Los Angeles Business Journal

Pretzel Supplier Alleges Twisted Tale

FOOD: Middleman says he was boxed out by Trader Joe’s. By Alfred Lee Monday, February 17, 2014
ConAgra pretzel treats.

ConAgra pretzel treats. Photo by Courtesy Photo

The Trader Joe’s Peanut Butter Filled Pretzel weighs three grams, measures less than a cubic inch and consists, as its name suggests, of a thin pretzel shell stuffed with peanut butter. It was an unheard-of technological marvel when the Monrovia retailer started carrying them 26 years ago – “You haven’t lived until you’ve tried the two together,” famed food writer Ruth Reichl rhapsodized in an early review.

Millions of bags of the treat are now sold every year, stocking dispensing machines at tech startups and satiating late-night cravings of Hollywood celebs and strapped college students alike.

Today, the bite-size comfort snack is worth a lot of money – and at the center of a high-stakes struggle for control. The fallout includes accusations of a ruthless peanut butter pretzel monopoly, the breakup of a decades-long partnership and competing cross-country claims to the snack’s invention.

The trouble began in the fall, when Trader Joe’s allegedly switched suppliers of the product, cutting out Aliso Viejo’s Maxim Marketing in favor of ConAgra Foods Inc., one of the largest food packaging companies in North America. The jilted Maxim has not gone quietly, launching a legal fight alleging antitrust violations and breach of contract.

“We pioneered these items,” said Terry Kroll, Maxim’s owner and chief executive. “We took something from nothing and built it into their top-selling savory snack.”

The pretzel crack-up has also offered a rare public peek inside Trader Joe’s, a company that, for all its customer-friendly attitudes, maintains an obsessive secrecy about its products and is known for aggressive cost-cutting with vendors.

“It’s at odds with the image that the company has on the outside with customers, which is very folksy, friendly and casual,” said Mark Gardiner, a retail marketing consultant who has written a book about the company. “A lot of people would naturally assume that this kind of culture pervades the company, but it doesn’t.”

Trader Joe’s declined to comment.

ConAgra called the lawsuit without merit and declined to comment further.

Food of the times

The simplicity of the peanut butter-filled pretzel belies its pained and complex origins. The technology to make it didn’t even exist until the 1980s.

Kroll was running food distributor Maxim in La Verne in the mid-1980s when a business contact told him that a New Jersey pretzel manufacturer, J. Reisman & Sons, was working on applications for new technology and needed help. Kroll was a food industry veteran, having done stints at Standard Brands, Sunmark Cos. and Sara Lee; he even married a woman named Saralee. When he visited the plant, he saw something groundbreaking.

Page 1 of 5

Prev