DAVID GREENE, HOST:
A, shall we say, salty skirmish has emerged from the aisles of Trader Joe's. The grocery store chain is being sued by a now former supplier over pretzels. They're not just any pretzels. We're talking about peanut butter filled pretzels, and were talking about a lucrative business here.
We're joined by Alfred Lee, who wrote about this lawsuit for the "Los Angeles Business Journal." Alfred, good morning and welcome to the program.
ALFRED LEE: Hi. Thanks for having me on.
GREENE: So give us the nuts and bolts of this lawsuit. What are we talking about here?
LEE: Sure. There's a company in Southern California that claims to have supplied Trader Joe's for 25 years with these beloved peanut butter filled pretzels snacks, of which the famed food writer Ruth Reichl once said, you haven't lived until you've tried the two together.
GREENE: It's that good, that combination.
LEE: They're pretty popular. The company, Maxim Marketing, is saying they been cut out by Trader Joe's, which has switched suppliers to the food giant ConAgra and Maxim now suing both ConAgra and Trader Joe's.
GREENE: So the company is basically suing, saying we had the deal with you. We came up with these pretzels. We supply these pretzels to you and now you're cutting us out and you're breaking the law in doing so.
LEE: Yeah. They're suing for alleged breach of contract and also alleging the existence of a peanut butter pretzel monopoly. I realize that sounds kind of funny, but this isn't some bite-sized niche, if you will. It's a market that's worth tens of millions of dollars.
Maxim is a middle man that doesn't own its own factories and ConAgra has bought up most of the peanut butter pretzel manufacturing capabilities in the United States. And Maxim is saying that this deal prevents them from doing business.
GREENE: As angry as Maxim might be, I mean, doesn't Trader Joe's have the right to use whatever supplier it wants to?
LEE: They do. I guess it's going to have to be determined in court what, if any, contractors there is and what it might say, and also to what extent this deal is eliminating competition in the peanut butter pretzel marketplace.
GREENE: Can you, on a serious level, tell us about this product, this ubiquitous snack which, as I understand, it's pretty difficult to manufacture?
LEE: Yeah. So it's exactly what it sounds like, if you haven't had the pleasure. It's a pretzel shell stuffed with peanut butter. That might not sound very complicated, but it turns out that it was a really difficult process to perfect. It's a process called co-extrusion - which is just a fancy way of saying tubes within tubes. So if you imagine an outer tube pumping out pretzel dough and an inner tube pumping out peanut butter filling onto a belt that is then sliced and baked in a giant 100-foot ovens.
And even that might not sound very hard, but it turns out that getting the mix right and the proportions right was pretty tricky. If there is too much water in the pretzel or if the shell is too thin, the things will explode. And imagine having to clean a 100-foot oven full of peanut butter.
GREENE: Not a good thing. Let me just ask you, if I can, Alfred Lee, I mean what is Trader Joe's argument here? Why did they have to make this change and go with a different supplier?
LEE: Well, they haven't talked about this case and haven't responded in court, so far, either. Trader Joe's is kind of a notoriously difficult company to report on because they don't talk to press. They don't reveal who their suppliers are. It's not a public company, it's privately held so they haven't talked much. It was kind of align with their reputation as a tough negotiator with their suppliers. And it would also make sense from their end, because they tend to cut out middlemen to cut costs and Maxim was a middleman that didn't own its own manufacturing capabilities.
We haven't heard their side of what the relationship with Maxim was like and if there were other reasons to nix the deal.
GREENE: So if they are so notoriously secretive, how did you find out about the story?
LEE: I go through legal dockets as part of my job, and I came across an antitrust lawsuit against Trader Joe's, which piqued my curiosity, just kind of a fascinating subject for journalists to look into. Then I realized it was about peanut butter filled pretzels, and moreover, that it was about an alleged peanut butter filled pretzels monopoly and like the snack, I couldn't resist.
GREENE: Alfred Lee is a reporter at the "Los Angeles Business Journal." Alfred, thanks so much for talking to us.
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