N.H. firm steaming after DoD reneges on lobster deal

Cancellation of a military contract to supply lobster to troops in Afghanistan caused havoc in the lobster industry in Maine and New Hampshire, claims a Portsmouth subcontractor that has filed a breach of contract suit in federal court.”The military blatantly disregarded how this would affect people,” said Charles Anastasia, CEO of Orion Seafood International Inc. “It was like they just laughed at us. If they didn’t want the lobsters, they shouldn’t have ordered them.”For Orion Seafood, a supplier with $300 million in revenue, the sudden cancellation of a $15 million order for 750,000 pounds of lobster meant at least a $1.5 million loss, resulting in a substantial cut in the end-of-year bonuses for its 30 employees.It also means temporary layoffs of about 100 workers in a processing plant in Maine and the loss of a major customer for local lobstermen, contributing to the fall in fresh lobster prices, Anastasia said.Orion isn’t suing the military, but it did file suit Tuesday in U.S. District Court in Concord against the military’s prime contractor, Supreme Group B.V, a Dutch food supply company that supplies the Defense Logistic Agency with all sorts of meals. (The suit also names subsidiaries Supreme Logistics, based in Dubai, and Supreme Foodservice GmbH, based in Switzerland.)For the last three years, according to the lawsuit, Supreme has ordered frozen lobster tails from Orion. It informed Orion in March 2011 that it planned to do so again, seeking a supply from September 2011 to July 2012, the suit claims.To fulfill that order, Orion said it needed to gear up in advance of the Maine and New Hampshire lobster season (from June to July), building up its inventory in August and September 2011. To do that it had to incur “millions of dollars” in expenses, relating to purchasing, packing, wearing, housing and insuring the lobster sale in order to supply lobster that meets certain military specifications, according to the suit.Supreme told Orion to expect its first purchase order in September, the lawsuit says.When that didn’t happen, Supreme kept on assuring Orion that the orders would come.”There is [sic] no changes in our plan,” said an Oct. 4 email from Supreme, the suit claims. And the following day, Supreme urged Orion to “continue packing as per the plan.”It was only in a face-to-face meeting on Oct. 25 that Supreme informed Orion that it would not require all 750,000 pounds of lobster, the lawsuit says. The company never issued a purchase order for any, according to the filing.”We were on them every freakin’ week, and email after email, ‘Everything is OK,'” said Anastasia. “All of a sudden, nothing.”Anastasia said Supreme officials told them that the Defense Logistics Agency, which was feeding the troops surf-and-turf meals every Friday, had cut back the meals to once a month and began using a lobster substitute.”If the military cuts back, I understand. But don’t put an order for $15 million worth of production and just not fill it,” Anastasia said.Calls to Supreme and the Defense Logistics Agency were not returned by deadline.The sudden stop of orders jammed up the cash flow all down the food chain, Anastasia said.Orion — which handles financing and distribution of the seafood — was able to absorb the loss, partly by reducing its planned bonus to its employees, Anastasia said.But Anastasia added that because of the glut in inventory, Orion stopped buying from a Maine processing facility, which temporarily had to stop operating, laying off about 100 employees.That in turn meant a major customer for about 5,000 local lobstermen had suddenly vanished, which is a “big part” of why lobster prices have dropped about 50 cents a pound, he said. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW