The beverage giant plans to help finance an estimated $30 million equipment purchase to enable Burger King to introduce a new frozen-slush drink, according to executives familiar with the deal.
The product, Frozen Coke, is being added in a large number of BK's 7,840 U.S. restaurants in the spring, franchisees said. It has been tested in a limited number of outlets (AA, May 25).
Frozen Coke will be offered in at least two flavors, including Coca-Cola Classic, and positioned as a snack or treat rather than as a beverage.
Similar to slush drinks sold in convenience stores and snack bars, the drink requires new equipment, and that's a thorny issue for cost-conscious restaurant franchisees. The dispensers cost an estimated $3,800 each.
WINNING BK'S FAVOR
Coca-Cola's help in paying for the dispensers makes it more attractive for BK to take on the product broadly. In addition, it could put the beverage marketer in an even more favorable light than it already is with the nation's No. 2 fast-food chain.
Coca-Cola's fountain-sales contract with BK expires at the end of 2000. While that looks to be an opportunity for archrival Pepsi-Cola Co. to jump in, the new BK deal could help Coke's chances.
Pepsi-Cola is aggressively pushing to gain more business in restaurants and last year filed a lawsuit against Coca-Cola over its practices in this sector of the business.
"Coca-Cola is a valued partner with the Burger King system," said a BK spokeswoman. But she declined to comment on future contract talks or the current pact involving Frozen Coke.
Said Jeff Dabbs, an equity analyst with Kercheville & Co., San Antonio, who tracks Lancer Corp., one of the equipment suppliers involved in the Frozen Coke deal, Coca-Cola's fountain beverage division has been aggressive in cobbling together the new program. Lancer announced Jan. 5 that it had signed a $10 million equipment order with Burger King's purchasing arm.
ADS MARKET BY MARKET
Instead of a big-splash national introduction, Burger King will first add Frozen Coke as an optional menu item advertised on a market-by-market basis.
Based on positive test results, many BK franchisees are expected to opt for the slush.
"It's excellent," said an executive with a multi-unit Burger King franchise who plans to add Frozen Coke to his restaurants. "I think it will be a real traffic driver that people will go out of their way to come see us for."
The BK product mirrors a similar launch at McDonald's with the McFlurry ice cream treat. Both are designed to bring in added business at snack time.
Because of its quick success in generating additional sales, McFlurry has been snapped up by most McDonald's Corp. franchisees in the past year, but has not