BITTER SPLIT Organic Partnership Turns Toxic

Alnatura, the organic goods maker, is in court with its key distributors, the DM chain of drugstores. Both companies were founded on ideas advocated by Austrian philosopher Rudolf Steiner.
An ugly battle behind organic branding is getting personal.

The bitter legal dispute between the DM drugstore empire and its organic supplier, Alnatura is growing more personal, and now the two founders of Alnatura find themselves on opposing sides.

Handelsblatt has learned that Wolfgang Gutberlet has joined DM founder Götz Werner’s lawsuit against longtime business partner and current Alnatura chief executive, Götz Rehn.

Mr. Gutberlet is the former head of Tegut, the Swiss-owned and German-based supermarket chain. More than 30 years ago, he teamed with DM’s Mr. Werner and Alnatura’s Mr. Rehn in founding the popular organic brand.

The battle now focuses on who actually owns the brand for what is now one of Germany’s largest organic food producers.

“We are convinced that it must be put straight how the brand originated,” Mr. Gutberlet told Handelsblatt.

Mr. Werner and Mr. Rehn declined comment.

The 65-page opinion reveals some awkward facts

The case is now in appeal, after a Frankfurt regional court dismissed Mr. Werner’s and Mr. Gutberlet’s lawsuit against their founding partner.

The 65-page opinion reveals some awkward facts.

According to the legal opinion, the dispute flared in 2012 during routine sales negotiations between DM, Germany’s largest drugstore chain, and Alnatura, its organic supplier.

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At the time, DM not only demanded more favorable delivery terms from its partner, but also wanted Alnatura to disclose purchase prices and supplier relationships. DM claimed the reason for the demands was that, under an existing sales agreement, Alnatura was not supposed to make a profit.

Alnatura refused to comply and the fight escalated. DM then unilaterally reduced what it was paying, according to the court, and “didn’t pay invoices amounting to about €2 million ($2.17 million).”

At the time, Alnatura was generating at least one-third of its sales through DM, so the drugstore chain’s potential for applying pressure was great.

Do they care who owns the brand?

 

On March 31, 2014, Mr. Werner and Mr. Gutberlet brought out their big guns. In a joint letter, they demanded that Mr. Rehn give back the rights to the Alnatura brand.

Mr. Rehn refused. In effect that would have meant ending his company, with 2,500 employees and yearly sales of €700 million.

Mr. Werner and Mr. Gutberlet then sued.

The current case goes back to the founding agreement that Mr. Rehn, Mr. Werner and Mr. Gutberlet presumably made in May 1985. Handelsblatt has obtained a copy of the undated, four-page typewritten document.

It begins with high-minded idealism and a few minor typing errors: The common goal was stated as “striving to humanize the business world, based on anthroposophically-oriented social organics developed by Dr. Rudolf Steiner.” For this purpose, they wanted to produce and market goods “that served mankind” and were produced through controlled organic farming. Dr. Steiner was as Austrian philosopher and spiritual scientist: his philosophies now also form the basis of Steiner schools, which provide an alternative education for children.

Business matters are covered under Point 2 of the agreement, which declared Mr. Rehn as “formal copyright holder” of the Alnatura brand.

Some tricky clauses follow. Mr. Rehn was, for instance, obligated to obtain the consent of his partners regarding the brand, particularly when licensing to third parties. And should Mr. Rehn die, his rights would revert back to his partners, Mr. Werner and Mr. Gutberlet.

The question now is whether Mr. Rehn is still bound by the agreement. And does it constitute a basis for his partners’ demand that he return the rights to the Alnatura brand?

“In our estimation, a partnership under civil law was created that owns the Alnatura brand,” said Mr. Gutberlet. “That is what we want examined in court.”

In principle, Mr. Werner and Mr. Gutberlet argue that Mr. Rehn only holds the Alnatura brand in trust, and that it actually belongs to retailers DM and Tegut.

The judges in the Frankfurt regional court, however, saw it differently and rejected the claims as “unfounded.” The plaintiffs were not entitled to having the brand transferred, nor could they stop Mr. Rehn from supplying other retailers with goods under the Alnatura brand.

Other details emerged of how a formerly friendly business partnership turned so sour.

Back in 2008, for instance, Mr. Rehn transferred all rights to the brand, which he personally held until then, to the Alnatura company. But his partners claim they were not informed of the move. They say they didn’t hear about it until early 2014 — and reacted angrily.

On November 10, 2014, DM sent an explosive email to Alnatura. In it, the drugstore chain informed its business partner that it would gradually discontinue Alnatura products and planned to replace them with its own organic brand.

After the email, Mr. Rehn canceled Alnatura’s distribution contract with DM and looked for other trading partners to compensate for the loss in sales.

Alnatura products are now sold in Edeka supermarkets and the Austrian retail chains Billa, Merkur and MPreis, in addition to the online shopping site, windeln.de.

Mr. Werner and Mr. Gutberlet claim that’s also a breach of their 1985 agreement, since their permission was not sought.

But they found little understanding from the Frankfurt regional court. The judges’ decision could have been influenced by Thomas Gutberlet, Tegut’s current managing director, who contradicted his father Wolfgang on one decisive point. According to the court’s opinion, he had already confirmed in writing, in August 2014, that Alnatura was a brand of the Alnatura company — and not Tegut’s own brand.

The regional court judges ruled that it would be “contrary to good faith” for the plaintiffs to have a claim to retransferring of the brand. They ruled that the original agreement was superseded by later concrete marketing agreements.

The judges stressed that a few years back Mr. Werner had asked Mr. Rehn, who was still his friend at the time, about the controversial 1985 founding document, because he “didn’t have it handy anymore.” The judges noted in their opinion that it didn’t sound like something that was “a central, enduring agreement.”

It remains to be seen whether the Frankfurt higher regional court sees it the same way. Mr. Werner and Wolfgang Gutberlet have appealed, but no date has been set.

 

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: kolf@handelsblatt.com

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