A Distraught Grocery Brand Now Files For A Surprising Bankruptcy

July 11, 2024

A distraught grocery brand has now filed for a surprising Chapter 11 bankruptcy in order to be able to better reorganize its business.

Hudson River Foods, a popular organic food and drink manufacturer, filed of a Chapter 11 bankruptcy on July 9th in the U.S. Bankruptcy Court for the Northern District of New York.

Hudson River Foods manufactures and distributes healthy baking products, plant-based drink mixes and other food products through its six retail brands: Cherrybrook Kitchen, European Gourmet Bakery, Hodgson Mill, Dancing Deer Baking Co., Healthy To Go, and Tempt Hemp.

The private healthy food company makes popular and unique foods with organic, non-GMO, kosher, vegan, allergen free and superfood options.

Originally known as Healthy Brands Collective, the company changed its name in 2017 to Hudson River Foods after it moved its headquarters and manufacturing plant to Castleton, just south of Albany, N.Y.

The Castleton-on-the-Hudson, N.Y., debtor listed $1 million to $10 million in assets and liabilities in its petition.

The debtor had indicated in the petition that funds will be available to pay its unsecured creditors.

Hudson River Foods products are sold nationwide through 11 grocers, that include Publix, Kroger (KR) , Amazon’s (AMZN) Whole Foods, Sprouts Farmers Market (SFM) , HyVee, Stop & Shop, Central Market, Natural Grocers, Raley’s and Mother’s Market & Kitchen.

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An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.

Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.

Supply Source brands include The Safety Zone and Impact Products.

The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.

Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.

Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products

The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.

However, the company’s financial performance deteriorated in subsequent years.

Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.

The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.

In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.

Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.

The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.

The excess inventory forced the debtor to secure additional storage space, which increased storage costs.

These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.

The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.

The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.

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Also Read: This Massive Mall Retailer Is Now Closing In California

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