High-End Candy Maker Sugarfina Files for Chapter 11 Bankruptcy

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Delicious champagne-flavored gummy bears couldn’t save Sugarfina from filing for Chapter 11 bankruptcy protection. As sweet as it is, the company fell victim to the decidedly more sour challenges of the current retail climate as it expanded from online to malls.

Sugarfina launched as an online-only high-end candy store for adults in 2012 before it moved onto physical retail stores in 2013. It featured items such as rosé or vodka gummy bears in tiny bento boxes among a rainbow of flavors. The company expects to continue business as usual and hopes to have a deal with an acquirer completed by November.

“After careful review of a wide range of available options, we determined that an organized restructuring of the company is in the best interest of all parties, including our valued customers, partners and employees,” the company said in a statement. “We look forward to emerging from this process as a leaner and stronger company, so that we can continue our brand’s mission of spreading sweetness.”

Sugarfina works with artisan candy makers from around the world to create an exclusive line of products. In 2018, the company took in sales of $47 million with a wholesale business selling to hotels and luxury retailers.

Bloomberg reported the company listed assets and liabilities of up to $50 million in its bankruptcy petition. Some well-known names among its minority shareholders are U2 lead singer Bono and Goldman Sachs CEO David Solomon. Neither are expected to see fortunes impaired, though, as their stakes are less than 1% each.

Private equity firm Great Hill Partners LLC provided $35 million of equity financing to the company in 2017, according to Bloomberg.

MCM Musings: A clicks-to-bricks success for a while, Sugarfina aimed to expand its reach through opening boutique stores in major markets, primarily in malls during a time when they were faltering. We have to ask: Was this a good move for a brand already selling wholesale and through ecommerce? Would it have been able to sidestep Chapter 11 had it remained a pure play? It may prove a cautionary tale, as not every digital native can successfully navigate to a winning omnichannel model.

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