Dive Brief:

• A wholesale plant nursery sued Kroger last week alleging that its products were stolen, given away and mishandled at stores in the grocery chain, representing a breach of contract.
• The wholesaler, Theut’s Flower Barn, pointed to one Kroger location where 40% of the 403 succulents that Theut’s supplied went unsold. Some stores had even higher rates of inventory shrink, at 47%, and the complaint alleged that hundreds of Kroger locations had shrink issues.
• The supplier estimated its missing Kroger inventory amounted to over $5 million in 2023. The company is seeking damages reflecting that number in addition to other costs. A Kroger spokesperson did not immediately respond to a request for comment about the lawsuit and its allegations.

Dive Insight:

The story Theut’s told in its complaint against Kroger is partly about the contract between the supplier and retailer.

According to Theut’s, its products are sold in some 1,200 Kroger stores. In 2022, the nature of their business relationship changed to a scan-based trading model.

Similar to a consignment arrangement, scan-based means suppliers own their inventory right up until the point-of-sale at a retailer. That means missing or unsold inventory is typically the supplier’s problem even if it’s in a retailer’s store or warehouse. Even in cases of distress where retailers offer suppliers consignment arrangements to reduce vendors’ risk of losses, suppliers don’t always bite.

By its own account, Theut’s didn’t exactly jump at the chance to change to such a model. “By the time Kroger informed Theut’s of these changes, Theut’s had made plans and purchases for the 2023 growing season,” the company said in its complaint. “Theut’s had little choice but to agree to Kroger’s changes to avoid losing money on these investments.”

According to the Michigan-based flower producer, problems cropped up quickly. “Theut’s immediately identified concerns regarding theft, improper care of plants, and improper signage,” the company said.

The company went on to allege that employees at some Kroger stores failed to properly water and care for Theut’s plants while “some stores destroyed, lost, or gave away about half of the plants Theut’s delivered to them. Theut’s was not paid for this inventory.”

The supplier also alleged that it has “attempted to engage Kroger to work toward a resolution, but Kroger failed to act.” Now Theut’s is seeking damages of over $5 million from Kroger through the lawsuit along with interest — “because Theut’s has been denied use of plants, which remained their property” — as well as attorney fees and costs.