Blum blasted the interference as “unacceptable”, adding: “We expect and demand the highest standards of conduct and integrity in all our vendor relationships, and will not tolerate any deviation from these standards.” Coke president/chief operating officer Steven Heyer responded with a written apology.
The drinks giant did not reveal the full findings of the inquiry due to the forthcoming legal action, though it did say it would take a $9 million charge as a result. It also disclosed that the Securities & Exchange Commission is launching an informal probe into the allegations.
• Meantime, Coke’s week got even worse with news that it may face huge fines for allegedly abusing its dominant market position in the European Union.
After a four-year investigation, the EU plans to send the drinks firm a ‘statement of objections’ listing preliminary findings in September or October. The probe has focused on rebates certain retailers could gain by favouring Coke over competitors.
If the preliminary findings are confirmed in the final ruling, Coke could be fined up to 10% of its global turnover ($1.9 billion last year).
Data sourced from: multiple sources; additional content by WARC staff