Caraway Tea Company, LLC—a private-label tea manufacturer based in Highland, New York—filed for Chapter 11 bankruptcy protection on June 9, 2025 at the Southern District of New York (Poughkeepsie), under case number 4:25‑bk‑35620, presided over by Judge Kyu Young Paek Inforuptcy.
Financial Snapshot
In its filing, the company reported assets between $100,000 and $500,000, with liabilities between $1 million and $10 million, and listed fewer than 50 creditors Food & Drink International. Another report specified more precise figures: $614,660 in assets, nearly $2.7 million in liabilities, and projected approximately $3 million in revenue for the year Westfair Communications.
Operations & Background
Founded in 2010 by Gina and Michael Caraway, Caraway Tea specialized in creating and packaging custom tea blends, botanicals, and ready‑to‑drink beverages for both its own label and as a co‑packer for other brands. The company sourced ingredients globally from China, Sri Lanka, India, and Japan, and was certified to market some products as dietary supplements with formulations targeting energy, digestion, sleep, and immune support.
Path to Bankruptcy
The tea business saw a surge in demand in 2021, as buyers stocked up amid global supply chain concerns. But by 2022–2023, demand dropped significantly. The company borrowed funds in mid‑2022 to sustain operations, yet revenue remained under pressure—sales were halved by the end of 2023. Though partially rebounding in 2024, recovery was insufficient. Caraway operated on a month‑to‑month lease and, as of the filing, was facing possible eviction. Despite all this, company leadership expressed the intention of pursuing long‑term financial health and sustainable growth.
the most common mistake leading to bankrupcy is poor cash flow management
If Caraway had stronger cash flow planning, they might have avoided (or delayed) Chapter 11.
Revenue ≠ Liquidity
Many businesses see top-line revenue growth (like Caraway’s projected $3M), but if collections are delayed, margins are thin, or debt service is heavy, they run out of usable cash.
Debt Becomes a Trap
Borrowing to “buy time” is a common move, but if demand doesn’t rebound fast enough, debt obligations compound the problem. That’s exactly what Caraway did in 2022, and by 2023 sales had halved.
Vulnerability to External Shocks
Global supply chain swings, inflation, or customer pull-backs are outside a business’s control. Without cash reserves and tight forecasting, one downturn can push a company into crisis.
How Business Owners Can Prevent This
- Build a Cash Buffer – Aim for at least 3–6 months of operating expenses in reserves.
- Track Rolling Cash Flow Forecasts – Update weekly or monthly to anticipate crunches before they hit.
- Shorten Collection Cycles – Incentivize faster customer payments and manage accounts receivable closely.
- Control Costs in Real Time – Monitor operating expenses monthly, not just quarterly.
- Seek Flexible Financing – Lines of credit or invoice factoring may be safer than large lump-sum loans that require immediate servicing.
In short: Many businesses fail not because they lack customers or revenue potential, but because they run out of liquid cash at the wrong time.