In the first three months of 2017 alone, nine retailers have filed for Chapter 11 bankruptcy protection, and if this trend continues, bankrupt retailers will hit the highest annual total since the Great Recession, FoodDive.com reported yesterday. The number of retailers on Moody's distressed list is also headed toward a record. Despite the poor financial performance in other industries, food manufacturers aren’t as prone to bankruptcies. There are a few exceptions to the rule — Hostess had two chapter 11 bankruptcies and a chapter 7 bankruptcy, and Atkins Nutritionals and Pure Foods have both been through it. But for the most part, while food companies get in financial trouble, they seldom file for bankruptcy. While there is volatility in food prices and fluctuations in supply that impact margins, thanks to an active futures market for commodity crops, there are opportunities to minimize the negatives. The food and beverage industry can also absorb unprofitability in certain segments of their companies because commodity pricing changes don’t affect them too greatly. Many food companies are diversified, offering a variety of products. A portfolio of brands can help a company in financial distress because it provides the ability to raise cash through an asset sale. Food companies go into bankruptcy but are often able to work out company sales through a state law contract process and avoid the more formal bankruptcy proceedings. Senior creditors — usually lenders who hold some of a company's collateral — also play a role. However, an almost-century-old law makes it more difficult for food companies to file for bankruptcy.
