A deal turned sour

Black Enterprise, Jan, 1999 by Robyn D. Clarke

Kevin Copeland is seeking to reclaim Copeland Beverage Group

Why cry over spilled milk if you can file a lawsuit instead? That's what Kevin A. Copeland, former president and CEO of Copeland Beverage Group Inc. (see "Milking the Cash Cow," Motivation, June 1998) opted to do last November after he was ousted by CBG's board of directors in August. His removal came two and a half months after he took over the lease of the Santee dairy facilities in Los Angeles.

The lawsuit against the Los Angeles Community Development Bank, a noncommercial bank created in 1995 by the U.S. Department of Housing and Urban Development and the city of L.A. to help fund businesses that couldn't secure financing from mainstream lenders, is pending. A $6 million loan from the bank helped Copeland buy the 19-acre site and dairy processing equipment from former co-owners Hughes Markets and Stater Bros. in mid 1997.

But not long after he assumed the lease and distribution rights in May 1998, things began to curdle. The dairy lost nearly $2.5 million in its first year of operation. And the bank suggested that Copeland, whose primary experience had been in the soft-drink industry, couldn't cut it in the dairy business. Meanwhile he accused the bank of micromanaging by putting in place key executives and board members who usurped his leadership power.

"I was given only 75 days to show what I could do," recalls Copeland, who rejected the board's offer for a senior marketing position. "That seemed unfair, considering that most businesses with outside financing are given the three years it typically takes for a business to show a profit or go bust."

The L.A. Community Bank has repeatedly denied these charges. But documents from a second loan agreement, made last July for $4 million, show that the bank obtained the right for "review and approval" of CBG's bylaws. Further, a change in bylaws--made that same day--dictated that "prior written consent" from the bank was necessary before any "management personnel changes" or alterations of the executive board committee could be made. The bank also asked Copeland and his wife to sign over the voting rights to their 51% stock interest in CBG (they still retained the stock interest as of late October).

The bank's belief that Copeland didn't have the industry knowledge and administrative experience necessary to effectively run CBG overshadowed the fact that he was able to construct deals with a number of big-name contractors. Allied Domecq Retailing USA, owner of the Baskin-Robbins ice cream chain, tentatively agreed to take over the two bank loans as part of a potential long-term, $550 million condensed milk and cream deal. And Taco Bell Corp., which has called for Copeland's reinstatement, had been working on a $45 million sour cream contract.

With Copeland at the helm and 1998 revenues of $42 million, CBG--the nation's only black-owned and-operated dairy--was poised as a contender for a slot on the BE 100s. Now Copeland is regrouping and working on !Caramba!, a full dairy line targeted to the Latino market, !Caramba!, which means wow in English, is being launched this month.