Overview
Read the case study below. Analyze the problem. Develop 10-15 questions and respond to each.
Case Study: a Bakery Comes Back From the Dead
It was an all-too-familiar story line out of Detroit: Last November, the owners of Awrey Bakeries announced their plans to close down the 103-year-old business, a hometown favorite, and lay off its 203-person work force.
Best known for its chocolate ripple cakes and windmill cookies, Awrey Bakeries is one of the largest privately owned baking facilities in the U.S., occupying a 218,000-square-foot factory in Livonia, Michigan, a suburb just outside downtown Detroit. Though Awrey was best known in the Midwest, it also had national distribution deals with institutional clients such as the U.S. Army. At its peak, the bakery did an estimated $75 million in revenue and employed about 400 workers, the majority of whom were unionized.
The company's fortunes started heading south in 2003. Sales continued to plunge, and in 2005, Awrey filed for Chapter 11 protection. Two private equity firms swept in and purchased the company for $25 million. They were able to revive the company for a few years, but Awrey's business continued to deteriorate.
Last November 28, Awrey's employees were told that unless new owners or investors were found, the company would be forced to close its doors within 60 days. With no buyer in sight, the company laid off its entire staff this February and arranged to auction off its physical assets, including baking equipment, stand mixers, flour hoppers, and cooling racks.
The auction was scheduled for February 20. In true storybook fashion, disaster was averted when two local businessmen, Ron Beebe and Jim McColgan, struck an 11th-hour deal on February 19 to buy the company and all its assets.
The rescue of Awrey Bakeries was good news for the economically depressed Detroit region. Beebe and McColgan were lauded as heroes in the Detroit press. On March 11, local officials joined them for a ribbon-cutting ceremony to mark the reopening of the bakery.
The Problem
Despite these good vibes, Awrey has already been through one unsuccessful restructuring and remains a deeply troubled company. When Hilco Equity Partners and Monomoy Capital Partners purchased the company in 2005, they streamlined Awrey's roster of products and eliminated about 300 items. In a bid to capture a more affluent market, the new owners also bought Atkins Elegant Desserts, an Indiana bakery that specialized in cheesecakes and decorated cakes.