Koffee Kup purchases Vermont Bread

On April 26, employees of Vermont Bread, a Brattleboro subsidiary of Burlington-based Koffee Kup, arrived at work to find themselves out of jobs. 

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BURLINGTON — Former employees of Vermont Bread Company in Brattleboro got some good news and some not so good news Monday.

During a court hearing in Chittenden County, it was announced Flower Foods had purchased Koffee Kup and its assets, Vermont Bread and Superior Baking in North Grosvenor Dale, Conn.

Justin Heller, attorney for the court-appointed receiver tasked with preserving Koffee Kup’s assets until sold, said during the hearing the deal means all of the former employees will be finally receiving their paid-time-off balances.

“While we are contractually bound to keep the purchase price confidential,” said Heller, "we are authorized to disclose that the price is sufficient to pay KeyBank and others secured, in full, and to pay the PTO claims ... in full,” said Heller.

But while that is good news, Flowers Foods is in no rush to put the employees back to work.

“We have no immediate plans to reopen the bakeries but will be assessing how they may fit our strategic network optimization efforts in the future,” stated Ryals McMullian, Flowers Foods president and CEO in a news release.

Flowers Foods is headquartered in Thomasville, Georgia.

“This acquisition brings brands and production capacity in the Northeast, a key growth market for our company,” stated McMullian. “The Koffee Kup and Vermont Bread Company brands have a strong consumer following in the region and we’ll be evaluating their role within our brand portfolio.”

Flower Foods is a publicly traded company and has annual sales in excess of $4 billion.

Flowers’ products include Wonder, Nature’s Own, Dave’s Killer Bread, Tastykake and more.

Flowers Foods purchased the Country Kitchen Bakery in Brattleboro in November 2018. Two months later, 60 employees were laid off when the facility was closed. Flowers still uses the facility in Brattleboro, but only as a warehouse.

“This was an unexpected development,” said Adam Grinold, executive director of the Brattleboro Development Credit Corporation, which has been helping to identify buyers, including East Baking Company in Holyoke, Mass., and Mrs. Dunster’s, in Canada.

“At this time, we know none of the details or intent of the sale,” he said. “We are reaching out to understand if there will be a return to normal operation. Our continued focus will be on the employees and their ability to return to work.”

KeyBank declined to comment on the sale.

“By comparison,” said Heller during the hearing in Chittenden Superior Court, Civil Division, “the other offers of Mrs. Dunster’s and East Baking were not sufficient to pay even KeyBank in full.”

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He called it “an excellent result for the receivership estate.”

Monday’s hearings were scheduled to address a motion from Koffee Kup asking the court to order the receiver to pay employees their accrued PTO out of the assets being held pending sale. The court was also considering a sealed motion from East Baking related to its grievance that the company had not been selected as a purchaser.

Dan Serra, owner of East Baking, declined to comment about its grievance or the sale.

Heller noted the receivership order does not include any direction on how the receiver should deal with surplus funds and whether former employees are entitled to any priority status for their PTO.

Flowers Foods did not respond to a question about how soon ex-employees will get their balances.

During the hearing, Judge Samuel Hoar Jr. urged the parties to find a solution “that means getting the PTO into employee hands,” though he did say it would be “particularly unfair ... to impose upon the receiver the obligation” to figure out who gets paid first.

“It’s a process that I’m not sure the current receivership order contemplates or gives this court the authority to supervise,” he said. “And I’m not sure what the vehicle would be for giving this court jurisdiction to make that determination. But I think what I’m coming around to on all of this is that we may need further submissions.”

Hoar also said East Baking may make a motion to void the sale. He encouraged lawyers for the involved parties to interact before the next hearing scheduled for 3 p.m. June 22.

“Let’s be clear,” he said. “This is coming at all of us lightning fast and I don’t think it’s fair of the court to ask anybody today to state a firm position on any of this. Instead, what I think would make sense is for you folks to communicate, collaborate and see what you can come up with, and maybe there’s a stipulated resolution.”

Figures related to PTO need to be determined, Heller told the court. He said at first, the number he heard for claims owed for PTO totaled $790,000 but the receiver believes it is about half that amount.

Employees of Koffee Kup, a bakery founded in Troy in 1940, only learned they were out of a job when they showed up to work on April 26.

On April 1, American Industrial Acquisition Corp. purchased a majority share in Koffee Kup. Twenty-five days later, AIAC closed the bakeries with no notice to employees.

The day after the closure, Jeff Sands, of Dorset Partners and the senior adviser in North America for AIAC, told the Reformer: “Four years of losses are the culprit. Everyone wants a villain storyline, but there’s just not one there. This one just wasn’t salvageable.”

Then many ex-employees received their final paychecks with paid-off-time balances only to have the balances yanked out of their accounts, causing overdrafts.

In mid-May, Heller wrote in a news release the balances were supposed to have been paid out of a $2.5 million support package from AIAC, not out of the assets under the control of the receiver. Heller wrote that AIAC reneged on the agreement to provide the funds, and acknowledged the result was the first payroll disbursement was rescinded and replaced with an adjusted disbursement.