The struggling but (at least to older Americans) iconic canned fruit and veg maker Del Monte Foods filed for Chapter 11 bankruptcy on July 1. Its CEO cited the Trump tariffs as the factor forcing it to seek a court restructuring of its obligations. Note that Del Monte had already negotiated a debt restructuring a year ago, but that became untenable due to the impact of tariffs on steel and aluminum costs, and perhaps also to litigation woes.
First from AI Circle in Del Monte files for bankruptcy amid soaring aluminum tariffs:
Heritage canned‑food maker Del Monte Foods has filed for Chapter 11 protection, citing credit pressures and “stunning increases” in packaging costs, driven in large part by President Donald Trump’s decision in early June to double U.S. tariffs on imported steel and aluminium to a whopping 50 per cent….
Industry sources highlight that aluminium foil and can suppliers already faced a roughly 6% jump in material costs following the tariff increase, with projections of a 24% hike in can pricing by spring 2026. The Can Manufacturers Institute warned these tariffs distort domestic packaging supply and could push U.S. food prices higher.
Del Monte CEO Greg Longstreet acknowledged the “dynamic macroeconomic environment”, emphasising that elevated aluminium costs, on top of steel duties, have forced the company to consider an expedited sale process. …Other packaging options such as cartons or glass are being considered throughout the industry, yet Del Monte continues to be bound by its aluminium-canned legacy.
The bankruptcy filing highlights the ways in which dramatic trade policy changes, ostensibly aimed at strengthening home country metal sectors, can instead wash through food supply chains. Del Monte’s search for a buyer comes as analysts indicate that the crisis bodes ill for established can-dependent brands.
For those not familiar with Del Monte, in addition to its canned fruits, such as fruit cocktail, peaches, and pineapple, and veg like canned peas and corn, the company owns other brands:
Contadina (Roma tomato products; my mother used Contadina tomato paste in her pizzas)
College Inn (broths and stocks)
Kitchen Basics
Joyba (fruity bubble teas)
Take Root Organics
S&W Premium (another canned fruit and veg lines; as a consumer, I perceived this to be lower quality than Del Monte, but that may be a function of label design)
While I am not a cook, and the Del Monte target customer is one, I still spent enough time wandering around grocery stores to see plenty of brands. I must confess to never encountering Kitchen Basics, Joyba or Take Root Organics in any of the stores I patronized in New York City or Alabama. Publix has a Greenwise mini-chain which focuses on organic and healthy foods, and I would have expected to see Take Root there (I did buy the Greenwise house brand for things like organic canned beans, stocks, and even organic olive oil spray). So I wonder if this product families suffered from limited distribution.
Admittedly, the earlier debt renegotiation is proof that Del Monte was under duress. But even if the impact of the tariff-induced can cost increase was arguably only at the margin, you can drown just as fully in 6 inches of water as 6 feet. So even if the tariffs were far from the sole cause of Del Monte’s tsuris, the CEO cited them as the proximate cause for the bankruptcy filing.
Although a business-savvy colleague quipped, “How do you go out of business in canned goods”? Del Monte was in product categories that were in long-term decline. Despite increased budget stress among lower and middle-income consumers, Del Monte attempted to maintain a high quality/high price position, which among other things was undercut by store brands. And as the recap below shows, they wrong-footed the Covid-lockdown and food shortages spike in demand, incorrectly anticipating it would persist. From Sherwood:
The bankruptcy follows Del Monte’s miscalculated bet on the Covid boom, when it ramped up production to meet record-high demand for shelf-stable goods. But as that buying frenzy tapered off, the company was left with excess inventory it had to store, write off, or sell at “substantial losses,” per its court filing. That, combined with rising interest rates that nearly doubled its annual interest expense since 2020, drove the company’s liquidity to historic lows….
But, even if the company had weathered the postpandemic period more prudently, it’s hard to escape the reality that’s been eating away at its core business: canned food just isn’t what America wants.
According to the USDA, canned vegetables accounted for just 23% of total US vegetables available for consumption in 2019 — down from 30% five decades earlier. The decline is even steeper for canned fruit, whose share more than halved, from 11% to 5% by 2023.
Consumers are increasingly opting for fresher, healthier options — and with inflation still biting, many are also trading down to cheaper store-brand alternatives, leaving legacy packaged goods companies like Del Monte struggling to keep up.
Meanwhile, newly imposed 50% tariffs on imported steel and aluminum — the key materials used to make cans — could put pressure on margins, especially since ~80% of US can-grade steel is sourced from abroad.
The New York Times provided additional backstory:
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.”
Del Monte secured $912.5 million in debtor-in-possession financing and will (as is typical) keep operating during the bankruptcy process. Bloomberg gave an overview of the earlier restructuring that went pear-shaped:
The development ends a challenging year for the borrower that saw its parent company Del Monte Pacific Ltd. in June elect to skip a payment to the unit’s lenders as part of a lawsuit settlement tied to a controversial debt restructuring…
Del Monte Foods executed a debt overhaul last year, which became the subject of a lawsuit by left-behind lenders who said the company defaulted on a $725 million financing agreement when it shifted the assets away from the reach of lenders.
The strategy — known in industry parlance as a drop-down transaction — allowed Del Monte Foods to raise fresh liquidity by borrowing against the transferred assets. The deal also prioritized participating lenders via debt swaps and created different payment priorities, Bloomberg reported.
Even though Chapter 11 is designed to help enterprises survive debt excesses and economic shocks, there’s no guarantee of successful long-term result. Some like Body Shop or many years ago, Interco, enter Chapter 11 and have their restructuring fail. The Interco collapse is the reason the US has not had much of a shoe industry in recent decades. Others emerge from Chapter 11 only to become serial bankrupts before an eventual winding down.
So wish Del Monte Foods well, if nothing else for the sake of its employees and suppliers.
And let’s hope an enterprising journalist keeps track of Trump-tariff-induced bankruptcies, since more are sure to come.
