Sugarfina filed three Chapter 11 bankruptcy cases in Delaware courts on September 6 – one each for its US, Canadian, and international holdings. A few days later, a judge ruled that the company could not siphon $4m from a bankruptcy loan due to high interest fees but could pay employee wages, taxes and various other operating costs.
“Like many retail brands, Sugarfina has been negatively impacted by a challenging retail environment, particularly in malls where many of our boutiques are located,” co-founder Rosie O’Neill told us in a statement. “We look forward to emerging from this process as a leaner and stronger company.”
These candy storefronts aren't the only ones to struggle: fellow boutique candy retailer, Lolli & Pops, filed for bankruptcy in August.
Sugarfina had been trying to find a buyer for about two months. Despite $47m in net sales last year, according to court documents, It needed more capital to keep going, a reality O’Neill and co-founder Josh Resnick determined would be better suited in bankruptcy proceedings.
A holding company called Candy Cube Holdings, LLC offered $13m as part of a debtor in possession setup, which would allow Sugarfina to continue operating its businesses.
More lawsuits amid Sugarfina bankruptcy
As the bankruptcy unfolded, a warehouser for Sugarfina’s raw candy, which O’Neill told us the company imports from contract manufacturing partners in Europe and the US – refused to ship goods to stores.
Sugarfina said that MJC Confections LLC (doing business as the Hampton Popcorn Company) and GLJ Inc. (functioning under the name Midnitesnax) have withheld shipments due to alleged missed payments. On September 21, the retailer sued to receive those goods and restrict them from being destroyed.
“It’s disappointing to us that our former business partner would try to take advantage of our difficult financial position to interrupt and cause damage to our business,” said O’Neill, adding that the refusal of both companies to return ‘Sugarfina’s property’ violated the automatic stay policy of US bankruptcy proceedings.
“This has left us no choice but to bring this action.”
This summer, Sugarfina ended a contract with MNS (a joint venture between GLJ and MJC) in which the warehouser held, packaged and assembled the boutique’s products. MNS sued in August, claiming that Sugarfina had intentionally ended the contract to save money and move jobs to Mexico.
Sugarfina, meanwhile, had accused MNS of manufacturing ‘counterfeit’ candy cubes. The retailer has patents on that packaging design, and in March landed $2m from Sweet Pete’s, a Florida candy store, for allegedly copying its 3x3-inch ‘bento box.'
Funding 'luxury' candies in clear cubes
Positioned as a ‘candy store for grownups,’ Sugarfina was perhaps best known for its distinct packaging (including a clear ‘candy cube’ with the teal-blue Sugarina seal) and alcohol-infused gummies. Earlier this year, it collaborated with an Instagram-sensation coffee shop in Los Angeles on caffeinated gummy bears.
O’Neill and Resnick started the brand in 2012, expanding to more than 20 standalone stores and more than a dozen ‘shop-in-shops’ inside select Nordstrom locations in the US and Canada.
In 2017, Boston-based private equity firm Great Hill Partners invested $35m to help Sugarfina scale the brand ‘across web, mobile, retail, wholesale and corporate gifting.’ That money also intended to support international expansion to the Middle East, Europe and Asia.
Great Hill did not respond to a request for comment by press time.
Sugarfina reported assets and liabilities of up to $50m, as well as nearly $27m in debt owed in part to Goldman Sachs. Musician Bono of the rock band U2 was one of a handful of high-profile backers.