Tupperware files for bankruptcy protection Premium

Tupperware files for Chapter 11 bankruptcy to reorganize and transform into a digital-first company amidst declining sales.

The story so far: Concluding a grim run of declining sales since the third quarter of 2021, food storage and homeware maker Tupperware on Thursday filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court for the District of Delaware. Explaining the rationale, President and CEO Laurie Ann Goldman held that the company’s financial position has been “severely impacted by the challenging macroeconomic environment” - referring to the coronavirus pandemic and later the ensuing impact of Russian actions in Ukraine. Therefore, after having explored “numerous strategic options”, she stated, it was the best way forward. “This process is meant to provide us with essential flexibility as we pursue strategic alternatives to support our transformation into a digital-first, technology-led company better positioned to serve our stakeholders,” she said.  

Filing for Chapter 11 bankruptcy does not translate to end of the road for an enterprise. Instead, it translates to what U.S. Courts define as “reorganisation bankruptcy”. The enterprise is mostly allowed to run their business and may, only with court approval, be allowed to borrow further money. 

The primary idea is to allow the company time in order to propose a plan of reorganisation and keep their business alive and pay creditors over time.  

Proceedings commence with the bankrupt applicant proposing a plan for reorganisation. Creditors whose rights may be affected are asked to vote on the plan. Thereby, the plan is confirmed by the courts if it gets the required votes and satisfies legal requirements. However, should the proceedings not find conclusive ends, the case is either dismissed or converted to Chapter 7 liquidation proceedings.  

The serve-ware and homeware products maker has historically been reliant on its direct- selling model. Now, this is centred around freelance agents selling Tupperware products to consumers on a commission basis. However, as held by the Chief Restructuring Officer of Tupperware Brands in the court declaration, the growth slowed as “few newer market opportunities presented”. More pertinent to note, the over-reliance often came at the cost of developing an omnichannel strategy and a modern e-commerce infrastructure. The two were of particular importance considering the Chief Restructuring Officer’s observation about shifts in consumer behaviour, that is, with the advent on online shopping and increased retail convenience. To put things into perspective, 4% of homeware sales in the overall industry are derived from direct selling. However, Tupperware derived 90% of its sales through this channel, the Officer held.  

The two focus points have been largely absent from Tupperware’s distribution as well as marketing strategy. The latter is another realm where the Florida-headquartered has relied immensely on their freelance representatives. The declaration held that the company has “historically had very limited coordinated, formal marketing (particularly online)”. For perspective, the company’s digital advertising spend has been less than 1%.  

Tupperware’s distribution model was massively impacted at the onset of the coronavirus pandemic because of lockdowns and curtailed scope for interactions. The plastic storage maker however received a short-lived encouragement starting the third quarter of FY 2020 when sales went up 14% on a year-over-year basis owing to increased demand for safe food storage products from home-bound consumers cooking at home.