Maryland salad dressing maker Tessemae's hit with supplier lawsuits

Tessemae’s, a fast-growing maker of natural salad dressings based in Essex, has been sued in recent months by a handful of its suppliers, including an Elkridge-based contract manufacturer that filed a lawsuit in April seeking more than $150,000 in damages.

Maryland Packaging Ltd. Inc., which co-packs and co-makes products for food manufacturers, alleged in the suit that Tessemae’s failed to pay for more than $60,000 worth of services and owes nearly $90,000 in late fees.

The packaging company began blending and packaging single-serving salad toppings in spring 2016 for Tessemae salad kits that were launched nationally and sold in Kroger supermarkets. The salad dressing company began falling behind on payments last May, then halted production in July, according to the lawsuit filed in in Baltimore County Circuit Court.

“We worked with them very closely, trying to assist them,” said Marwan Moheyeldien, CEO of Maryland Packaging. “Unfortunately, they stopped paying us altogether almost eight months ago. They promised time and time again to pay and never lived up to the promise.”

Greg Vetter, CEO of Tessemae’s, which he and his two brothers started in Annapolis nine years ago based on their mother’s all-natural salad dressing recipe, has a different view of the events.

Tessemae’s was forced to stop doing business with the contractor and find a new packer, Vetter said, because the Elkridge company failed to follow its procedures. Tessmae’s offered to set up a payment plan to cover the raw materials, but Maryland Packaging refused, Vetter said.

“They were being completely unreasonable,” he said. “We would have paid that money back if they had accepted the plan.”

The Maryland Packaging lawsuit is one of five filed by suppliers, including olive oil distributors, against Tessemae’s since July, seeking more than $417,000 in total.

Despite those disputes, Vetter said Tessemae’s business is healthy and growing, in both retail and food service, including a deal to make some dressings for Starbucks.

“We’re coming off our best month ever,” and have become the fastest-growing salad dressing company in the country, Vetter said. “There’s nothing going on with the business. This is something that happens with brands and raw materials suppliers.”

Tessemae's, which got its start in a single Whole Foods store, now sells its lineup of dressings, ketchup, mustard and marinades at national grocers, retailers and hotel chains and is on the shelves at about 6,000 U.S. stores, including Whole Foods, Kroger, Walmart, Harris Teeter, Wegmans and Fresh Market.

In 2015, Under Armour CEO Kevin Plank and his brother Scott Plank invested $5 million in the company, which at the time had $25 million in sales. In March, Tessemae’s announced it had joined forces with Spike Gjerde, a Baltimore restaurateur, and begun selling Gjerde’s Snake Oil hot sauce through its website. Sales of Tessemae’s at Kroger, the largest U.S. supermarket chain, grew more than 87 percent in March compared with the same month last year, Vetter said.

Vetter said some of the court cases stemmed from vendors’ violations of the contracts, and that suppliers have been quicker to file suit as the company has grown and become more successful.

In July, Cascade Fruit Marketing Inc., an Oregon distributor of olive oil, sued Tessemae’s for breach of contract, saying the Essex company owes $45,600 for a supply of olive oil. AMD Oil Sales, a New Jersey food distributor, said in a lawsuit filed in August that the salad dressing maker owes it nearly $78,000, the balance of a delivery of more than $104,500 worth of olive oil.

Another lawsuit was filed in January by Irvine, Calif.-based Advantage Sales and Marketing, a sales and marketing agency with clients in the consumer packaged goods industry, seeking $110,900 for unpaid marketing services. All three were filed in Baltimore County Circuit Court.

AEG Environmental Inc., of Westminster, a waste disposal company, filed a complaint in Carroll County District Court in April that says Tessemae’s owes it nearly $10,000 for removing and disposing of expired food, such as dip and mayonnaise, in December from a storage facility in Essex.

Maryland Packaging’s Moheyeldien said his company held on to the Tessemae products because of lack of payment, which led to the products expiring and needing to be thrown out. He said his company couldn’t offer its 200 employees big holiday bonuses last year because of the payment default.

“It ended up hurting our relationship with other vendors that we owned money at the time,” he said.

Vetter said Tessemae’s hopes to rely less on contractors and more on its in-house operation. The company recently refinanced some of its high interest debt, which should help it invest more in in-house manufacturing and raw materials.

“Our problem is we can’t make enough salad dressing for the demand that we have right now,” he said. “We’re in the process of scaling the business.”

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