Snack company wins $21 million verdict against equipment manufacturer

A snack company that alleged a machinery supplier’s inability to deliver a working machine to commercialize its product caused its bankruptcy has been awarded $21 million.

A Santa Rosa, California jury found that Netherlands-based equipment manufacturer Tanis Food Tec failed to provide Smashmallow, a Sonoma Brands portfolio company, equipment it was contracted to build to scale up Smashmallow’s marshmallow production.

BraunHagey & Borden, the San Francisco-based law firm that represented Smashmallow, said in a statement on its website that a machine manufactured by Tanis Food Tec was unsafe to operate and “failed to produce Smashmallow’s products as warranted.”

A six-week trial concluded on Oct. 20 with a 12-member jury awarding Smashmallow $21 million in damages plus attorneys’ fees.

“They tried to trick us, we held them responsible, and we ultimately won,” Sonoma Brands Capital founder Jon Sebastiani told AgFunderNews.

After creating the snackable marshmallows in 2016, Smashmallow attracted $10 million in funding from Sonoma Brands Capital and VMG Partners in 2018 and additional capital from Alliance Consumer Growth in 2019.

Having secured distribution in several thousand U.S. stores, Smashmallow contracted with Tanis Food Tec to manufacture custom machinery capable of producing products at scale using organic cane sugar rather than corn syrup, according to AgFunderNews.

Sebastiani told AgFunderNews that the resulting machine, which was not specialized but instead “came off the shelf,” never hit volume targets and caused costs to surge.

Smashmallow filed suit in the Superior Court of California, County of Sonoma, on May 26, 2021.

Sonoma Brands Capital’s portfolio includes the Yuzu Japanese Barbecue Sauce, Milk Bar dessert brand, Krave jerky and Avaline, a line of wines made with organic grapes.