Walgreens Replaced Fridge Doors With Smart Screens. It’s Now a $200 Million Fiasco
A startup promised the pharmacy chain its high-tech coolers would track shoppers and spark an in-store ad revolution.
Illustration: Sean Dong for Bloomberg Businessweek
The refrigerated section at the flagship Walgreens on Chicago’s Magnificent Mile was glowing with frozen food and bottled drinks, but not for long. Where the fridge cases were previously lined with simple glass doors, there were door-size computer screens instead. These “smart doors” obscured shoppers’ view of the fridges’ actual contents, replacing them with virtual rows of the Gatorades, Bagel Bites and other goods it promised were inside. The digital displays had a distinct advantage over regular glass, at least for the retailer: ads. When proximity sensors detected passersby, the fridge doors started playing short videos hawking Doritos or urging customers to check out with Apple Pay. If this sounds disruptive—in the ordinary sense of the word, not Silicon Valley’s—that might have seemed a generous description in December 2023, when all the screens went blank.
At first, the outage didn’t arouse suspicion. These internet-connected fridge panels, developed by a Chicago startup called Cooler Screens Inc., frequently flickered, crashed or showed the wrong products. Every so often, they caught fire. But store managers were stuck with them. As part of a 10-year contract with Walgreens for a split of the ad revenue, Cooler Screens had installed 10,000 smart doors at hundreds of US locations like this one. It planned to install 35,000 more. By this point, Walgreens had already tried to pull out of the deal and get rid of the doors, blaming what it says was glitchy hardware and software. But Cooler Screens had temporarily prevented their removal the prior June by
suing Walgreens for breach of contract, seeking $200 million and demanding its screens stay in place. Unreported until now is that over the ensuing months of legal battling, during which Walgreens had countersued for monetary damages, Cooler Screens Chief Executive Officer Arsen Avakian decided to try a different form of pushback.
Functioning Cooler Screens smart doors once featured at a Walgreens store in Sacramento, California.Photo: Shutterstock
On Dec. 14, Avakian’s team secretly cut the data feeds to more than 100 Walgreens stores in the Chicago area. The dozen or so smart doors affected in each of these stores either glazed over with white pixels or blacked out altogether. Customers could no longer see where the Coke and Red Bull and Hot Pockets and Heineken sat, and either assumed the fridges were out of order or found themselves rummaging through one by one. Some staffers pasted pieces of paper on the opaque screens that read, for example, “assorted sports drinks & coffee.” Others filed service requests online with Cooler Screens, which had been marking all incoming complaints as resolved without fixing anything.
By the time Walgreens caught on and persuaded a judge to issue a temporary restraining order against Cooler Screens forcing it to restore the data feeds, the doors had been offline for a week. Before, it had been annoying for some screens to occasionally black out; it was much more painful for hundreds of them to crash simultaneously. Walgreens’ lawyers suggested this might have dented the company’s quarterly grocery sales. This “December attack,” as they called it, mostly targeted Illinois, the home state of Walgreens Boots Alliance Inc., the pharmacy chain’s parent company. “This was a brazen pressure tactic intended to harm Walgreens’s business and customer reputation during the busy holiday shopping season and force Walgreens to capitulate to Cooler Screens’s demands,” counsel for the retailer wrote in a court filing.
The drama illustrates how far Walgreens’ relationship with Cooler Screens has fallen. In the early years, it was downright familial: Avakian co-founded the startup with former Walgreens CEO Greg Wasson, who helped secure the deal with his old employer. The ongoing lawsuit between the two companies has dried up Cooler Screens’ main source of revenue and forced it to pitch new products to rivals including Kroger Co. “We’re somehow surviving this assassination attempt by Walgreens, which will be a miracle if we do,” says Avakian. He’s adamant that cutting off the store data feeds was a necessary step to get Walgreens to respond to overdue invoices related to internet and maintenance fees: “I got to tell them once, twice, three times, five times, ‘Guys, you got to pay the f---ing bill!’”
Walgreens says that the December attack occurred soon after it rejected a settlement demand from Cooler Screens and that Avakian’s claims of unpaid bills are bogus. “We always strive to provide the best possible experience for our customers, which is why we terminated our contract with Cooler Screens due to their failure to meet our expectations and their contractual obligations,” says Walgreens spokesperson Fraser Engerman.
This was a particularly wild episode from the gold rush known as retail media advertising, a market long dominated online by Amazon.com Inc. These days, Walgreens, Target, Best Buy and other chains are eager to stuff their physical stores with screens and claim some of the $166 billion that researcher eMarketer Inc. estimates will be up for grabs in the retail media ad market this year. (That’s triple the pre-pandemic number.) Last month, Walmart Inc. acquired TV maker
Vizio Holding Corp. in large part to ensure it has a
ready supply of screens to push ads to the 255 million people who walk into its stores each week.
Cooler Screens, which has
raised funds from Microsoft Corp. and Verizon Communications Inc., is betting that its technology will appeal to retailers without the scale or cash flow of Walmart. Avakian says the company is expanding its software beyond freezers to all kinds of store displays and has a bunch of clients ready to take a closer look once its legal headaches are resolved, though the details on interested customers are hazy. “As soon as we flip that page, which we will very shortly with Walgreens, they’re all going to say, ‘Let’s look at the core,’” says Avakian. “‘Is this real shit? Or is this bullshit?’”
Shoppers may have other perspectives. Even though Cooler Screens resumed servicing Walgreens stores after the judge’s order, its smart doors continued to crash. When a set of fridges went dark at a Walgreens in Joliet, Illinois, in early 2024, an employee taped photos of the interior shelves to the exterior of each blanked-out display. In a viral Reddit post showing the scene, a customer joked: “If only there was some other technology that would let us see what’s in there … ”
A Cooler Screens display at a Chevron gas station in Walnut Creek, California.Photographer: Jason Henry for Bloomberg Businessweek
A century ago, the refrigerated display case was the newfangled technology, supplanting iceboxes and backroom cold storage. As cooling technology became more efficient, glass-fronted refrigerators grew popular at grocery stores, followed eventually by open-air spreads of desserts and cheeses that would have spoiled in the past.
Avakian began working on his idea for the next generation of fridge cases in 2017, when he was 42. He’d grown up in Armenia, studied computer science and come to the US to get his MBA. He went on to start a well-regarded cafe chain called Argo Tea in Chicago in the 2000s. Early on, he fantasized about Argo becoming “the Starbucks of tea” but eventually set his sights higher, publicly framing the brand as “the Apple of tea.”
Within a decade, Argo had opened about 40 shops. It found wider success selling bottled beverages in supermarkets and convenience stores, including Walgreens and Kwik Trip gas stations, which became its biggest buyers. But Avakian says he was frustrated by the limitations of physical retailers—that they couldn’t offer him anything like the data tracking and personalized ads that Facebook and Google sold online. He says he spent “thousands of hours in the aisles of stores” wondering how he could “compete against all the big boys,” like Lipton and
AriZona, without a more sophisticated in-store marketing platform. So in late 2017, he says, he exited Argo and set out to make one.
What happened next to Argo is a subject of debate. Avakian maintains that Argo was profitable and booming before he left and that he had no subsequent day-to-day involvement with the company, which struggled financially, shuttered most of its locations and faced a series of lawsuits related to unpaid obligations in the following years. But legal filings indicate Avakian was both president and a director of an entity that later acquired Argo’s debt and assets, for $10.6 million, and went bankrupt during the pandemic. A default judgment was entered against Argo in favor of one landlord who had accused Avakian and others of fraudulently transferring its assets to a shell corporation to avoid paying creditors. (A spokesperson for Avakian says, “The facts show Arsen was wrongly accused.”)
Arsen Avakian in 2017 at an Argo Tea shop in Chicago.Photographer: John J. Kim/Chicago Tribune/TNS/Alamy
Tea aside, Avakian discussed the concept that would become Cooler Screens with friends in Chicago business circles, including Wasson. As head of Walgreens from 2009 to 2015, Wasson is most remembered for overseeing its
fraught international merger with Alliance Boots, a European chain. But he also bet on technology, gussying up its pharmacies with tablets, acquiring e-tailer Drugstore.com and leading the company’s $140 million investment in a then-promising startup called Theranos. (
Oops.)
The big idea behind Cooler Screens was to digitize in-store real estate that Avakian and Wasson saw as wasted. In lieu of glass freezer doors, Avakian proposed a giant iPhone-like screen that could amass loads of consumer data for advertising, track product inventory and update prices. Wasson was particularly excited about the latter feature, envisioning that the technology could be used to automate discounts digitally. Working at Walgreens since the 1980s, he had witnessed what a time suck it was for employees to manually change all the shelf stickers. “We used to put 60 million Sunday ads on the street, so every Saturday evening, a store had to have somebody hang those ad tags,” Wasson says.
“Arsen thought it was very, very important to be able to walk up to the door and ask, ‘Where’s the Ben & Jerry’s?’”
The screens were also a potential vehicle for targeted ads and for what’s known as
dynamic pricing—that is, lowering or jacking up prices at a moment’s notice, to whatever the underlying software has calculated shoppers will likely pay at that time or location. Imagine a retailer increasing the cost of bottled water and serving promos for ice cream on scorching summer afternoons. (A Cooler Screens spokesperson says the startup did not end up providing this dynamic pricing capability.)
Cooler Screens’ initial prototypes, constructed by third-party manufacturers, were able to display animated promos and a grid of product images that the industry calls planograms. They had external sensors to monitor shopper activity and watch for signs of attention, plus cameras inside the smart door to keep track of which items were in stock. Avakian stressed that data was anonymized to avoid any “creepy” privacy overreach. Wasson set up a demo meeting with billionaire
Stefano Pessina, Walgreens’ largest shareholder and his successor as CEO, with whom he remained friendly after departing the pharmacy chain. “‘We’re not tech guys,’” Avakian remembers the Walgreens team saying. “‘Prove it to us.’” He and Wasson say that based on their PowerPoint presentation, the company approved a six-store pilot program for 2018.
Pilot data showed the screens resulting in more than a 5% incremental sales jump, and Walgreens committed to installing them in an additional 50 stores the next year as part of a decade-long deal. In late 2020, after Walgreens agreed to add another 2,450 locations, Cooler Screens raised $80 million from investors including Silicon Valley Bank. While it also conducted small rollouts with partners such as Kroger, CVS and Chevron gas stations, the language of its contract with Walgreens kept it tightly bound to that retailer. Walgreens, for example, specifically restricted how much Cooler Screens could work with CVS and Walmart, both direct competitors. The startup filled a cramped office space in downtown Chicago with 75 employees. Test screens leaned against the walls.
By this time, say eight people involved, development was something of a mess. Wasson was focused on his family’s investment office and left Avakian in charge of the day-to-day. Avakian kept pushing the team to make the next iteration of the door look more like an iPhone. He recruited an industrial designer from Apple Inc. and demanded a Siri-esque voice feature. “Arsen thought it was very, very important to be able to walk up to the door and ask, ‘Where’s the Ben & Jerry’s?’” recalls a former product leader who, like many current and former employees, spoke on condition of anonymity for fear of retaliation. “It was like, ‘Dude, I’m spending 20 hours a day just trying to get the software to work.’” (A Cooler Screens spokesperson says that priorities were set by the heads of product and technology, not Avakian, and that the process is supposed to be “creative, high pressure, but very rewarding.”)
The wider Walgreens rollout commenced in spring 2021, around the time Covid-19 vaccines were easing stay-at-home restrictions. Cooler Screens began installing its new doors at the rate of about 200 stores a month, with the belief that scaling up faster would pay off in marketing dollars. Soon, a sea of aisle screens looped short videos featuring bubbling Pepsis and Jimmy Dean sausage sandwiches. Families seemed to get a kick out of some of the digital decor, such as a festive gingerbread man that danced across displays during the holiday season.
Behind the scenes, the ads were comically patched together, says Daniel Simmons, then the motion-graphic designer for Cooler Screens. Without custom media assets, Simmons recalls “squashing and stretching” TV spots for brands like Bud Light to fit the bizarre dimensions of a fridge. “I was basically butchering an entire ad campaign with zero oversight,” he says. Cooler Screens says brands and their agencies produce all the creative content, not the startup’s employees.
Cooler Screens had outsourced sales of available advertising slots for its fridges to Yahoo, then a subsidiary of its investor Verizon. But Yahoo barely topped $3 million in sales for the fridges in 2021, 91% lower than projected, a Cooler Screens court filing said. The problem, according to three former Cooler Screens executives and a former Yahoo executive, was that their clients thought of the screens as “shopper marketing,” an old-timey ad category that covered in-store promos like the balloons or cardboard displays that clerks hang over cases of beer. Spending in this area was far lower than the more lucrative digital ad rates Avakian hoped to charge. One of the former Cooler Screens execs says that Avakian wanted marketing dollars well above what the industry was willing to pay and that his lieutenants could be preposterously condescending on calls with the Yahoo sales team, which at times devolved into shouting matches. “The Yahoo people hated them!” this former exec says. “Their MO was to ride them [Yahoo] like Secretariat.” (A Cooler Screens spokesperson says that this description is inaccurate and that Avakian’s relationship with Yahoo executives remained positive.)
As outlined in a subsequent lawsuit between the companies, the relationship soon blew up. Cooler Screens alleged in court filings that Yahoo balked at paying what it believed was a $19 million contractual fee to make up for its ad-revenue shortfall. Yahoo accused Avakian of hiring his own competing ad-sales team in violation of the deal. Avakian says Yahoo never lived up to its end of the bargain. The parties settled for undisclosed terms in 2022. (Yahoo declined to comment.)
Shoppers could no longer see which food and drinks were inside the smart doors during what Walgreens called Cooler Screens’ “December attack.”Source: Rob Klas
Meanwhile, Avakian’s relationship with Walgreens was also souring. Pessina and the board had brought on Starbucks Corp. veteran Rosalind Brewer as CEO. On a tour of various Walgreens stores, according to a court filing, she compared Cooler Screens’ fridges, derisively, to Las Vegas. (Brewer didn’t respond to a request for comment.) A source close to both companies says the word that trickled down from Brewer’s team was blunter: “Why do our stores look like an effing casino?”
In March 2022, lawyers for Walgreens sent a second notice to Cooler Screens complaining of breach of contract. The first, six months earlier, had claimed widespread freezer glitches. This one alleged that the screens were continually failing to meet their goals for net ad revenue. Walgreens says each smart door ended up bringing in just $215 that year, or a mere 59¢ a day, about half the contractual minimum and a pittance when measured against the thousands of dollars each door cost to build and install. (Cooler Screens says it met its obligations and that the ad-revenue figures are inaccurate.)
Brewer seemed more upset with the fridges’ technical performance. Their digital planograms could be adjusted over the internet, but they depended on store staff to physically stock goods accordingly. Too often, customers opened a door projecting rows of milk only to discover soda or empty shelves instead. The internal cameras were supposed to detect and dim out-of-stock items, but they were inconsistent. And that was when the screens worked at all: Walgreens was plagued with “dark doors,” blackened or distorted displays that Cooler Screens’ remote monitoring system showed as functioning properly.
Rosalind Brewer in 2022 while CEO of Walgreens.Photographer: Lucy Hewett/Redux
It turned out an electricity issue was likely causing the crashes, which wasn’t necessarily Cooler Screens’ fault. Walgreens’ store infrastructure was often dated, according to Cooler Screens, and power surges tripped up the displays. Two people familiar with the matter say there was a trick to root out the problem: When shoppers swung open the freezer doors, Cooler Screens employees could use photos taken by the cameras on the inside of the frames to see nearby refrigerators and determine which doors were dark. Cooler Screens says that no pictures were ever taken of customers or to identify dark doors, and that it’s technically impossible to do so given how the cameras were mounted.
The startup raced to repair the screens. Despite the crashes, it says customer surveys were positive, and
clips of the dancing gingerbread man were a surprise hit on TikTok. But it acknowledges that the broken doors also led to a swell of social media hate. “I got dozens of life-threatening emails—death threats over a freaking screen in a store,” Avakian says. The smart door installation was halted at 10,300 screens in 700 stores, roughly one-quarter the number planned. Cooler Screens blames its advertising woes on this suspended rollout: Avakian says brands would’ve invested way more money if only Walgreens had allowed him to expand to all 2,500 locations, as it had originally agreed to. Wasson repeatedly talked with Pessina by phone to heal the relationship, to no avail. In February 2023, Walgreens effectively told Cooler Screens it was terminating their contract.
Avakian was furious. He heard Walgreens was bad-mouthing Cooler Screens to marketing firms and says the chain turned off its access to point-of-sale data for products outside the cold section, which brands like Revlon needed to confirm lipstick ads on fridges really were enticing shoppers to walk over to the beauty aisle. “The rug got pulled,” he says.
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