VendingMarketWatch.com |

May 28, 2003

USA Today reports Coca Cola Co. has problems with "iFountain" multi-brand fountain dispenser and Planet Java frozen coffee dispenser
In 2001, Cocal Cola Co. introduced "iFountain" which it described as a "mini-manufacturing plant" that would add multiple brands and online marketing and diagnostic capabilities to the thousands of the company's restaurant and convenience store customers. Coke Senior Vice President Jack Wilson called the iFountain a fixture of "the online kitchen of the future." Although Coke prominently featured the iFountain in its last two annual reports, company documents and court records show iFountain already was in trouble at the time it was introduced, according to an article in USA Today.

Now, the iFountain program appears to be in danger of being shut down or overhauled after the dispensers fared badly in several markets, company records and interviews reveal. Coke documents show the iFountain is beset with technical flaws from "phantom pours" to excessive foaming, overuse of syrup and — until the problem recently was solved — possible electrical shock hazards, the report noted.

The article noted that Coke's problems with iFountain are symptomatic of broader concerns in the fountain division that have triggered an independent investigation ordered by the board of directors' audit committee. Coke also confronts continuing quality-control problems with a frozen coffee product called Planet Java. The setbacks have forced Coke to re-evaluate its relationship with publicly traded Lancer and its privately owned affiliate, Lancer FBD, which manufactures Frozen Coke, iFountain and Planet Java fountain dispensers.

During the 2000/2002 period, Coke also experienced growing problems with Lancer, the San Antonio company that supplies more than half its fountain dispensers, including dispensers for Frozen Coke, Planet Java and the multibrand iFountain. None of the fountain products performed according to expectations, but Planet Java's problems were the most visible, punctuated by Wal-Mart's decision to back out of the program, the article noted.

By late last year, Planet Java dispensers were experiencing "an almost 70 percent out-of-box failure rate," after Coke had invested $35 million in the product line, Coke records and e-mails show, the report noted. Lancer declined to comment.

To date, the iFountain also has produced more marketing froth than profit. Developed by Coke at a cost of about $50 million, the project confronted Lancer with technological complexities and demands that the smaller company was ill prepared to deal with, records show.

Coke's boasts at the 2001 National Restaurant Association trade show that iFountain dispensers were "being introduced throughout the United States" proved premature. Fourteen months later, iFountain remained on the drawing boards.

Elliot's Insight: Coca Cola Co. is a very big company. In big companies, accountability can become problematic. There are problems with iFountain, Planet Java and possibly other concepts, but this is often the case with new ventures.