Dive Brief:
- Kellogg has requested a 10-day extension to respond to a demand letter sent by former third-party distributors dated June 13, in which the distributors demanded injunctive relief and compensatory damages after Kellogg terminated their contracts to deliver Kellogg's snacks products.
- Since Kellogg announced its switch from a direct store delivery (DSD) distribution model to a warehouse distribution model, it has eliminated more than 4,000 jobs in 30 distribution centers nationwide. Some distributors are threatening to sue Kellogg for "unjust enrichment" and "breach of contract."
- Kellogg's business decision is part of a growing trend among big food producers, signaling a switch from a business-to-business model to a business-to-consumer model. Kellogg aims to cut out the middleman when distributing products to consumers in an effort to increase cost savings, profit margins and alleviate risk.
Dive Insight:
The former third-party distributors — represented by attorney Abe George — gave Kellogg 10 days starting June 13 to reply to their demand letter. If no response was received, they would commence with filing a class-action lawsuit on behalf of the distributors against the company. Kellogg asked for more time to respond, so on Wednesday George sent a follow-up letter to Kellogg, W.M. Brown and Premier Snacks to remind them of their legal duty to "identify and preserve all relevant materials that may related to this matter," in preparation for possible litigation.
This letter represents a procedural step in the legal process, laying the groundwork should the third-party distributors file a class-action lawsuit. It is still unknown whether Kellogg will choose to settle with the distributors or go to court. Also in the preservation of documents letter, it was noted that W.M. Brown and Premier Snacks have failed to respond at all.
Kellogg still has not returned repeated requests for comment.
