Tupperware files for bankruptcy amid opposition from lenders

Brief description of the dive:

• Iconic American home goods company Tupperware, in a long-awaited move, filed for Chapter 11 bankruptcy protection Tuesday in the United States Bankruptcy Court for the District of Delaware.

• But the company is facing resistance from new lenders known as the “Ad Hoc Group.” They want to seize the company’s assets through foreclosure or a Chapter 7 bankruptcy, which could involve liquidation, according to court documents.

• The brand — which rose to prominence after World War II and flourished under a direct-selling model known as Tupperware Parties — has about $811.8 million in funded debt obligations, mostly in the form of a single mortgage. In addition, the company has an $8 million bridge loan it took out last month.

Diving Insight:

In many ways, Tupperware, founded in 1946, was too late to meet the occasion.

At first, the brand was a megahit. Tupper Plastics had made materials like gas masks during World War II, but Earl Tupper knew his factories had to transition to a postwar economy. Tupper innovated ways to turn the black, stinking war material into clean, clear plastic and developed an airtight seal. The Tupperware brand was available in hardware stores and department stores until the housewife, who sold other products from home, was allowed to sell the new goods.

Eventually named Tupperware Parties, this direct selling method was lucrative for decades. Today, the company employs more than 5,450 people and has a global sales force of more than 465,000 salespeople in nearly 70 countries.

But the brand has been slow to adapt to the realities of e-commerce and omnichannel, according to court documents, and only in recent years, as part of a shift, has it begun working with retailers again. Tupperware can now be found through Amazon, Target, Macy’s, its own pop-ups and international stores, according to court documents. However, the company said that while direct sales now account for just 4% of its total household goods sales, Tupperware still makes nearly 90% of its revenue that way.

What’s more, “anti-plastic sentiment” and operational inefficiencies were also factors in Tupperware’s decline, according to court documents. The company’s revenue fell by more than 16% in 2022 and 2023.

“Tupperware used to be a hotbed of innovation in solving kitchen gadget problems, but it has really lost its edge, and with it a lot of market share and market position,” said Neil Saunders, managing director of GlobalData, in emailed comments. “It’s very difficult to see how the brand can return to its glory days. It’s now fighting to survive in some form.”

Indeed, its finances had been deteriorating for years, and its vendors were increasingly fleeing. The company issued a going concern warning in April 2023, setting in motion moves to potentially sell it and attempt a self-restructuring to improve liquidity. In October, the company appointed a new CEO and shook up its board.

But in February of this year, liquidity became an issue again, and Tupperware informed the bankruptcy court that it had failed to pay interest on a term loan, triggering the disclosure. The company sought to sell and considered several offers, including one that fell through around July 4. A bridge loan in August provided some relief as the company contemplated bankruptcy.

However, the new lenders continue to oppose the Chapter 11 process, informing Tupperware’s board in a letter filed with the bankruptcy court, “At this time, Ad Hoc Group does not consent to the use of cash collateral to fund a Chapter 11 proceeding that does not benefit anyone other than the company’s board of directors and restructuring professionals,” and that its intention is to file a motion to dismiss the Chapter 11 proceedings or convert them to a Chapter 7 proceeding.

In court documents, Tupperware said it had not yet received a written proposal from the ad hoc group.

For now, Tupperware said in a press release Tuesday that there are no changes to contracts with independent sales consultants. The company said it has “made significant progress” in what CEO Laurie Ann Goldman called its “transformation into a digital, technology-driven company better prepared to serve our stakeholders.”

“Whether you are a dedicated member of our Tupperware team, sell, cook with, or simply love our Tupperware products, you are part of our Tupperware family,” Goldman said in a statement. “We plan to continue to serve our valued customers with the high-quality products they love and trust throughout the process.”