Competition woes force plant-based food firm into administration

It’s fronted by celebs such as All Black TJ Perenara. It’s backed by a $1.25 million loan from the Ministry of Business, Innovation and Employment’s regional partnership fund. It’s a crowdfunding darling.
But Sustainable Foods Ltd, better known on supermarket shelves by the brand name Plan*t, has called in an administrator, begun laying off staff and is seeking a buyer to save it from liquidation.
Founded by food services entrepreneur Justin Lemmens, its troubles follow in the steps of sister company Rosa Foods, which shut down two years ago and laid off 82 staff.
At the time, Newsroom reported that Rosa’s collapse put Sustainable Foods and its taxpayer financing at heightened risk. Rosa’s liquidation was completed in April this year, and the final liquidator’s report reveals it was left owing $2m to creditors – including a debt to sister company Sustainable Foods.
And sure enough, just four months later, chief executive Lemmens and chair Suzanne Snively have been forced to call in an administrator, to take control of the business.
One of the first five staff laid off on Friday was Kelda Skelton, who worked in marketing from Auckland. She’s upset that the company headhunted her to leave a previous good job, just six months ago, when the writing must already have been on the boardroom wall.
“The unfortunate reality is, it doesn’t matter how good your story is or how good the product is,” Skelton tells Newsroom. “If you’re not delivering at a price the consumer is going to pay, you’re not going to succeed. And if you can’t supply the goods, people will lose faith and they’ll stop buying.”
Lemmens says the company sells eight retail products (like hemp-based burger patties and sausages ands chicken-style fillets) as well as 12 food service products, with an annual turnover of $2.5m at the monthly run rate. As well as retailers and food service companies, customers include Air NZ, Tank, Hell Pizza, Burger Fuel and St Pierre’s.
But as the company goes into administration, it has 35 creditors, all but three of them unsecured.
Lemmens and the administrator, Malcolm Hollis of PwC, blame factors including relocating from Kāpiti to Ashburton this year, and scaling up production using a high moisture extruder machine bought with the MBIE money.
“The small population in NZ means that it is harder to achieve the low cost scale manufacturing (that is, long high-volume production runs) that are commonplace in large overseas markets,” Lemmens says. “That means the product costs can be higher in New Zealand and producer margins on domestic sales are tighter.
But the final straw was dealing with the two big supermarket chains. Often, Lemmens says, customers reported their local stores would be out of stock of Plan*t products, and the supermarkets also reduced their shelf space.
“Meat alternative” brands owned by big overseas meat producers such as Ingham’s Chicken and Birdseye have the scale to guarantee themselves prominent placement in the supermarket shelves and chillers – but Lemmens says supermarkets are putting the squeeze on local brands.
“The cost-of-living crisis is very real and impacting on supermarket tactics to maintain customer traffic, focusing on high-volume meat products, crowding out shelf space for plant-based meat alternatives even though Sustainable Foods Ltd’s products consistently sell out.”
Lemmens confirms Woolworths NZ is cutting back the availability of Plan*t food products, though not deleting it entirely. He remains confident consumers will choose products such as Plan*t ahead of those manufactured by “large multinationals”, based on the quality of the eating experience and perceived value of the products available.
Earlier this year Sunfed, another crowdfunded alternative protein startup, announced it was shutting up shop. Chief executive Shama Sukul Lee said Covid, staff shortages, supply chain disruptions and skyrocketing costs had left the business “pretty battered and bruised” and in need of a cash injection.
But the “plant-based bubble” had burst, and the existing venture capital investors were “no longer interested in supporting the business”.
This week, Lee emphasises that her company has not gone into administration or receivership but, rather, is undergoing a solvent, well-managed orderly wind-up. “Many businesses across various sectors in NZ are facing challenges, as evidenced by the increase in liquidations.”
At about the same time, a third alternative protein firm, Off-Piste Provisions, quietly made the decision to pull out of Foodstuffs supermarkets and focus on exports to the United States. “It’s tough in New Zealand, the mainstream appeal is still not there,” says founder Jade Gray, “and we’re moving our sights to more progressive markets that do have that opportunity.”
Woolworths NZ hasn’t replied to questions about its treatment of locally owned suppliers such as Plan*t, and Foodstuffs NZ also refused to front up a representative.
Instead, public relations manager Clinton Rowling issued a statement attributed to an unnamed Foodstuffs spokesperson: “We don’t comment on specific supplier relationships but can say our teams work very hard to meet the needs of our customers and that it’s never nice when a fellow New Zealand business falls on hard times,” the spokesperson said.
“A couple of years ago, the vegan and plant-based category grew rapidly with lots of new suppliers entering the market. Since then, there’s been more competition, growth has slowed and with the cost-of-living crisis customers are prioritising value.”
As regional development minister Shane Jones and the Government begin to allocate the first $100m of its new $1.2b regional investment fund, Sustainable Foods’ woes may provide a cautionary tale.
This is the third investment, from the previous government’s provincial growth fund and accompanying regional strategic partnership fund, that has gone sour.
These investments are made by MBIE’s regional economic development and investment unit, Kānoa, through its investment company Crown Regional Holdings.
The Auditor-General previously investigated the $3b provincial growth fund, established by the Labour-NZ First government in 2018. It found that neither Parliament nor the public could have confidence that the fund’s investments would ultimately represent good value for money.
Its first really big investment was $10m, followed by $5m, to build the Sky Waka gondola on Whakapapa ski field. That money went to the shambolic not-for-profit ski field operator Ruapehu Alpine Lifts, which was put into administration in 2022. As it fell further into receivership and liquidation, successive governments felt obliged to bail it out again and again. The taxpayer has now put in about $42m, and the ski field’s future is still uncertain.
That was followed by $2.25m to the Bay of Plenty’s Tunnicliffe Timber Solutions, which promised to create 120 jobs in the “socially deprived” region. After long delays with the project, trading losses put “extreme” pressure on its cashflows, forcing Kānoa to move the loan to its “red” risk rating.
In October last year, Kānoa called in insolvency specialists Calibre Partners which determined the company wasn’t salvageable. It was put into liquidation, and a report last month shows it owes $6.3m.
Meanwhile, MBIE’s regional strategic partnership fund (also run by Kānoa and Crown Regional Holdings) invested $1.25m in Sustainable Foods Ltd.
Justin Lemmens says the loan enabled Sustainable Foods to purchase and commission the specialist high moisture meat analogue extruder. “It is new technology that produces the next generation of high protein plant-based products that have the taste and texture of meat, made from clean recipes with relatively few ingredients.”
Sustainable Foods had spent three years in R&D with Riddet Institute and FoodSouth to develop a unique product using New Zealand-grown hemp. “The regional strategic partnership fund loan was to scale for domestic launch and future export growth,” he says. “No part of the loan is past its due date and Sustainable Foods is continuing to trade while it searches for options to restructure and or recapitalise.”
As the company moved into voluntary administration, Crown Regional Holdings escalated the debt to “high risk”.
Paul Smith, Kānoa’s general manager of investment management, says the holdings company was aware Sustainable Foods had been placed into voluntary administration. Kānoa had been working closely with the food business. “The loan has been treated as a high-risk investment in accordance with the Crown Regional Holdings Ltd risk escalation process,” he adds.
Shane Jones was one of the ministers involved in establishing those first regional funds in 2018 and signing off the early investments such as Ruapehu and Tunnicliffe. Now he’s in charge of the new $1.2b regional investment fund.
Newsroom asks him whether the scrutiny and decision-making at Kānoa and in the Beehive is sufficiently robust.
He admits some of the investments have been “inordinately large” sums. “The moment that we do invest into enterprises, we expect the stewards of the fund to keep an eagle eye out. I think Covid would not have helped their circumstances. But hey, it’s all good learning.”
Jones cites other investments, such as South Island gold mining, that have paid their way. Indeed, those investments that remain in the black certainly outnumber the three that have gone bust.
“The easiest thing to do is to do nothing,” Jones says. “Perhaps, these were cases where too much was done.
“I don’t want be too cavalier about it, but these are the risks that one takes when you’re working with firms in these benighted areas of New Zealand.
“There’s not a lot else going on around areas like Ruapehu and, indeed, we may be witnessing the death of a large forestry processor there. Do you walk away from such areas? Or do you endeavour to invigorate them through working with firms, as opposed to just writing out cheques for welfare?”