BROKER GROUP LOSES APPEAL IN WAKEFERN, MMI LAWSUIT

RICHARD TURCSIK

HACKENSACK, N.J. -- A group of private-label brokers failed here in a legal action aimed at forcing Wakefern Food Corp. to end a private-label brokerage arrangement.

The Superior Court of New Jersey, Appellate Division, upheld a lower court's dismissal of a lawsuit brought by a group of private-label brokers against Wakefern Food Corp., Elizabeth, N.J., and Marketing Management Inc., a Fort Worth, Texas, firm it retained to represent its private-label interests.

The Private Label Brokers Group, the Matawan, N.J.-based association representing 30 brokers in the New York/New Jersey metropolitan area, which filed the lawsuit, claimed that Wakefern's arrangement with MMI could drive them out of business.

The group said, however, it was unlikely to appeal the ruling, which was handed down earlier this month, even though "the brokers continue to believe that the MMI program is violative of federal and state law."

Wakefern retained MMI, a national store-brand marketing company, in late 1994 as a private-label consulting firm to increase the sales and competitiveness of its ShopRite private-label lines. But private-label food brokers balked at the agreement, expressing concern that the arrangement would cause their manufacturers to switch to MMI and paralyze their own business.

In 1995, the PLBG filed a lawsuit in Elizabeth, N.J., seeking to terminate the cooperative wholesaler's arrangement with MMI. The basis of the original ruling, now upheld by the appellate court, was that only about 25% of Wakefern's private-label suppliers had selected MMI as their broker as of 1995.

"I would imagine the number of suppliers now using MMI is higher, but I do not have a specific number," said William Slattery, the attorney with the Short Hills, N.J., law firm of Slattery, McElwee & Jespersen, which represented the PLBG.

Thomas P. Infusino, chairman of Wakefern, said in a statement, "We are gratified and obviously pleased that the court has confirmed our strong belief that the plaintiff's complaint was without merit.

"We will continue to conduct business in a manner which we believe will help our entire membership and give all ShopRite stores the ability to offer their customers a total shopping experience, with the highest quality goods and services that represent the best value for their families."

Officials at Wakefern declined additional comment.

"MMI is particularly elated by this favorable Appellate Court decision upholding our Marketing Development Program, and our continued support to the store-brand industry. We can now concentrate our full energies on expanding and enhancing the future of our store brands," Herbert L. Pease, chairman and chief executive officer of MMI, said in a statement.

Several broker and manufacturer sources contacted by SN expressed disappointment in the ruling. However, Robert C. Schwarze, president and CEO of the Association of Sales & Marketing Cos., the Reston, Va.-based trade association representing the broker industry, said since the courts have ruled in favor of Wakefern and MMI it is time to move on and drop the matter.

"We definitely feel that the private-label broker does and will continue to make a valuable contribution toward assuring that the customer and the consumer have an opportunity for variety and value," Schwarze said.

"Wakefern has continued to purchase product through brokers -- private-label brokers -- who it feels do add value to the private-label program. I sincerely hope that now that there has been a court decision, things won't change," he said.

Richard Sullivan, executive director of the PLBG, said it was ironic that the "failure" of the MMI program was the basis of the courts' upholding the arrangement. Sullivan said only 100 of the 400 suppliers that sold to Wakefern had selected MMI as their broker, which was part of Wakefern's argument.

"All suppliers and private-label brokers should be diligent in making sure that Wakefern and other large buyers live up to the representation that Wakefern made to [the court] and upon which [the court] based its determination to uphold the preferred broker arrangement," Sullivan said.

Jodi Grulke, an MMI spokeswoman, said the decision on which private-label products to carry was always left up to Wakefern.

"We are always offering new items. When we come across something new, [Wakefern] will get new item presentations, and they get to pick the items," she said. Grulke said MMI is national in scope and counts Hannaford Bros., Genuardi's Family Markets, Shurfine, Associated Wholesale Grocers -- Kansas City, all U.S. divisions of Ahold and the Jewel-Osco division of American Stores Co. among its clients.

One of Wakefern's suppliers, who said he uses MMI in other operating areas, said he refused to use MMI when dealing with Wakefern.

"Early on, MMI did approach us, and we told them, 'No, we are not going to switch.' Our broker who represents us in the New York area has represented us for over 20 years. He knows the business and the New York area," the supplier said.

"While we are not going to have MMI or anyone else tell us what we are going to have to do, we do use them in markets where maybe we didn't have representation or it is a new market for us. That is something different," the supplier said.

One leading New York-area food broker, who asked for anonymity, said, "Unfortunately, a lot of people who were loyal to Wakefern for many, many years had Wakefern turn their backs on them. They went far beyond what normal brokers do to make sure that they had the business at the right price, right product. Unfortunately, they lost all of their business."