Distressed credit investors are tipping companies with sugar- and white flour-related products as possible casualties of the low-carbohydrate fad. The companies could may see marked revenue and creditworthiness declines and move into distressed land. “We’re all just waiting for the next shoe to drop. We’re wondering what the next big wave will be,” commented one distressed investor, noting investors are eyeing carb producers as potential prey in the future. While the low-carb craze seems to have already plateaued, some investors speculate demand for sugar-related products will not recover. Interstate Bakeries’ bankruptcy and Krispy Kreme’s well-publicized third quarter loss have sparked debate over whether more sugar-product companies will crumble. Furthermore, recent poor earnings from Coca-Cola Co. and suggestions of a soft-drink slump have prompted investors to wonder if the anti-sugar trend will continue to cause earnings to fizzle. “The low-carb thing will be the next wave. People are eating fewer donuts,” said another distressed player.
Another investor involved in Interstate as a creditor said future credit woes could extend beyond just the carb producers and to the packaging industry. “The packaging companies are getting squeezed on both ends,” he said. In addition to slack demand for the products, packaging companies are hurt by high oil prices because many products are oil-based.
