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Big Baby Food Fight in New York

ALBANY, N.Y. (CN) - Baby foods manufacturer Gerber asked a state court to order its reinstatement as supplier to a nutrition program serving low-income women and children.

The company claims New York's Department of Health bounced it from the program, in which it had participated since 2009, but did not explain why.

"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," Gerber says in a complaint in Albany County Supreme Court.

Named as defendants are the state Department of Health and Commissioner Nirav Shah.

The change leaves the program with just one manufacturer of baby foods, Beech-Nut, which built a new state-of-the-art production plant west of Albany using more than $100 million in state and local incentives.

Gerber says it wants to return to the Special Supplemental Nutrition Program for Women, Infants and Children, or WIC, a federal-state assistance program for low-income women of childbearing age and their infants and children.

WIC is the country's third largest food program behind food stamps and school lunches, according to Gerber's complaint.

The U.S. Department of Agriculture administers the program on the federal level, setting quality and nutritional standards for authorized WIC food. States are required to identify brands of food and package sizes that can be included in the program.

The program provides vouchers to participating women to buy foods at full retail price from an approved list of products known as the Acceptable Foods Card.

New York's Department of Health publishes the approved list, which groups foods by categories. For baby foods, there are two categories: "vegetables and fruits" and "meat."

Manufacturers submit product information to the department for inclusion on the list.

Gerber says state regulations outline rights and responsibilities for the program's participants and vendors, but "are silent as to matters concerning food manufacturers, and, in particular, they contain nothing relating to compilation of the Acceptable Foods Card."

Nothing in the federal or state rules says there should be just one brand of a product offered on the WIC list, Gerber says.

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, also of Switzerland, is No. 2.

Mintel, a consumer research firm, pegged sales in the U.S. baby food and drink market at $5.4 billion in 2012.

Beech-Nut's baby foods are on the WIC list, Gerber says, and have been since 2009.

The lawsuit claims the Department of Health contacted producers on the WIC list in 2012 and asked for product information; Gerber responded for 10 of its baby foods in the vegetables and fruits category and four in the meats category.

"All of the baby food products submitted by Gerber complied in all respects with all specifications for said products contained in the federal and state regulations governing the WIC program," Gerber claims.

But late last year, Gerber says, it received a letter from the department "denying authorization for the inclusion of Gerber products on the proposed 2014 Acceptable Foods Card."

The letter broadly outlined criteria used in determining inclusion but "did not state that there were any concerns or issues with respect to nutrition standards or quality for Gerber products," the company says.

The decision will cost Gerber an expected $4.98 million in sales this year, according to the complaint. The company says its WIC sales totaled $5.37 million in 2012 and $5.17 million in 2013.

"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," the complaint states.

Beech-Nut, which began as a producer of vacuum-packed hams, operated in the village of Canajoharie for more than a century before moving about 20 miles east in 2011 to a new $124 million factory in a business park on the outskirts of the city of Amsterdam.

State and local incentives, grants and tax breaks totaled $104.5 million for the new plant.

The Canajoharie factory, which was damaged by flooding in 2006, started producing baby foods in 1931.

Last year Beech-Nut had to pay a $1 million penalty for not adding jobs as briskly at the new plant as it had promised in return for a property tax break, according to local media reports. The company blamed the weak hiring on a drop in demand for baby food as the U.S. birth rate stayed low.

Gerber's complaint makes no mention of the incentives given to Beech-Nut.

The company's attorney, David Wukitsch, with McNamee, Lochner, Titus & Williams in Albany, declined comment, saying, "Gerber does not comment on pending litigation."

A Department of Health spokeswoman returned an email late Wednesday seeking comment on the case by saying she would look into it.

Gerber says in its complaint that a court review of the department's decision is in order because it was arbitrary and capricious and made "without lawful authority."

Gerber wants the decision set aside and the department ordered to reinstate the company as a WIC-authorized producer. Gerber also seeks costs and attorneys' fees.

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