The legal dispute between animal-free dairy pioneer Perfect Day and former manufacturing partner Olon is turning increasingly ugly, with Olon describing the foodtech startup as “an atrocious business partner” presenting “a false narrative” of their deteriorating relationship.
Perfect Day, in turn, argues that Olon is guilty of “gross negligence and willful misconduct.”
The legal dispute began in April, when Olon filed a lawsuit* accusing Perfect Day of stringing it along while it “secretly planned” to switch production of beta-lactoglobulin (BLG) whey protein made via precision fermentation to cheaper in-house facilities in India.
According to its court filings, Olon spent six years working with Perfect Day on producing BLG via microbial fermentation, signing a contract under which Olon pumped millions into “expanding and tailoring” its manufacturing capabilities at sites in Italy to its partner’s unique specifications.
However, the parties’ working relationship “came to a screeching halt in August 2023” when Perfect Day stopped paying its bills, alleged Olon. In September 2023, it claimed, it was “flabbergasted” to learn that Perfect Day planned to move all manufacturing to plants it had recently purchased in India.
In a counterclaim filed in June, Perfect Day accused Olon of fraud, breach of contract, and misappropriation of trade secrets, arguing that Olon had failed to reach target manufacturing capacity by the agreed completion date, forcing it to “fundamentally alter its business plans” and “incur significant losses.”
The startup added that it had repeatedly made clear to Olon that it would eventually produce BLG at plants in India, but stressed that the facilities in question “were no threat” to its business relationship with Olon and have not to date manufactured any product.
Olon: ‘Perfect Day was running out of money’
In documents filed with the court this week, Olon argued that the “real story of this case is that Perfect Day… was running out of money and did not want to pay Olon the amounts due under the parties’ contract.”
While there were delays in the launch of the final phase of the manufacturing project, acknowledged Olon, “the most significant source of those delays was Perfect Day and its changeups in approach. Perfect Day… kept changing its mind about how it wanted to manufacture its product, which ingredients it wanted to use, what purification and filtration systems it wanted to apply, what vendors it wanted to buy main pieces of equipment from, and so on.”
Olon went to “extraordinary lengths” to accommodate Perfect Day’s “changing specifications,” claimed the firm, which went on to allege that Perfect Day had told Olon that it “wanted to buy its way out of the contract… very cheaply. None of this was acceptable to Olon. And none of it was allowed under the parties’ contracts.”
It added: “To posit that Olon was apathetic about the project is absurd. This was one of the biggest contract manufacturing deals in Olon’s history and the Olon team was highly focused on making it a success… A fraudulent scheme in which Olon would expend over €81 million of its own funds while intentionally abandoning a project that it anticipated would generate at least €150 million revenues over the next five years is economically irrational and fundamentally implausible..
“It is Perfect Day that has acted as an atrocious business partner, and it is Olon that has been left with massive out-of-pocket losses and been deprived of the benefits of its bargain by an unscrupulous counterparty.”
In a memo supporting its motion to dismiss Perfect Day’s counterclaim, Olon added: “Olon and Perfect Day were business partners operating under a suite of contracts until Perfect Day blew up the relationship in September 2023 in breach of the parties’ agreement. Perfect Day refused to pay the millions of euros due to Olon and the millions of euros due in the future to repay the huge capital expenditures Olon had fronted on the parties’ largest project, Zebu 1000 [a 1,000t/year plant in Settimo, Italy]. Olon was left with massive losses. It ultimately had no choice but to bring suit to recover the more than €130 million it lost due to Perfect Day’s breaches and fraud.”
Perfect Day, in turn, said that Zebu 1000, scheduled to be operational at the very latest by October 2022, was significantly behind schedule, with photos of the site from April 2022 revealing “that only basic excavation of the grounds had started.” By summer 2023, noted Perfect Day, the site was still not producing any product.
A turbulent few months
The litigation follows a turbulent few months at Berkeley-based Perfect Day, which is now led by TM Narayan following the departure of founders Ryan Pandya and Perumal Gandhi at the end of last year.
The company has raised almost $900 million from backers including Temasek and Horizons Ventures since it was founded in 2014, and is under intense pressure to deliver.
It recently sold its consumer brands (Brave Robot, Coolhaus, Modern Kitchen, California Performance Co) for an undisclosed sum and laid off 15% of its workforce in a bid to focus on its B2B business as it forges partnerships with large CPG companies.
*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.
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