One of the country's largest packaged food companies suing its sugar suppliers, claiming it found a dead bird in a 2012 shipment that forced it to destroy more than 146,000 cases of finished product and lose more than $1.6 million.
Kraft Food Groups Inc. filed suit Tuesday in Chicago’s federal court against United Sugars Corp., American Crystal Sugar Co., Minn-Dak Farmers Cooperative and United States Sugar Corp., alleging breach of contract and breach of express and implied warranty.
The complaint stems from a September 2012 shipment of granular sugar the defendants delivered via railcar to Kraft's Champaign, Ill. production facility, where the ingredient was to be used for salad dressings and sandwich spreads.
The company claims it began unloading the sugar from the railcar on Sept. 20 and the next day, found bird remains in its mix tank and one of its hold tank strainers.
It takes about 14 hours of continuous pumping to unload a railcar, each of which holds more than 300,000 pounds of sugar, into these tanks, where the product is mixed with water and filtered to ensure it doesn’t contain any foreign material or contaminates before it is moved into production, according to the suit.
Saying that its tanks and strainers were cleaned before the unloading process began on Sept. 20, Kraft asserts it traced the contamination of the bird remains back to the defendants’ sugar delivery.
The company said it sent the bird remains to an expert, who determined the bird had died at least two to four weeks before the delivery based on the state of decomposition and other factors.
“United has acknowledged that the remains were in the load of sugar that Kraft unloaded from the United railcar but claims that the remains ‘somehow fell/blew into the sugar’ during the unloading process,” Kraft alleges in its suit.
But, “given the age of the remains and the enclosed nature of Kraft’s production process,” the company asserts “the only possible point of entry of the remains into the production stream was from United’s sugar delivery.”
Once it found the bird remains, Kraft said it immediately put a hold on production from the sugar delivery and eventually destroyed about 146,000 cases of finished product due to the contamination, causing it to incur more than $1.6 million in losses related to product, material and transport costs, as well as the delay and disruption in manufacturing.
Kraft brought its suit to recover those alleged losses, asserting they were caused by the defendants’ breach of the parties’ contract that requires the sugar they deliver to “be free of defects” and “of good quality.” It also asked for an award of attorney’s fees and costs.
The company, which is behind a number of iconic brands like Kraft Macaroni & Cheese, Oscar Mayer, Jell-O, and Miracle Whip, said it has bought bulk sugar products from the defendants since at least the 1990s.
Kraft, a Virginia corporation with its principal place of business in Northfield, Ill., is being represented by Darrell J. Graham, Peter S. Roeser and John E. Bucheit of Roeser Bucheit & Graham LLC in Chicago.
According to the suit United Sugars Corp. is the marketing arm of the other named defendants. It and American Crystal Sugar Co. are located in Minnesota, while United States Sugar Corp. is based out of Florida and Minn-Dak Farmers Cooperative is located in North Dakota.
Attorneys for the defendants have yet to enter an appearance in the case.