Bankrupt Houseware Retailer Strikes Deal to Continue Operations

According to The Street, Multi-level marketing (MLM) companies generate sales through a network of sales representatives who aim to recruit others, expanding their sales force. This direct sales model accounts for a small fraction of the overall retail market in the U.S., representing about 1% of total retail sales, equating to approximately $40.5 billion in direct sales in 2022, according to the U.S. Direct Selling Association. Some of the most recognized names in this industry include Amway, Herbalife, Mary Kay, and Tupperware.

Industry Leaders

Amway, the leading player in the MLM industry, was founded in 1959 and is based in Ada, Michigan. A family-owned business and subsidiary of privately held Alticor, Amway sells a variety of products, including cleaning supplies, beauty products, energy drinks, multivitamins, and air treatment systems.

Herbalife, established in 1980 and headquartered in Los Angeles, specializes in nutritional products. However, the company has faced regulatory scrutiny over the years, including hefty fines for violations. In 2020, Herbalife paid $67 million to the Securities and Exchange Commission (SEC) to settle allegations related to the Foreign Corrupt Practices Act, along with a $55 million criminal fine. These penalties were tied to its Chinese subsidiaries allegedly offering meals, gifts, and other benefits to Chinese officials in exchange for sales licenses and favorable media coverage.

Mary Kay Cosmetics, founded in 1963 by Mary Kay Ash in Addison, Texas, is now one of the largest skincare and cosmetics companies globally. Currently led by Ash’s grandson, Ryan Rogers, who took over from his father in 2023, the company has maintained its position as a major player in the industry.

Tupperware, famous for its airtight food storage containers, was created in 1946 by chemist Earl S. Tupper in Massachusetts. Tupperware revolutionized marketing with its home party sales model, spearheaded by Brownie Wise, which led to the establishment of Tupperware Parties Inc. Tupper sold his company to Rexall Drugs Corp. in the 1950s.

Tupperware’s Financial Struggles

Recently, Tupperware Brands and nine of its affiliates filed for Chapter 11 bankruptcy protection on September 17. This move was aimed at selling its assets and preventing a group of lenders from seizing control through an out-of-court foreclosure. The company has been grappling with about $811 million in debt obligations and declining sales.

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In April 2023, Tupperware initiated a marketing process to find a buyer but failed to receive any acceptable offers from lenders. Despite attempts to secure a sale just before the July 4, 2024 holiday weekend, these efforts did not yield results.

To avoid losing control of the company, Tupperware sought debtor-in-possession financing to facilitate a sale to its prepetition lenders. However, the lenders initially resisted this plan, indicating intentions to acquire the brand through foreclosure.

Recent Developments and Sale Agreement

On October 29, Tupperware Brands Corp. is set to hold a sale hearing, seeking to finalize the sale of its assets to a group of lenders for approximately $23.7 million in cash, along with a credit bid of $63.8 million in prepetition revolving and term loan debt. The lenders will also assume $22.3 million in revolver debt under a new first-lien credit agreement.

U.S. Bankruptcy Judge Brendan Linehan Shannon signed an order on October 23 approving the sale procedures and canceling the auction. If approved, the transaction is expected to close on October 31. Objections to the sale must be submitted by October 28.