STiR coffee and tea magazine

STiR coffee and tea 15 Independent coffee companies are filing for Chapter 11 at an alarming rate all across the US. Chapter 11 Bankruptcy Filings Increase for US Coffeehouses The coffee industry in the United States is facing significant financial chal- lenges, with several companies filing for Chapter 11 bankruptcy protection in recent months, each one of them beloved in their communities. The escalating number of Chapter 11 and other types of bankruptcy filings highlights the difficulties coffee roasters, cafes, and specialty coffee brands face in a post- pandemic market. According to the website BankruptcyWatch.com, Chapter 11 filings are up by 43% from 2023. One of the latest casualties is Ink! Coffee, a Colorado-based company that filed for Chapter 11 bankruptcy on June 20, 2024, which was a strategi- cally-chosen date: one day before the CARES Act liability allowance sunsets under Subchapter V of the United States Bankruptcy Code. Subchapter V is a provision which makes it possible for the business to remain in control during organization, and for the duration of the CARES Act ruling the limit for liabilities was raised from $2.75 million to $7.5 million. Another prominent case is Frinj Coffee, a California-based company that filed for Chapter 11 bankruptcy in January 2024. The Santa Barbara Indepen- dent reported that Frinj Coffee claimed "about $215,000 in assets while listing more than $1.8 million in liabilities." The company's founder, Jay Ruskey, described the move as a "strategic semi-pause" to address financial matters. The business is being sued by multiple parties, including head roaster and investor Paige Gesualdo, who claims she was misled by Ruskey and other executives on a number of fronts. This messy legal situation is common when companies hit troubled waters. The challenges are not limited to smaller, specialty coffee brands. Even established chains are feeling the pressure. For instance, Cottonwood Coffee, a South Dakota-based roastery and café chain, filed for Chapter 11 bankruptcy on July 2, 2024, reporting $809,000 in total liabilities. There are countless factors which contribute to business owners taking the refuge of a court-protected restructure, but the coffeehouse industry has faced several key challenges in recent years. Economic uncertainty and inflation, the lingering effects of the Covid-19 pandemic, and rising interest rates come together to create a strangle- hold. Add that most coffee houses run on very thin margins (if profitable, it is rare to see an independent café and roasting company making 10% net profit) and are often either self-funded or over-leveraged and without reserves, and the growing trend makes sense. Business contracts and expands. The past 18 months or so have seen a contraction throughout the industry from farm to café. Hopefully there will be a turning point soon for this current round because the psychological and physical toll is high on the innovators and the doers who risk everything to serve coffee they believe in to customers they care about. by Emily McIntyre Starbucks Turns to Chipotle CEO Brian Niccol for Salvation Starbucks shares spiked 24% after the company announced that Brian Niccol would replace Laxman Narasimhan as CEO. The company is relying on Niccol's considerable success as CEO of Chipotle and experience weathering many storms to return the coffee giant to its former glory. Competition from lower-cost coffee brands, declining sales, boycotts over alleged support for Israel, and poor public image issues resulting from multiple lawsuits and labor disputes have investors calling for drastic changes. As CEO of Chipotle, Niccol dealt with his fair share of company scandals and lagging sales. In 2018, amidst shocking food poisoning outbreaks and plummeting profits, Chipotle turned to Niccol to help save the company from disaster, which he did with an outrageous amount of success. By introducing innovative menu items, a popular loyalty program, and seamlessly integrating mobile app orders with streamlined production and pick-up lanes, Niccol increased revenue from $4.9 billion in 2018 to $9.9 billion in 2023. Since taking over in 2018, Chipotle's stock has skyrocketed by 773%, making it one of the best performers on the S&P 500. While other fast-food companies suffer from decreasing sales and inflation-wary consumers, Chipotle's profits continue to climb. However, according to former CEO Howard Schulz, it's not just Niccol's profit-producing abilities that attracted Starbucks' attention. "Having followed Brian's leadership and transformation journey at Chipotle, I've long admired his leadership impact. His retail excellence and track record in delivering extraordinary shareholder value recognizes the critical human element it takes to lead a culture and values-driven enterprise. I believe he is the leader Starbucks needs at a pivotal moment in its history. He has my respect and full support," said Schultz. Brian Niccol is the new chairman and CEO of Starbucks. Photo courtesy Starbucks Other statements made by Starbucks board chair Mellody Hobson indicate they're looking for someone to "strengthen company culture" and restore focus and value to its partners in green. Over the last six years at Chipotle, Niccol raised wages and expanded employee benefits, such as paying for college tuition. Niccol's ability to focus on driving growth while innovating menu items, streamlining operational performance, enhancing brand values and image, and strengthening company culture simultaneously may be Starbucks' saving grace. The question is, can he do it across 38,000 stores worldwide? By Diana Jendoubi Coffee Report

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