Instant Brands Files for Chapter 11 Bankruptcy Protection Amidst Inflation and Pullback on Spending

Key Highlights :

1. Instant Brands has filed for Chapter 11 bankruptcy protection as the company that was already struggling is stung by inflation.

2. Inflation has buffeted consumers after a pandemic-fueled binge on goods for the home, but spending has also moved elsewhere as people are again able to travel, or go to restaurants and shows.

3. Sales of “electronic multicooker devices,” most of which are Instant Pots, reached $758 million in 2020, the start of the pandemic. Sales had plunged 50% by last year, to $344 million.

4. Dollar and unit sales have declined 20% from last year in the period ending in April, according to the market research company NPD Group.

5. Just last week, S&P Global downgraded the company’s rating due to lower consumer spending on discretionary categories and warned that ratings could fall again if Instant Brands seeks bankruptcy protection.

6. “Net sales decreased 21.9% in the first quarter of fiscal 2023, relative to the same period last year,” S&P analysts wrote. “This marked the seventh consecutive quarter of year-over-year sales contraction. Instant Brands’ performance continues to suffer from depressed consumer demand due to lower discretionary spending on home products.”

     As the pandemic continues to affect the global economy, Instant Brands, the company behind popular kitchenware products such as Pyrex glassware and the Instant Pot, has filed for Chapter 11 bankruptcy protection. Inflation has taken a toll on consumer spending, with people opting to spend their money on travel, restaurants, and shows instead of home goods. This has had a direct impact on Instant Brands’ sales, which have fallen 50% since the start of the pandemic.

     The filing with the U.S. Bankruptcy Court for the Southern District of Texas this week listed the company’s assets and liabilities as more than $500 million. According to the market research company NPD Group, sales of electronic multicooker devices, which are dominated by Instant Pots, have declined 20% from the same period last year. S&P Global also downgraded the company’s rating due to lower consumer spending on discretionary categories and warned that ratings could fall again if Instant Brands seeks bankruptcy protection.

     Instant Brands CEO and President Ben Gadbois stated that the company had done its best to manage through the pandemic and global supply chain issues, but had simply run out of cash. Tightening of credit terms and higher interest rates had made the company’s capital structure unsustainable. To help the company stay afloat, Instant Brands has received a commitment for $132.5 million in new debtor-in-possession financing from its existing lenders.

     The filing excludes the company’s entities located outside the U.S. and Canada. Instant Brands is the latest in a string of companies to feel the effects of the pandemic, with many businesses struggling to stay afloat amid rising inflation and a pullback in consumer spending. It remains to be seen how the company will fare in the coming months.

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