Problems are piling up at Walgreens — not least among them a bizarre, $200 million legal tussle with one of the drugstore giant’s vendors that has become “very awkward” for the company’s 82-year-old chairman, The Post has learned.
Billionaire Stefano Pessina — whose Walgreens Boots Alliance disclosed last week it will lay off 5% of corporate staff as it battles pharmacist walkouts and a shoplifting epidemic — is meanwhile caught in the middle of an ugly lawsuit from Cooler Screens, a startup co-founded by former Walgreens CEO Greg Wasson.
In 2019, Pessina — who according to a source maintains a “cordial” relationship with Wasson despite the litigation and isn’t named in the suit — greenlighted a multiyear contract to install video screens that flash ads on refrigerator doors at Walgreens stores. The tie-up grew as Cooler Screens, also backed by Microsoft, installed 10,300 “smart doors” in some 700 stores, according to court papers.
But trouble started two years later when Pessina also installed Roz Brewer, a former Starbucks executive, as the new Walgreens CEO. During a tour of Walgreens stores early in her tenure, Brewer expressed distaste for the Cooler Screens’ doors, comparing them in a “derogatory” way to “Las Vegas,” according to court filings.
Cooler Screens was among the “pet projects” of Pessina that Brewer scrapped during her rocky, two-and-a-half-year tenure that ended in September, according to a source close to the company. She was replaced a month later by healthcare veteran Tim Wentworth amid reports that her own forays into healthcare, including $14 billion worth of acquisitions, didn’t bear fruit.
Brewer didn’t immediately respond to a request for comment from The Post.
Elsewhere, Brewer had nixed a 2018 pilot with Kroger that allowed customers to order grocery items online and pick them up at Walgreens stores in Kentucky. She had also ended a partnership with Microsoft and Adobe that allowed Walgreens to personalize retail and pharmacy offerings.
“The tensions [between Pessina and Brewer] were known within Walgreens,” the source with knowledge of their relationship said. “She made it clear that she was not there to take direction from the billionaire owner of Walgreens and former CEO.”
Indeed, Brewer made the decision to cancel the Cooler Screens contract, and “she was unwilling to discuss it with those board members and executives who questioned her about it,” according to Cooler Screens’ complaint.
“It wouldn’t surprise me if Roz and Stefano butted heads,” Raymond James analyst John Ransom said. Citing his experience covering the company rather than any direct knowledge of the alleged dispute, Ransom said there was a “generational gap between them.”
Now, Walgreens is demanding that Cooler Screens take its doors back. The retailer removed five of them this summer, alleging in court filings that some doors caught on fire, didn’t function properly and didn’t generate the promised revenue. Walgreens claims the contract has been over since February and that the doors generated 1,496 work orders, including doors that went dark.
That was after Deerpark, Ill-based Cooler Screens sued Walgreens in June, alleging breach of contract and blaming technical problems on Walgreens’ poor maintenance of its refrigerators and freezers, pointing to records showing that Walgreens was behind on $1.3 million of overdue maintenance on its refrigeration equipment, according to court papers.
Cooler Screens cites Pessina’s “steadfast support and encouragement” as a driving force behind the partnership. The Chicago-based tech company refers to Pessina at least eight times in its heavily redacted complaint while Walgreens does not mention its chairman in its counter claim by name at all.
“It is very awkward for Stefano,” said the source familiar with the situation, who says that Pessina had advocated for Cooler Screens “behind the scenes” and still supports the company.
Pessina — whose Swiss-based Alliance Boots pharmacy chain merged with Walgreens in 2014, with Wasson leaving shortly thereafter after five years at the helm — didn’t respond to an email requesting comment.
A Walgreens spokesperson said Pessina was not available to speak with The Post and that the company does not comment on pending litigation. Wasson and Cooler Screens’ chief executive and co-founder Arsen Avakian also declined to comment.
The “smart doors” had been driving between a 2% and 3% bump in incremental sales at Walgreens locations where they were in use, according to a source with knowledge of the situation. That revenue, however, has since dried up as many advertisers were scared off by the litigation, according to court filings.
There’s also a risk that the doors could simply go dark, with Cooler Screens and Walgreens blaming each other for not paying Verizon and T-Mobile bills that keep ads flowing, according to court papers.
At a Walgreens in Manhattan on West 38th Street and Broadway last week, a Pepsi ad repeated itself, showing a can with the message “New Look. Same Great Taste.”
Despite the discord with Walgreens, Cooler Screens has a nearly four-year partnership with Kroger, which is on target to have 100 stores by the end of the year, according to a source with knowledge of the deal. A press release this year states that Kroger has committed to 500 stores. The tech firm also works with Giant Eagle and Chevron, but Walgreens is by far its largest client.
A judge hasn’t yet ruled on an Oct. 10 motion by Walgreens to dismiss the Cooler Screens suit. The law firms representing Cooler Screens, including lead counsel Armstrong Teasdale of Chicago, are doing so on a contingency basis, a person with knowledge of the situation told The Post.