“If HEB does have a near monopoly, they have certainly earned it,” he said. “They are the envy of their competitors.”
As much as 80% of Delta Produce’s business was through H-E-B, according to court documents.
The deal grew to include avocados and watermelons. Over the next decade, Delta Produce said it added more than $1.75 million in facility upgrades to handle H-E-B’s growing capacity for produce, and the exclusive sales deals were reiterated numerous times.
Delta Produce alleges it was approached by H.E. Butt competitors, including Bentonville, Ark.-based Wal-Mart Stores Inc., but it was told to refuse the business or else lose H-E-B.
Delta Produce declined an offer from a prospective buyer because H-E-B’s current produce director Hugh Topper said H-E-B would cease purchasing from Delta because the prospective buyer did business with Walmart, according to the lawsuit filing.
The filing says after several attempts to get the restriction lifted, Delta Produce reached an agreement to lift the restriction with Topper in early 2008, but “by the time H-E-B lifted the selling restriction, other retailers who might have otherwise purchased form Delta had established relationships with other sellers.”
H.E. Butt issued a statement denying the claims, according to an article in the San Antonio Express-News.
The statement said, “H-E-B strongly disagrees that it is to blame for Delta’s poor performance and will vigorously contest Delta’s lawsuit. H-E-B is confident that after a full airing of the facts, Delta’s unproven assertions will be found meritless.”
H-E-B said in the statement Delta Produce couldn’t keep up with the changing market.
“Delta was a longtime supplier to H-E-B and H-E-B regrets that Delta has been unable to weather the recent economic downturn and changes taking hold in the produce marketplace.”
HEB did not return a request for comment.
Pulman said Delta Produce has about $8 million in assets and about $8 million in liabilities. The company hopes to reorganize and pay off the debts.
“If we can’t then assets will be sold and creditors should be paid,” he said. “We think there are enough physical assets, should we have to liquidate, the PACA creditors should be paid. People are interested in buying the facility.”