Beverage Maker Hansen Foods Files Under Chapter 11
The fizz has gone out of beverage maker Hansen Foods Inc. Saddled with paying for a costly new plant at a time when its natural soda niche was under assault by new competitors, Hansen this week filed for protection under Chapter 11 of the federal bankruptcy code.
In its petition, filed Wednesday in U.S. District Court in Los Angeles, Hansen listed debts of $32.6 million and assets of $34.7 million.
The financial slide of Hansen came eight years after the company introduced a popular line of so-called “natural” soft drinks that nearly made the City of Industry beverage maker a household word in the hotly competitive soft drink business. By 1986, Hansen’s soft drinks, which combined the popularity of sparkling mineral water with the sweetness of traditional sodas, were generating more than $51 million in annual sales from grocery stores in 17 Western states and health food outlets nationwide.
But after borrowing heavily from Bank of America to build a $20-million processing plant in the City of Industry in order to expand operations, Hansen found itself facing increasing competition. Sales dropped 14% in the past year, according to Hansen’s bankruptcy lawyers.
Although beverage giants Coke and Pepsi never introduced products similar to Hansen’s, Canada Dry and Schweppes did, according to Bruce Sweyd, vice president and chief operating officer of Hansen’s main rival, Original New York Seltzer of Walnut. Other competitors in the flavored seltzer field include 5th Avenue Seltzer and Old San Francisco Seltzer.
The problems were compounded by delays and cost overruns at the plant in the City of Industry. Hansen had to seek out a financial partner, Erly Industries of Los Angeles, after Bank of America balked at providing additional financing.
Tim Hansen, president of the company, could not be reached for comment. But lawyers hired by the company to handle the bankruptcy proceeding blamed Hansen’s financial woes on poor marketing efforts by Erly Industries. The two firms had a complicated marketing agreement under which Erly both marketed and distributed Hansen sodas in California and Nevada. Erly also periodically advanced money to Hansen, which was paid back from sales of Hansen sodas.
“There have been some disputes between Hansen and Erly about whether Erly was doing a good enough job in marketing the product,” said David Levene, Hansen’s bankruptcy lawyer.
“Hansen has been very disappointed with the existing contractual arrangements” with Erly, Levene added. “I think that the management of the company (Hansen) is very optimistic it can get outside financing to improve the situation because of its name recognition and high visibility product.”
Large Stake
But an Erly official disputed that assessment.
“They (Hansen) have never tried to negotiate a change in the nature of our marketing agreement with them,” said Gerard P. Thomas, vice president and chief financial officer of Erly. “Needless to say, as a lender that currently has over $25 million due and payable from Hansen, we’ve been as cooperative as we can possibly be. We want them to be successful because we have a very large stake in them.”
“They’ve been in trouble for at least a year,” said Tom Pirko, a food industry marketing consultant. “They’re playing in a real tough league. . . . They compete against the fruit juice people. They compete against the the soft drink people, and that’s a fast track. There’s a whole lot of competition out there.”
A spokesman for Lucky’s supermarkets, one of more than 100 creditors listed on Hansen’s Chapter 11 petition, said that Hansen’s sodas were only “average performers” even though the store has slashed the price of Hansen from its regular price of $2.09 a six-pack to $1.69 in order to compete with Coca-Cola, which also sells for $1.69.
