Baby food giant Gerber Products Co. is suing the state Department of Health to be reinstated as an approved supplier to a nutrition-assistance program aimed at low-income women and children.
The lawsuit, filed last week in state Supreme Court in Albany County, accuses the department and Health Commissioner Nirav Shah of acting arbitrarily and “without lawful authority” in bouncing the company from the program.
The action means New York will have just one manufacturer supplying baby food to the program, Beech-Nut Nutrition Corp., which received more than $100 million in state and local incentives for a new, state-of-the-art factory near Amsterdam.
Gerber, headquartered in northern New Jersey, says it has participated in the federal-state nutrition program since 2009.
“At no time from 2009 through 2013 did DOH ever express any concerns with Gerber baby food products with regard to quality, price or any other matter,” the company says in its lawsuit.
The Special Supplemental Nutrition Program for Women, Infants and Children, known as WIC, provides vouchers to pregnant and nursing women to purchase food at retail prices from an approved list of products.
The program is administered on the federal level by the U.S. Department of Agriculture, which sets quality and nutritional standards for WIC-authorized products and provides grants for the food to all 50 states.
In New York, the Department of Health oversees WIC, identifying brands of foods and package sizes that meet the federal standards.
The approved products go on a list known as the Acceptable Foods Card. Foods are divided into categories such as milk, eggs and cheese, and under eggs, for instance, the card notes that large and medium white or brown eggs may be purchased but “high-cost specialty eggs,” including organic or free-range, may not.
Food manufacturers that want to be on the card submit their product information to the Department of Health, according to the Gerber complaint. “Nothing in the federal or state regulations provides that there must be only one brand of a particular type of product” on the card, the company says.
Like Gerber, Beech-Nut has participated in the program since 2009, according to the lawsuit, giving WIC participants a choice between the two companies’ baby foods in the categories of vegetables/fruits and meat.
Gerber, founded in Michigan in 1928 and now part of Nestle SA of Switzerland, ranks No. 1 in U.S. baby food sales; Beech-Nut, part of Hero AG Group, also of Switzerland, is No. 2.
Mintel, a consumer research firm, pegged sales in the U.S. baby food and drink industry at $5.4 billion in 2012.
Gerber says that just before Thanksgiving last year, a letter arrived from the Department of Health advising that “it was denying authorization for the inclusion of Gerber products on the proposed 2014 Acceptable Foods Card.” According to Gerber, the letter talked broadly of program selection criteria, but “did not state that there were any concerns or issues with respect to nutrition standards or quality for Gerber products.” The company said it filed the lawsuit because the department’s decision “is final and binding.” Gerber contends WIC participants will be harmed if the decision is not overturned in court because they’ll lose their right to choose between Gerber and Beech-Nut products. And they prefer Gerber, the lawsuit says, citing a brand study conducted by an outside firm.
The company says it, too, will be harmed because WIC sales were expected to generate $4.98 million this year. Gerber said sales under the program totaled $5.17 million in 2013 and $5.37 million in 2012.
“With the removal of Gerber baby food from the Acceptable Foods Card, Beech-Nut is the sole remaining manufacturer of baby food on the Acceptable Foods Card, and WIC participants are left with only one option for baby food,” Gerber says in the lawsuit.
Beech-Nut, originally a producer of vacuum-packed ham, operated in the village of Canajoharie for more than a century before relocating some 20 miles east to the town of Florida Business Park off Route 5S.
State and local incentives, grants and tax breaks totaling $104.5 million kept the manufacturer in Montgomery County. Its new 600,000-square-foot, $124 million plant opened in 2010.
Production ended in early 2011 at the Canajoharie factory, which was badly damaged by flooding in 2006. That plant started producing baby food in 1931.
Last year, Beech-Nut had to pay a $1 million penalty for not meeting the new plant’s 2012 job quotas under a property-tax break. The company cited a drop in demand for baby food, due to a stagnant U.S. birth rate, for the slack hiring.
The Gerber lawsuit makes no mention of the Beech-Nut incentives.
Asked if Gerber thought it was bounced from WIC because of the Beech-Nut incentives, Gerber’s attorney, David Wukitsch of the Albany law firm McNamee, Lochner, Titus & Williams P.C., declined comment. “Gerber does not comment on pending litigation,” he said.
The Department of Health also had no comment in response to two emails that asked the same question.
“The Department of Health does not comment on pending litigation,” a spokeswoman wrote back.