Popular Coffee Companies and Cafes File for Chapter 11 Bankruptcy

A combination of troubling economic factors has forced several coffee shop chains and roasters to file for Chapter 11 protection to reorganize or, sometimes, Chapter 7 liquidation if all is lost.

The economic problems that most debtors in the coffee industry blame for their financial difficulties are the lingering effects of the Covid-19 pandemic, a high interest rate environment, rising inflation and another huge problem – a 65% increase in bean prices imported coffee. as of January 2021, reported by Food Manufacturing.

Related: Popular pizza chain files for Chapter 7 bankruptcy

Netherlands-based global coffee bean supplier Mercon Coffee Corp. filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York on Dec. 7, seeking sell its assets, cease operations and pursue a liquidation plan, according to court filings.

The coffee supplier said it has faced headwinds in recent years, including a global impact of the Covid-19 pandemic and a decline in the market price of coffee, according to bankruptcy filings.

Mercon said it will seek $40 million in debtor-in-possession financing from its pre-petition creditors to pay operating expenses, fund the Chapter 11 case and pursue a liquidation plan.

The debtor in court filings reported less than $11.8 million in cash and $363.3 million in funded debt obligations, including $7.5 million owed to Starbucks.

Related: Popular fast-food burger chain files for Chapter 11 bankruptcy

Brookings, SD-based roaster and coffee operator Cottonwood Coffee filed for Chapter 11 on July 2 in the United States Bankruptcy Court for the District of South Dakota, likely suffering lingering effects from the Covid-19 pandemic and increased coffee prices.

Colorado Springs, Colorado-based Switchback Coffee Roasters filed for Chapter 11 bankruptcy protection on August 19 in the Bankruptcy Court for the District of Colorado. Switchback Coffee reported having assets between $50,000 and $100,000 and liabilities between $500,000 and $1 million.

The company did not comment on why it had to file, but rising coffee prices and the effects of Covid-19 are good bets as causes. The company is still taking online orders and appears to be fully operational.

In the filing, the company said the funds will be available to unsecured creditors. Switchback also noted that its assets “include perishable goods or assets that could rapidly deteriorate or lose value without attention.”

Coffee companies are struggling with the lingering effects of the Covid-19 pandemic and rising costs.

Image source: Shutterstock

Red Bay Coffee files for Chapter 11 bankruptcy

Finally, the Red Bay Coffee chain filed for Chapter 11 bankruptcy on August 29 to reorganize as it suffered a long-term impact from the Covid-19 pandemic and rising costs of two processes. Higher coffee bean prices likely also contributed to the company’s woes.

More bankruptcy stories:

• Retail chain Big Lots is poised to file for Chapter 11 bankruptcy
• Manufacturers of popular retail products file for Chapter 11 bankruptcy
• The mattress company’s rival files for Chapter 11 bankruptcy

The Oakland, Calif.-based company listed about $250,000 in assets and $3.3 million in liabilities in its petition, World Coffee Portal reported. The company had a net loss of more than $850,000 from January to July 2024.

Red Bay Coffee, founded in 2014 by Keba Konte, is facing high costs from a 2018 sexual harassment lawsuit and breach of contract litigation.

The coffee company currently operates six coffee shops, located in Oakland, San Francisco and Berkeley, California; an Oakland coffee roaster and a coffee van.

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