Company Behind 'Lucky Charms' And 'Cheetos' Files For Bankruptcy: Are Worker Layoffs Coming?

H-Food Holdings LLC, the parent company of contract manufacturer Hearthside Food Solutions, has filed for Chapter 11 bankruptcy protection. Despite its parent company's legal and financial troubles, Hearthside Food Solutions plans to manufacture its snack favourites as usual.

Hearthside Food Solutions, an American contract manufacturer, produces popular snack products like bars, baked goods, meal kits, and packaged foods for major brands such as Kraft, Kellogg's, Mondelez, General Mills, and PepsiCo.

Hearthside Food Solutions manufactures a wide range of products for major brands, including Kellogg's Oats, Kellogg's Crunch Granola Almonds & Cranberries, PepsiCo's Lays and Quaker Oats, and Kraft Foods' Kool-Aid and Jell-O and other popular products like Lucky Charms and Cheetos.

Snack Giant's Stumble

H-Food Holdings LLC, Hearthside Food Solutions' parent company, filed for Chapter 11 bankruptcy on November 22 to eliminate $1.9 billion in debt, restructure its operations, and secure $200 million in new capital.

"We have taken decisive action across our company to put our past challenges behind us and are encouraged by the improvement we have already seen," said Hearthside CEO Darlene Nicosia in a statement.

The company filed several routine "first-day motions" with the court to ensure a smooth transition into restructuring and uninterrupted operations during the Chapter 11 process.

"Hearthside has filed a number of customary 'first day motions' with the court to facilitate a smooth transition into Chapter 11 and operate without disruption during the process, including continuing to pay employee wages and benefits, maintaining customer programs, and honouring obligations to vendors," the company said.

Will Workers Keep Their Jobs And Paychecks?

Hearthside Food Solutions plans to maintain normal operations, ensuring workers receive salaries and benefits, customer programs remain unaffected, and vendor obligations are honoured.

To finance its operations during bankruptcy, the company filed a motion seeking court approval for a $300 million debtor-in-possession financing.

"Today's announcement marks an incredibly important step forward for Hearthside, our valued customers, and our dedicated team as we continue to transform our business for the future," said Nicosia.

"With a sustainable capital structure and a significant infusion of new capital to fund our long-term plan, we will be well-equipped to enhance our leadership in the food manufacturing industry as we drive continued innovation and growth." The company expects to emerge from bankruptcy by the first quarter of 2025.

A Rocky Road For Snack Maker

Hearthside Food Solution's bankruptcy filing is the latest chapter in the company's tumultuous history. Last year, the manufacturer faced scrutiny over child labour allegations at its snack factories.

A New York Times article from February 2023 revealed that migrant children worked in hazardous conditions at Hearthside Food Solution's facilities to produce popular snacks like Chewy granola bars, Lucky Charms, and Cheetos.

Child Labour Scandal Rocks Industry

Bloomberg first reported that the company, which insists it has never knowingly employed children at its facilities and that the allegations were not the primary cause of its restructuring, was preparing to file for bankruptcy.

In response to the report, the company stated that it had terminated contracts with third-party staffing agencies and implemented stricter employment practices.

It also acknowledged that the New York Times article triggered immediate and severe consequences, including government investigations and negative publicity from media outlets and consumers.

The company stated that the investigations did not result in any fines. Following its bankruptcy filing and the closure of over 100 stores in the past year, TGI Friday's unveiled its long-term strategy.