Tree of Life, a US subsidiary of Dutch food group Wessanen, and US retailer Wild Oats Markets have announced that they have reached an agreement to terminate their current distribution agreement as per the end of the first quarter of 2004.
Wessanen said that the termination of the contract is expected to have a positive impact on its operating result in 2004, while its current outlook for 2003 is maintained.
Wessanen is currently undergoing a programme is aimed at strengthening its financial performance by lowering the cost base by €100m (US$117.1m).
“Client profitability is a central point of attention in this respect. This is why much effort has been put in by both companies to achieve break-even by the end of the year and be profitable as from next year. The current situation, however, does not indicate that these objectives will be met. And although we are disappointed that the relationship did not bring the anticipated benefits, both parties agree that annulment of the current distribution agreement is the best way forward for both Tree of Life and Wild Oats,” said Wessanen CEO Ad Veenhof.
Tree of Life posted quarterly losses in the first and second quarters of 2003, which were partly attributable to costs associated with the Wild Oats account. The termination of the distribution agreement is expected to result in a loss of approximately US$150m in sales volume, representing less than 10% of Tree of Life’s total sales.
Wessanen said the involved exceptional charges will be included at the publication of the third quarter results on 21 November.