LOS ANGELES (CN) - Nestle abuses its market power to squeeze competing ice cream-makers off supermarket shelves - including makers of healthier ice cream, a sugar-free ice cream-maker claims in an antitrust complaint.
Clemmy's, of Rancho Mirage, sued Nestle and its Dreyer's subsidiary in Superior Court, alleging restraint of trade, unfair competition and intentional interference.
Food companies live and die by shelf space, and many lawsuits have been filed challenging the way large food companies and supermarkets deal with it.
Clemmy's claims that Nestle pressures major supermarkets such as Kroger and Safeway to limit the amount of Clemmy's sugar-free ice cream on shelves, and/or to place Clemmy's ice cream in the "far corner of the freezer next to the awful tasting brand no one is buying."
Nestle owns the Dreyer's Edy's and Skinny Cow brands as well as its own.
U.S. ice cream and frozen dessert sales in 2011 topped $25 billion, with packaged ice cream accounting for 55 percent of total sales, according to industry publications.
Nestle dominates the market, with 24 percent of sales, followed by Unilever with 19 percent, according to a May 2012 report on food-navigator.com.
Clemmy's says it was founded in 2007 by Jon Gordon, after he was diagnosed with "pre-diabetes." Citing the "obesity epidemic in America," and tracing it to "excess sugar consumption," Clemmy's claims it made "the first completely sugar-free, lactose-free, gluten-free, super-premium ice cream on the market."
That caught Nestle's attention, Clemmy's says, because its upstart ice cream threatened the food giant's stranglehold on the "'better for you'" ice cream market, dominated by Nestle brands Dreyer's, Edy's and Skinny Cow.
Clemmy's claims that were it not for Nestle's illegal restraint of trade, Clemmy's would be a "household name," with supermarket aisles "overflowing" with sugar-free ice cream.
"(W)hen Nestle learned of Clemmy's and its 100 percent sugar-free ice cream, Nestle sensed a threat to its continued hegemony over the 'better for you' ice cream sections in supermarkets," the complaint states. "Nestle realized that Clemmy's ice cream is not only healthier than Nestle 'better for you' ice cream, but also tastes better - facts that, if widely known, would logically result in a dramatic decrease in Nestle's share in (and dominance over) the 'better for you' ice cream market.
"Nestle thus commenced a coordinated and intentional campaign to shut down Clemmy's and make it as difficult as possible for the public to discover Clemmy's superior alternative product.
"Nestle's predominant market share, particularly when combined with certain peculiarities of the supermarket industry, enabled its campaign."
Clemmy's claims that Nestle uses its "disproportionate access" to influence everything from how ice cream is shelved "to whether a competitor's product ever sees the light of day at all."
Clemmy's claims that Nestle sabotaged Clemmy's deals with nonparties Safeway and Kroger.
Clemmy's negotiated a nationwide deal last year with Kroger to carry its ice cream, but Kroger's called it off at the last moment, "due solely to the collusion of Nestle and Kroger," according to the complaint.
"Just two days after the Clemmy's nationwide expansion was documents in Kroger's Kompass Program, on the afternoon of Jan. 26, 2012, without any explanation or warning," Kroger said "that plans had changed and Clemmy's was no longer going national with Kroger," the complaint states. The only reason that Kroger provided was that someone had "goofed," according to the complaint.
Clemmy's claims that Nestle used "its undue influence" to kill the deal.
It claims that Nestle used similar tactics to limit the amount of Clemmy's ice cream sold in Safeway stores.
"Nestle took (and continues to take) full advantage of its power to intentionally, unfairly, and illegally limit the growth of Clemmy's and the sales of Clemmy's sugar-free ice cream in supermarkets throughout the country," the complaint states.
Clemmy's seeks an injunction, treble damages of $10 million, and costs.
It is represented by Keith Wesley with Browne George Ross.
A Nestle spokeswoman told Courthouse News in an email: "We have reviewed the complaint, and we strongly believe that the allegations have no basis. We look forward to vigorously defending ourselves in court."