Exclusive Obligation Claimed : ICEE-USA Is Sued Over Its Deal With Coca Cola
ICEE-USA, the Anaheim maker and marketer of a flavored slush drink, said Monday that it has been sued by a supplier and co-partner in a syrup-making company in an effort to halt ICEE’s recently announced contract to purchase Coca Cola and Fanta brand syrups.
Universal Industries Corp., an Aberdeen, Miss., flavoring maker, claims the agreement between ICEE and Coca Cola USA violated an exclusive obligation ICEE has to purchase syrups from Western Syrup Co., which is based in Santa Fe Springs.
ICEE, however, denies the allegation. “Under the agreement forming Western Syrup, there was no agreement to buy syrup from Western,” said Lawrence C. Maltz, ICEE’s president.
ICEE and Universal, which is reorganizing its debts under U.S. Bankruptcy Court protection in Aberdeen, each own 50% of Western Syrup.
The deal with Coca Cola USA is expected to boost sales for ICEE because of the popularity of Coca Cola’s soft drinks. But at the same time, it will reduce ICEE’s purchases from Western, thus cutting into Universal’s income at a critical time for that company.
Deal Would Cut Orders
ICEE, which reported sales of about $13 million last year, currently buys 40% to 45% of its syrup from Western, 20% directly from Universal and the rest from two other sources, Maltz said. The agreement with Coca Cola would drastically reduce the orders from Western Syrup, he added.
But, Maltz said, his company’s new ICEE Pop, a frozen yrup bar, will come from Western Syrup and will partially make up for Western’s lost revenues from ICEE’s deal with Coke. And Western’s management told him it has “good prospective new business.”
“We want Western Syrup to make money,” Maltz said. “But for us, the advantages of the Coca Cola deal far outweigh any problems with Western Syrup. Neither one of us has ever taken any money out of Western Syrup. It’s a very small part of our business and of Universal’s.”
Mac Howard, Universal’s president, could not be reached for comment. He is scheduled to testify in a deposition Thursday about the grounds for the lawsuit.
