Court Filings On $200M Lawsuit Filed By Cooler Screens Against Walgreens Detail A Big Freaking Mess
June 20, 2023 by Dave Haynes
An industry friend sent me a copy of the complaint filed with an Illinois court regarding the dispute between US chain drug giant Walgreens and Cooler Screens, the DOOH start-up that was retrofitting the store’s chiller sections with custom-made transparent LCD screens embedded in the doors.
It’s a big freaking $200 million mess.
The heavily redacted complaint – which blacks out what are probably things like minimum revenue guarantees and other financials – details the Cooler Screens side of the story. The company argues that Walgreens was at first fully supportive of the concept and rollout, but when a new CEO came in, started actively undermining the whole initiative.
The parties were on the same page, working cooperatively, and enthusiastic about the partnership, until 2021 – when Walgreens brought in a new Chief Executive Officer, Rosalind (Roz) Brewer, who decided that she did not like how the screens looked and that she wanted them out of the stores.
As a result, Walgreens stopped working with Cooler Screens to ensure the parties’ mutual success and, instead, worked to undermine it. Walgreens generally began obstructing Cooler Screens at every turn; it needlessly halted Cooler Screens’ expansion to more stores; refused to provide timely approvals; stopped providing data; and blocked ads Cooler Screens was permitted to display on the cooler doors. Walgreens’ conduct was part of a scheme, apparently with direction from the very top of the organization, aimed at preventing Cooler Screens from meeting certain contractual performance and revenue targets and manufacturing “breaches” that Walgreens could then use to exit the contract.
Walgreens ultimately followed through with its threats, purporting to terminate the parties’ agreement more than years early and with far less than one-third of the Smart Doors installed, depriving Cooler Screens of the benefit of its bargain and the opportunity to recover its costs and ultimately profit from this expensive venture. To add insult to injury, Walgreens is now wrongfully demanding that Cooler Screens expend tens of millions of additional dollars to remove all the Smart Door technology from Walgreens stores.
Cooler Screens’ lawsuit seeks to stop Walgreens from forcing the startup to remove its “smart doors” and is seeking compensatory damages to reimburse it for suggests adds up to more than $200 million in losses.
The company, in the filing, says two years of collaboration and mutual interests in the rollout succeeding ended when the new CEO came in. It suggests Walgreens then began a “concerted effort to obstruct Cooler Screens’ performance, declare bogus breaches of the Agreement, and force Cooler Screens to remove the screens and technology” from the Smart Doors.
From the filing:
Walgreens’ president, John Standley, sent a September 23, 2021 email to Pessina that copied Brewer. Pessina forwarded the email to Wasson two days later. Standley’s email complained about alleged (a) black doors; (b) doors experiencing flickering, blurred, frozen, or distorted images; (c) doors with non-functioning out-of-stock indicators; (d) doors with condensation/icing; (e) non-functioning doors that had to be replaced with non-Smart Doors; (f) doors with electrical and/or hinge issues resulting in sparking, smoke, and/or fire; and (g) doors not displaying pricing.
In the email, Standley also claimed to be concerned about the safety of the doors and demanded that Cooler Screens stop the roll-out and cease installation until the alleged issues were worked out. At that point, Cooler Screens had installed Smart Doors in approximately 700 of the 2,500 stores (or approximately 10,300 thousand doors) anticipated by the roll-out.
Cooler Screens suggests performance issues had to do with the state of the refrigeration systems in Walgreens stores. Over the years, Walgreens chose not to invest in and neglected its retail store HVAC refrigeration systems. As a result, Walgreens’ aging refrigeration infrastructure was plagued with problems, including leaking refrigerators and coolers, condensation issues, electrical issues, faulty switches, and rust, among other things.
It says more than $1.3 million in overdue maintenance was identified by third-party, pre-install site surveys. Yet, Walgreens repeatedly refused to make any repairs to its faulty infrastructure and directed Cooler Screens to proceed with installations.
The halted deployment has also left Cooler Screens sitting on some $87 million in screens manufactured specifically to fit in Walgreens chiller system doors. This inventory was specifically designed for Walgreens stores, is or will soon be out of warranty, and is being rendered obsolete due to Walgreens’ wrongful termination; these screens cannot be repurposed.
The company argues the network was demonstrating positive sales lifts for brands visualized on the chiller door screens, but said the limited rollout has adversely affected overall ad sales – as brands want scale and national coverage.
Walgreens put out a statement a couple of weeks ago, after the legal action was publicized.
“We are disappointed that Cooler Screens is falsely claiming that anything other than their failure to perform was the basis for the termination of our contractual relationship,” said Walgreens spokesperson Jim Cohn. “The claims and allegations in Cooler Screens’ complaint are baseless and unfounded. Safety, customer experience, and meeting revenue goals are a priority for our company. Cooler Screens failed to meet its contractual obligations, and the decision to terminate the contract was based on our experience with Cooler Screens.”
Walgreens terminated the agreement in February, and as part of the termination, wants Cooler Screens to uninstall all of those transparent LCD doors.
The courts or lawyers will likely be at this for months or years before there is a resolution. Meanwhile, Cooler Screens is now actively promoting its deployment with US grocer Kroger.
Looks like there was some backlash from consumers having to be held hostage by advertising before locating their product. Not aware of any n-depth research supporting that advertising model. Reminds me of advertising on ATM screens or hybrid checkout at supermarkets. Most consumers see it as gating or barrier to intent. Ends up wasting time doors open and expelling a ton of refrigerated air which ends up costing (and then the foggy syndrome). Looks like Cooler Screens has been pretty active in the patent space as well Dave.
Nice writeup on winsight — https://www.winsightgrocerybusiness.com/technology/cooler-screens-sues-walgreens-200-million
Customers are not all that enthralled and you have to believe Walgreens management knows it.
Search on reddit/coolerscreens and see lots of threads. Here is a sample:
https://www.reddit.com/r/mildlyinfuriating/comments/pbayq0/dear_walgreens_thanks_for_the_upgrade_to_these/
Maybe not a representative cross section of Walgreens shoppers, but directionally useful.