Salad dressing firm files for Chapter 11 bankruptcy
Annapolis-based Tessemae’s looks to stop litigation
Tessemae’s, an Annapolis-based organic salad dressing maker, has filed for Chapter 11 bankruptcy to restructure debts and stop what it called costly and distracting litigation by a former lender.
The seller of dressings and condiments sold at dozens of national and regional retailers filed a voluntary petition for bankruptcy reorganization Wednesday in U.S. Bankruptcy Court in Baltimore. The filing lists liabilities in a range of $10 million to $50 million.
The Chapter 11 process will allow the manufacturer to preserve its assets, obtain new capital to fulfill customer demand and stop litigation, the company said. The company called the former lender’s claim meritless and has filed a counterclaim but said the litigation and ongoing costs have impeded growth in recent years.
“We got to the point where we just needed to go back to our mission, which is making salad dressing,” said Gregory Vetter, Tessemae’s CEO, in an interview. “We’re not a law firm. It got overly expensive, combined with what’s going on in the world with economic climates and supply chain issues.”
The ongoing litigation has cost the company “millions of dollars a year,” Vetter said.
Tessemae’s shifted to a contract manufacturing model last fall when supply chain bottlenecks and litigation expenses made it no longer cost-effective to run its own plants, he said. By December, the company had laid off 35 workers and closed two former plants in Rosedale and Essex. The company now has six employees, all of whom work remotely.
“Our goal, from the beginning, was to bring a suite of products into the marketplace to those who believe there is a better way,” Vetter said “This decisive action, will no doubt, enable us to do just that and, in turn, emerge as a stronger, more competitive business.”
The company said it believes the restructuring will benefit creditors, interest holders and consumers, and it expects to continue operating without interruption. As part of the bankruptcy, the company has been able to secure a loan to go toward raw materials and fulfilling orders, Vetter said.
“The brand is doing well,” he said. “The supply chain side and the legal component of it are very distracting.”
Tessemae’s organic salad dressings and condiments are sold online and at retailers such as Costco, Giant, Harris Teeter, Mom’s Organic Market, Safeway, Sam’s Club, Shop Rite, Sprouts, Target, Walmart, Wegmans and Whole Foods Market.
Vetter and his two brothers started the company in Annapolis in 2009 based on their mother’s all-natural salad dressing recipe. The products debuted in a single Whole Foods store, and sales quickly expanded to national grocers, retailers and hotel chains.
The brand got a boost in 2015 when Under Armour founder Kevin Plank and his brother Scott Plank invested $5 million in the company, which at the time had $25 million in sales. By 2018, Tessemae’s products could be found on the shelves of about 6,000 U.S. stores.
The company has faced its share of litigation over the years.
In 2018, a handful of suppliers filed lawsuits against the company, including an Elkridge-based contract manufacturer 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 owed nearly $90,000 in late fees.
At the time, Vetter said the dressing maker was forced to stop doing business with the contractor because it failed to follow its procedures. Four other suppliers, including olive oil distributors, also filed lawsuits.
And in 2020, the company alleged in federal court that its onetime consultants and former leaders tried to “steal” the company from the three brothers who founded it.
That lawsuit in U.S. District Court of Maryland accused a Washington-based law firm and five Maryland men of attempting to “muscle out” the three brothers and causing the company to sustain an estimated $45 million in losses.
The 12-count complaint said various defendants, including some who held executive roles or served on the board, were engaged in racketeering, negligence, legal malpractice, fraud, conspiracy, wrongful interference with a business relationship, breach of contract, breach of fiduciary duty and unjust enrichment.