Lancaster to Divest from Bantam Bagels Citing ‘No Foreseeable Path to Profitability’

Less than four years after acquiring the brand, Lancaster Colony Corporation plans to divest from the frozen food maker Bantam Bagels later this summer.

“Based on the financial underperformance of the business, with no foreseeable path to profitability, the company has made the decision to exit the Bantam Bagel business,” the Ohio-based company said in a press release late last week.

In its Q3 FY 2022 earnings, Lancaster reported consolidated operating income dropped $45.0 million to an operating loss of $7.6 million. Along with rising manufacturing, freight, labor and ingredient costs, executives attributed the decline to the unfavorable impact of a restructuring and impairment charge of $22.7 million for Bantam Bagels.

Overall, the company reported consolidated net sales increased 12.9% to $403.5 million while retail net sales increased 7.4% to $213.1 million. Lancaster’s other brands include In Angelic Bakehouse wraps, buns and breads; Marzetti dressings, dips and croutons; and Sister Schubert rolls, as well as condiments produced via licensing deals for foodservice partners such as Chick-Fil-A, Arby’s and The Olive Garden.

According to executives, Bantam’s sales were severely impacted by the loss of one of its largest foodservice customers at the start of the COVID-19 pandemic. Though the QSR customer was not named, Bantam had a long-standing relationship with Starbucks, which carried its products at stores nationwide. As of press, the brand is no longer listed on Starbucks’ website.

“Early during the pandemic, the food service industry was severely impacted by store closures and traffic declines. During this period, numerous restaurant operators made choices to streamline their menus for operating efficiencies,” said Lancaster president and CEO David Ciesinski told analysts on the earnings call. “[Bantam’s] discontinuation and the sustained impact of the pandemic changed the economies of this business.”

The company was also forced to recall two lots of its cream cheese stuffed bagels this year after its co-packer Damascus Bakery reported undisclosed egg allergens in the product.

Founded by husband and wife duo Nick and Elyse Oleksak in 2012, Bantam gained notoriety for its cream cheese stuffed bagels after a 2015 appearance on the television show Shark Tank. At the time of its $34 million acquisition by Lancaster in 2018, the brand had already branched out into egg stuffed bagels and stuffed pancake bites, reporting roughly $20 million in annual net sales and distribution in 20,000 stores including Target, Stop and Shop, Vons, Albertsons, Fresh Thyme, Kroger, Sprouts and Costco.

Since then, and in response to the loss of its foodservice business, Lancaster has tried to refocus Bantam Bagels on retail sales, launching new pizza stuff bites in August 2021. According to the brand’s website, its products are currently sold in over 21,000 stores.

“Despite investments to support the growth of Bantam Bagels in the retail sales segment, and our best efforts to replace the loss of the major customer in the food service segment,” Ciesinski said, “we were unable to identify a credible pathway to profitability for the business.”