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The Guys Who Beat General Mills

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It's a common enough story: big company sues small company; small company heroically stands its ground -- and gets litigated into oblivion. Such was the prospect facing John Hanna in June 1986, when $4.6-billion General Mills Inc. filed suit against his $1.4-million International Yogurt Co. for trademark infringement and unfair competition. This time, however, the story had a different ending. The small Portland, Ore.-based yogurt maker not only won the suit, but rode the ensuing publicity to national distribution, surging sales, and a $2-million initial public offering.

At issue was International Yogurt's right to use the name Yo Cream for a premium yogurt product it had been marketing regionally since 1982. The problem was that, in 1984, General Mills had developed its own upscale yogurt called Yocreme, which it then rolled out nationally. General Mills claimed that it owned the trademark and wanted to stop International Yogurt to stop using its version of the name.

International Yogurt wouldn't have survived either a long or a losing battle. Its legal expenses eventually came to about $350,000, representing some 20% of '87 revenues. But, thanks to federal judge Owen Panner, the company got a favorable and a speedy decision. In June 1987, he ruled that Yo Cream could stay, and Yocreme must go. Although no monetary damages were awarded, General Mills agreed to pay $225,000 for being given an extra 90 days to withdraw Yocreme.

Meanwhile, the story was making the national media, and International Yogurt was on its way. "There's no doubt the decision helped launched us," says CEO Hanna. "It gave us national clout and facilitated negotiations with Norpac," a national distributor. The publicity also helped the company line up an underwriter for its IPO last fall. And this spring, yogurt sales took off, increasing some 50% over first-quarter 1987. Annual sales are expected to reach $20 million in '89, which would bring International Yogurt to within 1/250th the size of its humbled adversary. But savoring the victory is its own reward, says Hanna. "People call us 'the guys who beat General Mills."

Last updated: Jul 1, 1988




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