Financing

Midwestern favorite Oberweis Dairy declares bankruptcy and cuts staff

The ice cream chain intends to lay off staff in June and cut its costs in other ways, but to remain in operation following a Chapter 11 bankruptcy filing. It is struggling to find a buyer.
bankruptcy
The ice cream chain said it had no choice after a purchase fell through. | Photo: Shutterstock

The parent of the 40-unit Oberweis Dairy ice cream chain has filed for Chapter 11 bankruptcy protection after failing to find a buyer, according to a court filing.

The family that has owned and operated Oberweis Dairy Inc. since 1927 said it intends to cut costs by laying off 127 of its roughly 1,100 employees starting in June, or the beginning of its busiest season. The documents indicate that the Oberweis clan owes about $4 million to creditors.

The Oberweis scoop shops generate roughly half the company’s revenues, with the remainder coming from sales through supermarkets and grocery delivery services.

The bankruptcy filing flatly states that the company landed in trouble after nearly a century as a Midwestern cult favorite through a combination of mismanagement and shifts in consumer tastes.

Among the missteps is an “under-investment” in production capabilities and an “over-investment” in the company’s distribution network. The bad calls left the company “unable to weather a period of diminishing sales.”

One of the reasons for that drop in sales, according to the filing, was a growing tendency of consumers to forsake traditional ice cream for plant-based, high-protein and shelf-stable frozen alternatives. Yet Oberweis didn’t move with the shift, the documents indicate.

As sales eroded, the company failed to tighten its belt and seek efficiencies, the filing continues. Meanwhile, it had sunk more capital into distribution instead of updating its production capabilities.

Last year, the Oberweis family hired investment advisors to seek a buyer. According to the bankruptcy filing, the call for suitors drew a number of interested parties. One took steps to become a stalking-horse bidder, or a would-be buyer willing to set the floor for the bidding in exchange for having its fees paid if a better offer was eventually fielded by the seller. That lead suitor was not identified.

The deal fell apart in March 2024, leaving the company with no other option but to seek bankruptcy protection, the documents assert. The company indicated that it intends to continue operating, but with some adjustments to its plight.

Oberweis enjoys a following and reputation in the Midwest that’s akin to Edy’s in the East and Dryer’s in the West. Four generations of Oberweis family members have run the chain. One member is Jim Oberweis, a member of the Illinois Senate and a frequent but unsuccessful contender for higher office. He has run twice for the U.S. senator twice, two times for a seat in the U.S. House of Representatives and one for the governorship of Illinois.

Oberweis is headquartered in North Aurora, Illinois.

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