Beloved Brands Going Bankrupt

Is Del Monte the Only Company in a Financial Crisis?

Why Did Del Monte File For Bankruptcy? Those of us who beeline it straight to the beloved brand in the canned foods aisles have a hard time understanding how the household name could be in such a crisis. Did we miss something? 

Have canned goods lost their relevance? Is this a policy problem or a continuation of pandemic fallout? How big an impact do higher interest rates have on shelf-stable food? And, the bigger question: if Del Monte found themselves here, could this be the future fate of more food labels we trust?

Del Monte’s Supply and Demand Challenges

An accurate supply and demand balance is essential in any industry. For Del Monte, inventory rates remained high while consumer demand for canned food decreased. The dynamic might have unfolded similarly, albeit at a manageable rate, as supermarket shoppers began to frequent the produce aisles more than they did the canned goods aisles had Del Monte’s inventories not gotten so bloated.

Oversupply is not unique to Del Monte or even canned goods specifically. In fact, pandemic factors have had a significant influence on the food industry at large, and the decisions made amid those factors five years ago are making or breaking brands today. Del Monte is not the only company to experience a boom directly related to 2020 and 2021 dynamics, which prompted investment in production expansion operations.

In 2020, supermarkets were essential businesses and remained open to the public.  Consumer spending was pressured by a fear that items might run out, and shoppers regularly stocked up on non-perishable items. And, without endless dining out options, an increasing number of meals were prepared at home. Just like the American farmers who banked on another boom year and doubled down on corn crops, Del Monte ramped up production of canned foods, aiming to ride the wave of growth as long as possible.

Unfortunately for both the corn farmers and Del Monte, the pandemic dynamics changed quickly. Del Monte products were not selling as fast as they were being canned, and the company started spending more to store goods than they were earning from supermarket sales. Higher interest rates made carrying inventory more expensive than before. And they are not alone. Big names like PepsiCo, Post Holdings, and J.M. Smucker have had to make strategic business decisions as they aim to stay relevant, competitive, and profitable.

Risk Management Decisions

We can’t blame this bankruptcy completely on the pandemic or interest rates. Del Monte, like other brands, chose to expand. In the short term, incurring debt seemed like a manageable risk when profits were high. When the bottom dropped out in a perfect storm of factors, including the reopening of restaurants, consumer desire for fresh produce, tight family budgets that prompted more private label purchases, and price increases for metals, Del Monte was already in the red.

Did Del Monte get too comfortable as a household name? Did they believe their age and category made them immune to bankruptcy? Or did they simply spread themselves too thin to weather normal market ebbs and flows? If there is one thing we can learn from Del Monte, it's that the food manufacturing sector is up against some significant challenges, and agility and innovation are, perhaps, the greatest tools in the toolbox. 

PepsiCo has closed plants and strategically scaled back on Tropicana and Naked juice brands while simultaneously investing in its innovative Fairlife milk line. Maintaining relevance and minimizing the risk of oversupply are two driving factors in these strategic decisions. What do people value, and what are they able to pay for that value? Rather than let go of popular carbonated beverages, they have started selling them in smaller cans and smaller quantities. 

Post Holdings has plans to close facilities in both Nevada and Ontario. Sales are down in the cereal department as a result of consumer demands for less sugar, lower carbs and portable snacks like granola bars.  Closing the plants will cost the company over $63 million, but it is a strategic move for Post, which is at risk of over-manufacturing more of the household name brand we are accustomed to seeing on store shelves. Post, like Del Monte, acquired their Nevada facility in 2021 amid the industry boom. Though they had a $110 million expansion project planned, the company never followed through due to falling sales post-pandemic.

J.M. Smucker is also aiming to sell plants in the Midwest and has already sold several brands. Their popular Hostess brand continues to underperform.  Like Del Monte, Post, and PepsiCo, J.M. Smucker acquired brands in 2023 with the goal of expanding their Sweet Baked Goods company, only to abruptly face the same market challenges in the form of changing consumer food budgets, tariffs, and decreased demand for high sugar, high-carb snacks.

Are all of these plant closures a sign of financial ruin in the food manufacturing sector? Some of the oldest brands in America are being sold or downsized. Or is Del Monte’s bankruptcy a one-off case of too many poor decisions in a row?

The Trickle Down Effect

Del Monte’s Chapter 11 filing will affect multiple other industries. As one of the largest and longest-standing food manufacturing companies, their complex supply chains relied heavily on freight logistics companies and warehouses to hold and transport their products. Currently, Del Monte owes millions to Uber Freight, Saddle Creek Logistics, and CHEP USA. Exactly how Del Monte will be sold is still unclear. While they have secured over $900 million in financing to see them through the bankruptcy process and the selling of all assets, the above companies may or may not have renewed contracts with the next buyers and are operating in support of Del Monte despite unpaid invoices.

Plant closers by PepsiCo, Post, Smucker, and Del Monte impact thousands of jobs across the country and the communities that benefit from the economic stability they can provide in healthy market dynamics. The fact that it is a fruit and vegetable company that is going under, rather than a sweet cakes or sugary soda company, has us on edge. If canned peaches can’t survive shifting consumer values, can chips, portable desserts, and carbonated beverages?