Smashmallow Wins $21M From The Case That Caused Business Shut Down
Snacking marshmallow brand Smashmallow might be no more, but at least the company has won a measure of justice: by that we mean a roughly $21 million measure. In a lawsuit against the equipment company that Smashmallow founder Jon Sebastiani said ultimately caused its downfall, the verdict has provided “a sense of redemption.”
On Friday, a Sonoma County Court jury found that Netherlands-based company Tanis Food Tec B.V. failed to deliver working production equipment to the marshmallow brand, which violated its contract and caused damages to Smashmallow. The Sonoma Brands-backed company was awarded $6.66 million for past losses, $14.3 million for expected future losses and, once the total sum is determined, will be reimbursed for attorney fees and expenses.
A representative for Smashmallow’s lawyers told NOSH that because the machinery was never able to “make marshmallows to Smashmallow’s specifications,” ultimately the company “had no choice but to wind down its operations.” Noah Hagey, one of Smashmallow’s lawyers, posted on LinkedIn that the “breaches and deceptions destroyed everything” for his client.
Smashmallow hired Tanis in 2018 to build a custom production system that could accommodate the product’s coatings and color varieties; one particular need: a system to safely coat all sides of its popular Cinnamon Churro SKU with a powdered mixture. Despite paying Tanis approximately $2.1 million, Smashmallow said the machinery never properly worked, and released unsafe amounts of microscopic air particles from the Churro SKU’s cinnamon and sugar coating process. Though the machinery was under warranty, requiring Tannis to “repair, replace, or redesign,” the system, Tanis refused to fix it and also demanded its final $300,000 payment.
In order to continue producing its marshmallows, Smashmallow was forced to spend over $100,000 on new equipment, but the machinery was slow and produced substandard marshmallows.
Due to all of these issues, and after years of trying to “fix the machine and mitigate its damages,” Smashmallow was unable to hit production requirements by its co-packer and was forced to pay a half a million dollars in penalties. The company fell behind in production, missed on-shelf commitments to retailers and was eventually forced to close operations.
