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Fleming Cos. is expected to be in court today, challenging Kmart’s assertion that it did not live up to the terms of their 10-year, $4.5 billion supply agreement and that it considered declaring bankruptcy to get out of the deal.

That supply agreement, of course, only lasted two years, and was ended last week as both sides agreed that it was no longer in the best interests of either company. At one point, Kmart accounted for one-fifth of Fleming’s revenues.

In its bankruptcy court filing looking to end the agreement, Kmart said that:

• Kmart didn’t tell Fleming that it planned to go to the bankruptcy court to end the deal because it was concerned that Fleming would declare bankruptcy itself to end the relationship.

• Kmart charged that Fleming provided it with inadequate service and rising prices.

• The relationship between the two companies got so bad that Fleming CEO Mark Hansen didn’t even return phone calls from Kmart CEO Julian Day, even though at that point Kmart was Fleming’s largest customer.

Fleming said it was going to court to rebut Kmart’s charges: it said that it never planned a bankruptcy filing and that Kmart’s prices only went up as its volume went down.
KC's View:
Ugly talk. We’ve said all along that we’re not sure that Kmart will be able to survive all the battering its reputation has taken (a battering much deserved, in our opinion). But you begin to wonder that as Fleming goes out and makes sales pitches to other retailers about why they should utilize it instead of another wholesaler, how exactly does it convince people that it can survive all this?

And you’d think that Fleming has to convince a lot of retailers to sign on, if only to make up for the 20 percent of volume that vanished when Kmart did.

We know there are a lot of good people working for Fleming around the country. This can’t make their jobs any easier.