Union, former owner question Foremost closing

By Sean Hao
Advertiser Staff Writer

The former owner of Foremost Dairies-Hawaii yesterday said it was "surprised and shocked" the milk processor has decided to end operations just eight months after it sold the company.

House Foods, the former owner of Foremost Dairies-Hawaii, and others are questioning the new owners' plan to shut down operations. That would make Meadow Gold Dairies the sole provider of locally processed milk — a situation House Foods says it sought to avoid. Gregory Yamamoto • The Honolulu Advertiser

Foremost's new owner, a group of investors led by Bahman Sadeghi, announced on Monday that the company would lay off 120 people and close in November because of equipment problems and a lack of money needed to maintain its Kalihi factory. Sadeghi has blamed House Foods for not disclosing the extent of problems when it sold Foremost to him in January.

An attorney for House Foods' U.S. subsidiary, House Foods Holding USA, disputed those charges yesterday. House Foods disclosed all known problems with the facility before to its sale as required by law, said Theodore Roper, a Los Angeles attorney. The plant was sold "as is" after several months of inspection and at a significant discount because of its condition, he said.

"They knew what they were buying and that it would take a lot of money to fix the facility," Roper said. "That was taken into consideration in the sales price."

Lynette Lo Tom, a spokeswoman for Foremost, said the company had no comment on House's contention.

Foremost's struggles became public in August when the company said it would temporarily shut its plant and process its milk through competitor Meadow Gold.

That came after an Aug. 5 report by the state Department of Health that two 5,000 gallon storage tanks at Foremost needed exterior repairs. Overall, Foremost has about 90,000 gallons in total milk storage capacity, said Peter Oshiro, the state health official who wrote the report.

Foremost had cited the Department of Health report as one reason for shutting down.

"If they're saying that two 5,000 gallon storage tanks are affecting their operation, that's ridiculous," Oshiro said. "It was a relatively minor equipment problem. It's nothing that would have shut the plant down."

Foremost's union also has questioned why the factory is being closed.

"We believe the plant is still in operational condition," said Mel Kahele, president of Teamsters and Allied Workers Local 996.

The union has expressed concerns that the shutdown is part of an effort to reorganize the company as a nonunion business — a charge Foremost has denied.

Sadeghi and other unidentified investors purchased the Foremost business and facility for an undisclosed price on Jan. 30. The land and factory at 2277 Kamehameha Highway was then sold to Newfair Investments LLC for $9 million and leased back to Foremost. Newfair is run by Island Holdings Investments LLC, whose officers include Colbert Matsumoto, Franklin Tokioka and Nolan Kawano, all executives for Island Insurance Cos. Messages left with those three weren't returned yesterday.

While Sadeghi plans to shutdown Foremost, he has said he hopes the brand will somehow survive. Foremost has operated in Hawai'i for 51 years and is one of only two major milk processors in the state. In addition to milk, the company distributes yogurt, cottage cheese, sour cream, ice cream, juices and nectars.

"House Foods wanted to sell it to somebody who would continue to run the business and maintain competition in Hawai'i with respect to the milk business," Roper said. "House was very careful about who they sold it to."

House Foods purchased Foremost from Knudson Corp. in 1987. House said in January it sold the operation to focus on its spices, curry and package products businesses.

Reach Sean Hao at 525-8093 or shao@honoluluadvertiser.com.