Del Monte Foods, the nearly 140-year-old company known for its wide array of canned vegetables and fruits, filed for bankruptcy protection on Tuesday after struggling with rising borrowing costs, pandemic missteps and a changing global economy.
The California-based company, facing secured debt of more than $1.2 billion, said it had agreed to a restructuring agreement with lenders that calls for Del Monte to sell “all or substantially all” of its assets. The company, which also produces College Inn broths, Contadina tomato sauces and Joyba bubble tea, said it had secured $165 million to help continue operations during the Chapter 11 bankruptcy process.
“After a thorough evaluation of all available options, we determined a court-supervised sale process is the most effective way to accelerate our turnaround and create a stronger and enduring Del Monte Foods,” Greg Longstreet, the company’s chief executive, said in a statement.
Del Monte has for several years faced a number of economic issues and geopolitical concerns.
During the coronavirus pandemic, when more people were eating at home, demand rose to record highs, Del Monte said in the filing, and the company committed to higher production levels. Once demand began to ease, Del Monte was left with too much inventory that it was forced to store, write off and “sell at substantial losses.”
The company also said it had carried a large amount of debt since it was acquired in 2014 by Del Monte Pacific Limited, which borrowed to finance the acquisition. Interest rates continued to increase, and the company’s annual cash interest expense has nearly doubled since 2020.
S&P Global analysts downgraded Del Monte’s credit rating last year to B– from B because of poor operating performance. The pressures were compounded by increasingly price-conscious consumers, who are choosing store brands, or private labels, rather than national names like Del Monte.
“About 40 to 45 percent of the total market is serviced by private label players, which are typically at lower prices compared to the branded offerings,” said Arpi Gupta, an analyst at S&P Global.
“We do think that the consumer is stretched right now,” Ms. Gupta said. “Due to all the inflation that these companies have been facing, average retail prices are anywhere between 25 to 30 percent higher compared to about three years ago.”
Tariffs on steel and aluminum would also make cans more expensive. Roughly 80 percent of the steel used for cans for food comes from abroad.
Del Monte, founded in 1886, grows most of its produce at family farms across the United States and Mexico, according to the filing, and the majority of the products are locally sourced.
“We remain committed to our mission of expanding access to nutritious, great-tasting food for all,” Mr. Longstreet said.
Emmett Lindner writes about breaking and trending news. He has written about international protests, climate change and social media influencers.
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