Haagen-Dazs Is Victor in Distribution Fight
Haagen-Dazs has won the first round in its food fight with Double Rainbow Gourmet Ice Creams of San Francisco as a federal court approved the super-premium ice cream maker’s policy of prohibiting its distributors from selling competing brands.
U.S. District Court Judge Charles A. Legge in San Francisco ruled Wednesday that the Teaneck, N.J.-based producer of ice cream with lots of buttermilk and little air did not break the law when it abruptly ended a distribution agreement with Two Count Co. in 1985. The Newark, Calif.-based distributor had begun selling to stores desserts by rival Double Rainbow.
“Competition in the ice cream market is flourishing and interbrand competition is intense. Antitrust lawsuits are no substitute for such true competition. . . . Separate distribution has led to increased and successful interbrand competition,” Legge ruled.
Two Count and Double Rainbow immediately vowed to appeal. “We’re extremely disappointed with that decision. . . . It’s just not fair,” said Robert J. Walsh, president of Two Count.
Suit Filed in ’85
“Absolutely; we’re going to appeal. We think the decision bears no relation to the facts in the case,” said Joseph M. Alioto of Alioto & Alioto, a San Francisco firm representing Double Rainbow.
Legge had ruled--after reading legal briefs and hearing oral arguments--that the case did not require a jury trial. Alioto and Walsh said they will challenge that and ask the 9th District of U.S. Court of Appeals to order one.
Double Rainbow filed its antitrust suit in Minneapolis in November, 1985, against Haagen-Dazs; its Minneapolis-based parent, Pillsbury Co., and Oakland-based Dreyer’s Grand Ice Cream, then the main Haagen-Dazs distributor in Northern California and northwestern Nevada. The suit, later moved to San Francisco, claimed that Double Rainbow lost at least $20 million in sales and $5 million in profits because Haagen-Dazs exploited its alleged dominance of the market for gourmet ice cream.
Alioto said Legge ruled that gourmet ice cream was not a separate market from the national ice cream market and that Haagen-Dazs’ dominance among premium brands did not give it monopoly power in the overall market. But Alioto contended that gourmet ice cream is marketed and distributed very differently from other ice cream.
“Our distributor policy is healthy for competition, and the facts have proved it,” Haagen-Dazs President Mark L. Stevens said in a statement.
Yet even while fighting court battles to defend its exclusive distributor policy, Haagen-Dazs has begun to bypass independent distributors entirely. Last year, the firm doubled to 30% the share of ice cream moving through its own distribution centers. Dreyer’s stopped distributing Haagen-Dazs in March, 1986.
Pillsbury stock closed at $35, down 75 cents, in trading of 260,400 shares on the New York Stock Exchange. Haagen-Dazs’ sales last year rose 11% to $174 million, a tiny fraction of Pillsbury’s $6.13 billion in overall sales.
