Oberweis Dairy laying off workers after filing for bankruptcy

Oberweis Dairy plans to lay off 127 employees starting in June, the company informed the state in a WARN filing.

The move comes just days after the North Aurora-based company, known for its ice cream and milk, filed a voluntary petition for Chapter 11 bankruptcy protections in the Northern District of Illinois, court records show.

The first layoffs are scheduled to start on June 11.

The company said it owed more than $4 million in total unsecured claims to its top 20 creditors, including more than $173,000 to the Cook County treasurer. The largest debt listed was with a Hudson-based transportation company, with the dairy owing more than $774,000, according to records.

Oberweis Dairy is owned by the family of Republican state politician Jim D. Oberweis.

With headquarters in North Aurora, the company has 43 ice cream stores in several states, as well as in St. Charles, Elgin, Bartlett, Geneva, Naperville and Bloomingdale.

In an affidavit filed Monday in bankruptcy court, President Adam Kraber said the company started seeking a buyer in October 2023 because of its financial difficulties. A potential buyer backed out in late March. Several others have expressed interest in buying parts of the business, according to the affidavit.

“Despite the popularity of its products, the ODI [Oberweis Dairy Inc.] business has faced increasing financial challenges in recent years, driven primarily by a combination of demand fluctuations and operational inefficiencies,” Kraber said in the affidavit.

He noted consumers are drinking and eating less conventional milk and dairy products.

“Meanwhile, the ODI Business made a series of improvident uses of its capital [such as under-investing in its manufacturing equipment and over-investing in its distribution capacity] that left it unable to weather a period of diminishing sales,” he said.

Some of those decisions included expanding to Texas, where it had a co-producer bottling milk and other beverages, including organic versions of its milk products. The company underestimated the cost of transporting milk and empty bottles between Illinois and Texas, according to the affidavit.

There was also an ill-fated attempt to use amber-colored glass bottles designed to prevent light from degrading the milk in retail stores. Customers didn’t like the bottles, according to Kraber’s affidavit.

The company didn’t invest enough in preventative maintenance and modernization of the North Aurora plant, and failed to adjust standard costs regularly, “leaving management with an inaccurate understanding of labor and overhead costs,” according to Kraber’s affidavit.

Oberweis started in Aurora in 1927. The founder’s grandson, John, took it over in the 1960s.

Jim D. Oberweis and his then-wife, Elaine Pearson, assumed leadership in 1986, with him as chairman and Elaine as president and chief executive officer. Their son, Joe, became its leader in 2007. He resigned from the board of directors in May 2023.

Kraber began working for Oberweis in 2000 as a home delivery driver, rose through the ranks, and quit in 2015 to work for another food-service company. He returned to Oberweis in 2022.

https://www.dailyherald.com/20240416/business/oberweis-dairy-laying-off-workers-after-filing-for-bankruptcy/