Acosta Inc. and affiliated companies filed their prepackaged Chapter 11 bankruptcy petitions Sunday, saying in court documents changes in consumer behavior and industry trends have hurt its business in recent years.
The Jacksonville-based sales and marketing company announced last month it would file a prepackaged reorganization plan to convert about $3 billion of debt to equity, with the approval of a majority of its creditors.
Acosta filed its petitions in U.S. Bankruptcy Court for the District of Delaware.
The court documents do not give specific financial details for Acosta but its disclosure statement said the company has lost $631 million in revenue since 2015, without giving a figure for total revenue. Florida Trend magazine estimated Acosta’s 2018 revenue at $2.3 billion.
“Acosta has faced the same pressures affecting the retail industry as a whole, as well as certain Acosta-specific challenges,” the disclosure statement said.
“In the past five years, Acosta has suffered from the industry headwinds facing CPG (consumer packaged goods) manufacturers and the resulting consolidation and downsizing of CPG manufacturers’ marketing spend. Acosta’s sales and marketing model also has faced pressure as the industry has moved away from Acosta’s historical processes.”
Several trends have reduced Acosta’s revenue, the statement said. “Specifically, consumers have shifted away from traditional grocery retailers where Acosta has had a leadership position to discounters, convenience stores, online channels, and organic-focused grocers, where Acosta has not historically focused,” it said.
However, “Acosta-specific operational and strategic challenges” also have hurt the company, it said.
“For instance, the Company has traditionally operated a syndicated model, wherein Acosta associates typically serve multiple CPG clients at the same time. The sales and marketing industry has moved, however, to a dedicated team model, pursuant to which one SMA team works for one CPG client,” it said.
“Though Acosta is shifting to a dedicated model, the transition has been slow in achieving significant results.”
Other changes included a revamping of its executive team in July.
Although it is not mentioned in the disclosure statement, 28-year company veteran Darian Pickett was promoted to CEO of Acosta in July. Acosta lost several key clients in July, which hurt its liquidity position and impacted its ability to pay off debt.
The Chapter 11 reorganization not only gives the company’s creditors the best opportunity for recoveries of debt, but also helps “protect the jobs of the Debtors’ approximately 30,000 employees,” the disclosure statement said.
Acosta, founded in 1927, was acquired in 2014 by funds affiliated with The Carlyle Group for $4.75 billion. The international investment firm formed a company called Anna Holdings Inc. to facilitate the acquisition and Acosta is a subsidiary of Anna, the disclosure statement said.
The main Chapter 11 petition was filed by Anna Holdings.
The largest creditor, according to the petition, is Wilmington Trust, which holds $800 million in senior notes.
Acosta’s main law firm in its Chapter 11 case is Kirkland & Ellis LLP, with the Wilmington firm of Klehr Harrison Harvey Branzburg LLP acting as local attorney.
Acosta said in a Nov. 8 news release announcing its plan that with approval in advance from most its creditors, it expects to move through the Chapter 11 process quickly without disruption to its business.
