Private Equity Cost-Cutting Makes Bakers Cry

Buyout firms should really avoid messing with nostalgia-shrouded companies. When they do, they run the risk of falling into an unsavory PR battle.

At least that’s how things have played out with Brynwood Partners’ investment in Stella D’oro Biscuit Company. The 79-year-old Bronx company’s workers have been on strike ever since Brynwood cut its bakers wages and vacation days ten months ago. Their chant? “No Contract, No Cookies.”

According to a story in yesterday’s NY Post, Brynwood is “slowly squeezing the life out of the city jewel by having inexperienced replacement workers produce poor quality cookies as they pursue their profits.”

The cookies are so bad that the striking bakers “cry when they see the products in the store.” Could there be a worse headline for private equity? Greedy buyout bosses make cookie-loving bakers cry. What’s next? Private equity ruins Christmas?

I’m going to give Brynwood the benefit of the doubt and say the wage cutting was a drastic measure taken to save the company from a full-on failure, not the firm’s profit-obsessed plan all along. The firm purchased Stella D’oro from Kraft in 2006 as a turnaround after its revenues had shrunk by half over the past decade. At the time of purchase, the firm discussed its plans to reposition the company’s brand to tap into current trends like portion control, organic foods and 100-calorie packs (which it has done). Even the Bronx’s Rep. Eliot L. Engel welcomed the company’s new owners, commending Brynwood for agreeing to keep the plant open and its 180 employees at work.

Too bad Brynwood is finding out the hard way that all that job-saving and brand rejuvenation goes out the window once you make a baker cry.

(Note: Obviously there is a lot of information missing here, like, how close the company is to failure, whether Brynwood has written it down to zero, whether the firm has taken a dividend on the company, or whether the main reason the company is suffering is because of its debt load. I haven’t heard back from the firm (which has declined to comment on just about every story I’ve read on the strike) but will update if I do.)