Manufacturing issues and tainted ingredients can be some of the biggest causes of small and medium companies losing business and shutting their doors for good. In many cases, if production is stalled or a product is ruined and must be thrown out, a company can lose millions of dollars.
Food and edible products are even more susceptible to being ruined if even one facet of the production line is contaminated, a whole warehouse of items must be destroyed. An ice cream company learned this the hard way and must file for bankruptcy.
Small Mistakes Mean Big Losses
Another company, electric vehicle maker Fisker, filed for Chapter 11 protection in June after all of the 2023 Fisker Ocean vehicles produced through May 2024 were forced to be recalled.
The issue involved door handles that might stick and prevent passengers from getting in and out of the car. The company was forced to recall 12,523 Oceans sold throughout the U.S., Canada, and Europe, and ultimately caused the company to restructure in order to remain afloat.
What Is Chapter 11 Bankruptcy?
A company filing under Chapter 11 of the U.S. Bankruptcy Code is considered a reorganization that allows business to maintain their operations and create a plan to pay back their creditors over a period of time.
Chapter 11 filing does not always mean that a company will close its doors, but it is a good indicator that it cannot pay back its current debts with the money that it has in the bank or brings in monthly.
Restaurants Often Use Chapter 11 Bankruptcy
It’s increasingly common for food-based companies and restaurants to use Chapter 11 bankruptcy to keep the company intact while exchanging ownership or restructuring the company to make it more profitable.
The food category is something that often has tiny margins for profits, so companies can often find themselves in trouble and in need of assistance despite having healthy sales.
Totally Cool Files to Restructure
Totally Cool Inc, a manufacturing company that makes ice cream brands like Friendly’s, Hershey’s Ice Cream, Abilyn’s Frozen Bakery, Keni’s and ChipWich, was forced to file for Chapter 11 bankruptcy protection on August 23.
The company was forced to halt production and distribution after recalling all of its ice cream just two months ago for a potential Listeria monocytogenes contamination.
What Is a Listeria?
Listeria is a bacteria that is commonly found in unpasteurized milk products.
Although healthy adults rarely become ill due to a listeria infection, it can be fatal to unborn babies, newborns, and people with weakened immune systems.
How Does Contamination Occur?
The contamination usually occurs during a product’s production or packaging if machinery pieces are improperly cleaned.
Sometimes, the listeria bacteria comes from the raw ingredients purchased for the products.
Pasteurized Milk in the United States
Almost all dairy sold in the United States must be pasteurized. However, social media influencers have made raw milk and dairy products more common.
Unpasteurized products can easily be purchased directly from farmers, and although listeria infections are rare, they can be deadly.
Totally Cool Shut Down Production
The Owings Mills, Md., company filed its petition with the U.S. Bankruptcy Court in the District of Maryland.
The company listed $1 million to $10 million in liabilities and $500,000 to $1 million in assets.
The Recall
The company shut down production and recalled 69 ice cream products across 13 brands.
The issue was alerted after the Food & Drug Administration sampled a few of the products and found the presence of Listeria monocutogenes. The company then completed a full investigation and took preventative action.
What Happens to the Recalled Products?
Consumers who purchased the recalled products were encouraged to throw them away and contact the company for a full refund. They could also bring the items back to the store where they were originally purchased for their money back.
Although the products were distributed across the country, no illnesses were reported.
Health Effects of Listeria
Although listeria is not fatal for most healthy adults, it can still cause uncomfortable short-term symptoms.
Some of the side effects felt after contracting listeria are high fever, severe headaches, stiffness, nausea, abdominal pain, and diarrhea.
