In a dramatic turn of events, animal-free dairy innovator Perfect Day has responded to a $144 million lawsuit from its former Italian contract manufacturing partner, Olon, with a substantial $200 million counterclaim. The litigation, which has captured the attention of the agritech industry, underscores the volatile nature of partnerships in the rapidly evolving field of precision fermentation.
Olon’s initial lawsuit, filed in New York on April 12, accused Perfect Day of breach of contract, alleging that the company had secretly planned to shift production of its beta-lactoglobulin (BLG) whey protein to more cost-effective in-house facilities in India. According to Olon’s complaint, the Italian firm had invested over €81 million ($86 million) over six years to expand and tailor its manufacturing capabilities to meet Perfect Day’s unique specifications. However, the relationship soured in August 2023 when Perfect Day allegedly stopped paying its bills, culminating in Olon’s discovery in September that Perfect Day intended to move all manufacturing to its newly acquired Indian plants. Olon claims it is owed $112 million in unpaid fees and other costs, plus an additional $32 million in damages due to what it describes as Perfect Day’s fraudulent actions.
Perfect Day’s counterclaim, filed today, paints a different picture. The 84-page rebuttal accuses Olon of fraud, breach of contract, and misappropriation of trade secrets, asserting that Olon’s actions amount to gross negligence and willful misconduct. According to Perfect Day, it had always been transparent about its intention to eventually produce BLG at its own facilities in India, a move it claims posed no threat to Olon’s business relationship with the company. Perfect Day argues that Olon was well aware that exclusive reliance on its manufacturing would not be financially viable for Perfect Day due to cost constraints.
The counterclaim details a three-phase project, dubbed the ‘Zebu Project,’ initiated in 2018 to scale up the production of animal-free whey protein. Phase one, with a capacity of 120 tons per year, was completed in early 2021 at Olon’s Capua facility. Phase two, expanding capacity to 400 tons per year, was finished in February 2022. The contentious phase three, a 1,000-ton per year plant in Settimo, was supposed to be operational by October 2022. However, Perfect Day alleges that progress at the Settimo site was alarmingly slow, with only basic groundwork completed by April 2022, despite Olon’s reassurances.
Perfect Day claims that Olon’s delays and alleged fraudulent invoicing for incomplete work forced it to alter its business plans significantly, resulting in substantial financial losses. The company also contends that Olon’s unilateral shutdown of the smaller Zebu 400 facility in Capua in September 2023, citing an invoicing dispute, further disrupted its operations.
This legal battle comes at a challenging time for Berkeley-based Perfect Day, which has been navigating a period of turbulence. Following the departure of its founders Ryan Pandya and Perumal Gandhi, the company, now led by TM Narayan, has been under immense pressure to deliver. Perfect Day has raised nearly $900 million from investors and recently sold its consumer brands to focus on its B2B business, forging partnerships with major CPG companies like Unilever and Nestlé.
The outcome of this high-stakes litigation could have significant implications for the precision fermentation industry, influencing how companies approach partnerships and manage production strategies. As the case progresses, the agritech world will be watching closely to see how this dispute unfolds and what it might mean for the future of animal-free dairy products.
*The case is: Olon S.p.A. v. Perfect Day, Inc.65194/2024 filed at the Supreme Court of the state of New York on April 12, 2024.