Tupperware: recency bias leaves investors boxed into heritage brand

Tupperware is best known for plastic reusable containers that can encourage users to keep food long after they should have thrown it out. Shareholders in the company know what that feels like. They — like many investors in pandemic-era crazes — have learnt a painful lesson in the limits of their own foresight.

On Friday, Tupperware announced it had hired financial advisers amid a cash crunch. Its status as a viable business, or ‘going concern’, is in doubt. Tupperware’s stock fell to a market capitalisation of less than $100mn compared with a debt load of more than $700mn.

In 2023, the company recorded revenue of $1.7bn, compared to $2.7bn a decade ago. Its decline has been inexorable, a few stray quarters in 2020 and 2021 excepted.

The pandemic boosted cooking and eating at home. Sales rallied. Tupperware’s market capitalisation climbed to more than $1bn in late 2020, on the belief that demand for branded plastic containers would be sustained. Lex rightly predicted that the craze would be shortlived.

Earl Tupper founded the business in 1946. It prospered thanks to so-called “Tupperware parties” at which groups of neighbourhood women socialised and bought containers. The company still relies on direct selling by hundreds of thousands of independent distributors and salespeople. This appears anachronistic in the digital age.

Before the pandemic, the company completed a debt exchange that slashed principal it owed. In 2022, Tupperware recorded ebitda of just $124mn, implying a total debt to ebitda ratio of nearly six times. The company appears headed for a final restructuring in which creditors would become the owners of a slimmer Tupperware package.

Pandemic-era investment crazes also included Peloton, Zoom and Domino’s Pizza. Some investors have a bad habit of “recency bias”, extrapolating long-term trends from short-term blips. They should stock up on Tupperware to keep that realisation fresh, even when their food is not.