Business Irish

Wednesday 12 December 2018

Embattled Aryzta set to go to trial next year in American case

Kevin Toland took over as chief executive of Aryzta last September
Kevin Toland took over as chief executive of Aryzta last September
John Mulligan

John Mulligan

The trial in a case taken by the US-based McKee Food against Swiss-Irish group Aryzta is set to get under way next year in Tennessee.

The US snack giant has previously claimed it will lose millions of dollars of profits because it alleges that Aryzta couldn't fulfil its orders properly and disrupted McKee's own supply chain.

McKee sells well-known snacks in the United States, such as those under the Little Debbie brand.

The group has annual sales of about $1.5bn (€1.2bn).

Aryzta, which owns the Cuisine de France brand, has denied that it was directly responsible for being unable to fulfil any orders.

It has claimed that Aryzta's production facilities in Chicago - called Cloverhill and Cicero - were hit by a US immigration crackdown, which impacted staff supplied to those facilities by a third-party agency.

Aryzta, whose CEO is Kevin Toland, has told the Tennessee court that it's relying on the "defence of impossibility of performance", as result of the sudden labour shortage.

The immigration crackdown last year saw as many as 800 staff, or a third of the workforce, being forced out of the Cloverhill facilities.

In February, Aryzta sold the Cloverhill facility to Hostess Brands, and its Cicero plant to Bimbo Bakeries.

Aryzta said it generated proceeds of €57m from the sale of the plants. Aryzta paid an estimated €530m for the sites in 2014.

Aryzta had a contract to manufacture a number of products for McKee Foods.

The US firm terminated its contract with Aryzta last August, despite the fact that the move would result in a number of its products being temporarily unavailable to consumers.

McKee claimed Aryzta had missed shipments, shipped incomplete orders, shipped incorrect orders and shipped orders late.

It claimed that "significant damage" would occur in the market for its products if it continued to submit orders that were not filled.

McKee and Aryzta have also secured a court order that enables them to prevent the public dissemination of confidential business information during the case.

Such confidential information includes sales information, trade secrets, or other confidential research, development or commercial information, and shall include "information not generally disseminated or available to the public", according to court filings.

Aryzta is being represented in the case by the Nashville office of Michigan-headquartered law firm Dickinson Wright. McKee is being represented by Chattanooga firm Chambliss.

The trial, due to begin on July 16 next year, is slated to last five days.

A separate lawsuit being taken against Aryzta in the US by Massachusetts firm Groom Construction has already revealed part of the Swiss-Irish group's former expansion plans in America.

The action filed this year by Groom Construction claimed that Aryzta had planned to roll out as many as 2,500 in-store bakeries in America under the Swiss-Irish firm's Hungarian Fornetti brand by 2020.

Mr Toland - the former CEO of DAA, which operates Dublin and Cork airports - took over at Aryzta last September to spearhead a turnaround for the ailing business.

Reporting interim results last month, Aryzta said its earnings before interest, tax, depreciation and amortisation (ebitda), slumped almost 30pc to €161.3m in the first half of its financial year. Its revenue fell 6.3pc to €1.79bn.

Irish Independent

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