Smith Bros., the iconic Chicago-based cough drop brand that relaunched under new owners two years ago, has ceased production and is dissolving its assets after a failed comeback bid.
The ambitious plan to revive the dormant 168-year-old brand with aggressive marketing and a new line of cough drop and wellness products never gained traction, and the company has once again fallen into insolvency.
The bearded faces of the Smith brothers still gazed stoically from a sign above the entrance to the shuttered South Side factory this week, overseeing a desolate industrial block that will soon be on the block to the highest bidder.
Everything is set to be auctioned off by year's end, including the trademarked likenesses of the Smith brothers themselves, as the New York-based owner, private equity firm York Capital Management, looks to recoup some of its losses.
"There was not enough business running through the plant," said John Wheeler of Chicago-based Development Specialists, who was brought in by York Capital to oversee the liquidation of Smith Bros. "The lender just didn't want to continue to fund losses."
About 250 employees worked at the 160,000-square-foot brick factory at 3501 W. 48th Place in the Brighton Park neighborhood at the end of last year. Wheeler said only a skeleton crew of 15 remains as operations wind down.
The expanded Smith Bros. line rolled out last fall at thousands of retailers across the U.S. and Canada, backed by a national TV campaign, but projected sales never materialized. The cough drop has since all but disappeared from shelves at key distribution partners like Walgreens, which last fall participated in several in-store promotions with Smith Bros. featuring bearded NHL hockey players.
"We do not carry any Smith Bros. products at this time," said Walgreens spokesman Jim Cohn.
The last Smith Bros. cough drop rolled off the factory line on Sept. 23, when an equipment malfunction shut down dwindling production for good. Smith Bros. was placed into assignment for the benefit of creditors on Sept. 25, an insolvency proceeding under state law that facilitates liquidating and distributing assets.
Smith Bros. was started by siblings William and Andrew Smith, who cooked up the cough drop recipe in their Poughkeepsie, N.Y., restaurant in 1847. Their bearded images, which adorned the products for more than a century, were updated into hipsters for the relaunch, but the new offerings failed to capture a sustainable share of the U.S. cough drop market.
Sales of Smith Bros. cough drops generated just over $2.9 million during the latest 52-week period ending Sept. 6, according to IRI, a Chicago-based market research firm. While that represents a healthy 252 percent year-over-year increase, it is still a fraction of the $721 million U.S. cough drop market dominated by Deerfield-based Mondelez and Ricola, a Swiss company.
Revenues were also substantially below former CEO Steve Silk's projections of $10 million to $15 million for the revitalized Smith Bros. product line in 2015.
A food industry veteran, Silk said he stepped down from the company several months ago "to pursue other brand building opportunities."
"I am very proud of what we accomplished bringing this iconic brand back to life," Smith said in an email to the Tribune.
In 1977, Smith Bros. was acquired by Chicago-based F&F Foods, a privately held company that manufactured branded and private-label candies, mints and cough drops. By 2009, annual sales of Smith Bros. cough drops had dwindled to less than $1 million, and parent company F&F also was placed into assignment for creditors.
In 2010, the assets of F&F were acquired by York Capital for about $10 million. The firm invested another $11 million to upgrade the Chicago facility.
In addition to its signature wild cherry cough drop, the brand also introduced higher-margin wellness products like cold and flu remedies and immune support supplements.
Wheeler said the loss of a "big chunk of business" from a private-label client last year also proved devastating to the bottom line.
"They couldn't run the plant on just Smith Bros. products," Wheeler said. "They needed other business in there."
Wheeler said York Capital tried for several months to sell Smith Bros. as a going concern but did not find any takers. That led to the decision to liquidate.
While the company will be sold in pieces, it may not be the end of the bearded brothers. Wheeler is still hoping to capitalize on the brand, perhaps selling the intellectual property to another cough drop manufacturer.
"We are going to market that and sell that separately," Wheeler said. "If we can get somebody to make us an offer, then we'll see if we can get a bidding contest going."
http://www.chicagotribune.com/busin...gh-drops-closing-1008-biz-20151007-story.html
The ambitious plan to revive the dormant 168-year-old brand with aggressive marketing and a new line of cough drop and wellness products never gained traction, and the company has once again fallen into insolvency.
The bearded faces of the Smith brothers still gazed stoically from a sign above the entrance to the shuttered South Side factory this week, overseeing a desolate industrial block that will soon be on the block to the highest bidder.
Everything is set to be auctioned off by year's end, including the trademarked likenesses of the Smith brothers themselves, as the New York-based owner, private equity firm York Capital Management, looks to recoup some of its losses.
"There was not enough business running through the plant," said John Wheeler of Chicago-based Development Specialists, who was brought in by York Capital to oversee the liquidation of Smith Bros. "The lender just didn't want to continue to fund losses."
About 250 employees worked at the 160,000-square-foot brick factory at 3501 W. 48th Place in the Brighton Park neighborhood at the end of last year. Wheeler said only a skeleton crew of 15 remains as operations wind down.
The expanded Smith Bros. line rolled out last fall at thousands of retailers across the U.S. and Canada, backed by a national TV campaign, but projected sales never materialized. The cough drop has since all but disappeared from shelves at key distribution partners like Walgreens, which last fall participated in several in-store promotions with Smith Bros. featuring bearded NHL hockey players.
"We do not carry any Smith Bros. products at this time," said Walgreens spokesman Jim Cohn.
The last Smith Bros. cough drop rolled off the factory line on Sept. 23, when an equipment malfunction shut down dwindling production for good. Smith Bros. was placed into assignment for the benefit of creditors on Sept. 25, an insolvency proceeding under state law that facilitates liquidating and distributing assets.
Smith Bros. was started by siblings William and Andrew Smith, who cooked up the cough drop recipe in their Poughkeepsie, N.Y., restaurant in 1847. Their bearded images, which adorned the products for more than a century, were updated into hipsters for the relaunch, but the new offerings failed to capture a sustainable share of the U.S. cough drop market.
Sales of Smith Bros. cough drops generated just over $2.9 million during the latest 52-week period ending Sept. 6, according to IRI, a Chicago-based market research firm. While that represents a healthy 252 percent year-over-year increase, it is still a fraction of the $721 million U.S. cough drop market dominated by Deerfield-based Mondelez and Ricola, a Swiss company.
Revenues were also substantially below former CEO Steve Silk's projections of $10 million to $15 million for the revitalized Smith Bros. product line in 2015.
A food industry veteran, Silk said he stepped down from the company several months ago "to pursue other brand building opportunities."
"I am very proud of what we accomplished bringing this iconic brand back to life," Smith said in an email to the Tribune.
In 1977, Smith Bros. was acquired by Chicago-based F&F Foods, a privately held company that manufactured branded and private-label candies, mints and cough drops. By 2009, annual sales of Smith Bros. cough drops had dwindled to less than $1 million, and parent company F&F also was placed into assignment for creditors.
In 2010, the assets of F&F were acquired by York Capital for about $10 million. The firm invested another $11 million to upgrade the Chicago facility.
In addition to its signature wild cherry cough drop, the brand also introduced higher-margin wellness products like cold and flu remedies and immune support supplements.
Wheeler said the loss of a "big chunk of business" from a private-label client last year also proved devastating to the bottom line.
"They couldn't run the plant on just Smith Bros. products," Wheeler said. "They needed other business in there."
Wheeler said York Capital tried for several months to sell Smith Bros. as a going concern but did not find any takers. That led to the decision to liquidate.
While the company will be sold in pieces, it may not be the end of the bearded brothers. Wheeler is still hoping to capitalize on the brand, perhaps selling the intellectual property to another cough drop manufacturer.
"We are going to market that and sell that separately," Wheeler said. "If we can get somebody to make us an offer, then we'll see if we can get a bidding contest going."
http://www.chicagotribune.com/busin...gh-drops-closing-1008-biz-20151007-story.html
