Yowie takes legal action against former contract manufacturer Atlantic Candy

By Oliver Nieburg contact

- Last updated on GMT

Yowie has also named Hershey’s ex-international chief as its CEO. Photo: ©iStock/eccolo74 & Yowie
Yowie has also named Hershey’s ex-international chief as its CEO. Photo: ©iStock/eccolo74 & Yowie

Related tags: Yowie, Confectionery, Kinder surprise, Pleading

Toy-filled candy maker Yowie has appointed a new CEO and COO and has separately brought legal action against its former US contract manufacturer the Atlantic Candy Company.

Yowie named Hershey’s former head of international operations Bert Alfonso as the group’s global CEO on June 14.

On the same day, it appointed Mark Schuessler, former COO of Campfire marshmallow maker Doumak, as its global COO.

Also in June, Yowie Natural World, Inc, and Yowie Group Ltd., filed civil action against its former contract manufacturer the Atlantic Candy Company and its owner Hank Whetstone.

Australian group Yowie alleges it has suffered $2m in damages after Whetstone allegedly defamed the company and interfered with business relations with a new contract manufacturer – claims firmly denied by Whetstone.

The case was initiated in a New York district court, but Whetstone has told ConfectioneryNews there is a push to move the case to US federal court.

Dropped Candy Treasure lawsuit

In 2013, Yowie North America launched legal action​ against Candy Treasure, the maker of Choco Treasure surprise eggs, in the Southern district court of California. It accused Candy Treasure of patent infringement for Yowie’s 2000 patent design for a toy-filled chocolate encased capsule, but the case was later dropped. Hank Whetstone then sold licensing rights for his toy-filled candy design to Candy Treasure.

Yowie finds new contract manufacturer

Yowie claims its manufacturing agreement with Whetstone was non-exclusive so began discussing a new manufacturing contract with Madelaine Chocolate Novelties Inc. in October 2015 as part of its US expansion plans.

Yowie claims Madelaine was to use a new capsule designed and developed by Yowie, while Whetstone says Yowie disclosed his patented design.

Yowie’s Madelaine contract was signed months later, according to the Australian group, which alleges that Whetstone issued legal threats to delay the deal.

Yowie also claims that Hank Whetstone supplied Candy Industry magazine photos of Yowie products without its permission and posted defamatory comments on an influential social media site under a pseudonym.

Henry Whetstone counterclaims

Whetstone says he never supplied the photo and claims it was obtained separately by Candy Industry. He acknowledges posting the social media posts, but claims the posts were factual.

Hank Whetstone was previously at separate legal entity Whetstone Chocolate Factory, which was Yowie's contact manufacturer until Hank Whetstone transferred the contract to his own company

Separately the Whetstone Chocolate factory has filed a petition for removal of the case on August 3 this year and made counterclaims against three Yowie employees earlier this month (August 5).

It alleges the trio entered a Proprietary Rights Agreement on or about January 28, 2014, to use its manufacturing process for toy-filled chocolate and claims Yowie management breached the deal by disclosing the process when negotiating with Madelaine. 

In a letter to ConfectioneryNews, Hank Whetstone said he invented and patented a ‘Safe Capsule’ design for toy-filled confectionery in 1998 that overcame a US ban on toy-filled candy from 1938.

He claims his firm, Atlantic Candy, has suffered $21.5m to $57.1m in damages after Yowie allegedly breached a contract manufacturing agreement that he claims was exclusive.

Whetstone alleges he reached a contract manufacturing deal with Yowie in 2012, through Phil Hudson, former director of Yowie Enterprises Pty Ltd, when he was working with Whetstone Chocolate Factory. He claims he was urged to renegotiate terms when Wayne Loxton took over from Hudson in 2013 and refused.

But Whetstone says he agreed to negotiate a new deal with his own business (apart from Whetstone Chocolate Factory) after a meeting with Yowie representatives in January 2014 as part. That agreement ran until December 31, 2025, according to Whetstone, but Yowie terminated production with Atlantic Candy in November last year.

Yowie has declined to comment on the case and Whetstone’s allegations in the letter to ConfectioneryNews.

Yowie is also pursuing action against Hank Whetstone in the county court in Florida to obtain a candy wrapping machine. Whetstone tells us that case is set to appear before a judge in September. Atlantic Candy launched its own legal action against Yowie in Florida on March 16, 2016 for breach of contract, according to Whetstone.

 [Eastern District of New York (Brooklyn) - CIVIL DOCKET FOR CASE #: 1:16-cv-04320-ERK-RML]

Yowie fact file

Yowie new
Source: Yowie

The Yowie are a race of wildlife-loving monster characters based on Australian aboriginal mythology that are similar to the North American Sasquatch or Bigfoot. Yowie chocolate products were previously produced by Cadbury under license from Kidcorp Pty Ltd. Cadbury sold 31 million units in Australia in 1997. The Yowie Group now holds the rights to the Yowie characters.

The Australian-based group began producing toy-filled confectionery products under contract in 2013. Yowie gained distribution across Walmart’s​  entire US store network last year and in May this year it raised AUD $32m (USD $24m) to expand US operations. 

Yowie jumped to fifth in total US front-end chocolate sales for the 13 weeks ending July 16, 2016, its $3.9m of sales outstripping Hershey Milk Chocolate singles, according to Nielsen data.

The Yowie group plans to expand beyond the US next year and will also launch seasonal campaigns for Halloween and Easter. It plans $2m+ in digital marketing support including a Free Yowie App. It says New York contract manufacturer Madelaine can produce 100 million units annually allowing it to expand globally. The group has also established a publishing company to produce Yowie-themed books for children and is in talks with a Hollywood script writer to develop a feature film and animated series. Separately, the company has licensing rights to produce toy-filled confections for the Angry Birds and Yo-Kai Watch franchises. HSBC Custody Nominees (Australia) Ltd is the group’s main shareholder with a 14.2% share.

Atlantic Candy fact file

Hank Whetstone is the owner of Atlantic Candy. He was previously working at family business the Whetstone Candy Company, which began operation in the late 1980s. Whetstone Candy had been a contract manufacturer for Hershey, Mars and Nestlé, producing products such as the Hershey Kiss with almond and M&Ms hollow characters. Whetstone Candy began producing a toy-filled candy for Nestle named Nestle Magic in 1997 featuring Disney characters, but it was withdrawn from the market after the Food and Drug Administration overturned a decision to give it temporary permission to enter the US. Toy-filled confections have been banned in the US under a 1938 regulation, but have at times been overcome by Whetstone Candy, Hank Whetstone, Yowie and Candy Treasure. Hank Whetstone told ConfectioneryNews in January​ this year that his current firm, Atlantic Candy, was now able to produce his child-safe pod design for toy-filled candy for parties other than Yowie and Candy Treasure, hinting that it could pave the way for Ferrero to bring Kinder Surprise eggs to the US.

Related topics: Manufacturers, Chocolate

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