Lack of credit, slow FDA action blamed for co-op's losses
By DAN WHEAT
YAKIMA, Wash. -- Snokist Growers filed for Chapter 11 bankruptcy reorganization Dec. 7 and hopes to have a plan for continued operations by another party within 60 days.
The 108-year-old, grower-owned tree fruit processing cooperative in Yakima blamed the bankruptcy on delayed clearance of food safety concerns by the Food and Drug Administration and a new lender's reluctance to cover losses.
The future of the cooperative's 600 employees and service to its 150 grower members is in doubt, said Tina Moss, cooperative spokeswoman.
"We have a lot of options we're looking into right now and no concrete plan," Moss said. "We do know there will be a liquidation of some sort and we're looking at partnerships, leasing out the plant to someone else to operate."
The cooperative underwent a major restructuring about five years ago in which it ended its packing and sales of fresh fruit and concentrated on processing of apples, pears, cherries and soft fruit for juice, canning, fruit cups and purees.
Snokist laid off many of its employees Dec. 1 as seasonal apple processing finished. It was a normal seasonal layoff, Moss said. Warehouse shipping continues through the winter, she said.
In 2009 and 2010, Snokist lost a profitable level of processing because of strained relations with a lender, Snokist said in a news release.
In March of 2011, Snokist obtained a new lender and new credit line, which it hoped would reverse losses.
In May, a small number of North Carolina school children became sick from school lunches that included Snokist applesauce. An FDA inspection of Snokist facilities found nothing wrong with the applesauce, the news release said.
The FDA expanded its inspection "and conducted an unsubstantiated, broad-range investigation which resulted in a notice of certain claimed deficiencies at the plant," the news release stated.
As a result, Snokist's two largest customers, one being the USDA, suspended orders until the issues were resolved with the FDA.
Additionally, the USDA required Snokist to recall delivered product pursuant to USDA contracts even though they had been approved by an on-site USDA inspector at the time of production, according to the news release.
Snokist immediately started a voluntary recall of suspected product and provided solutions to FDA's claims but FDA delayed approval of the resolutions for nearly five months causing Snokist to suffer millions of dollars in lost sales, the news release stated.
"FDA's action caused an already stressful financial situation to become unworkable," the news release stated.
Snokist is pursing a managed sale of inventory and assets to pay all growers and creditors, the news release stated.