Sunfed Foods co-founder Shama Sukul Lee with a burger featuring the company's chickpea-based "Chicken-Free Chicken", which was sold in 300g packs at the equivalent of $45 per kilo - a price that one of its investors saw on the wrong side of the cost-of-living crisis.
Sunfed Foods co-founder Shama Sukul Lee with a burger featuring the company's chickpea-based "Chicken-Free Chicken", which was sold in 300g packs at the equivalent of $45 per kilo - a price that one of its investors saw on the wrong side of the cost-of-living crisis.
One of New Zealand’s highest-profile plant-based “meat” start-ups, chicken-free chicken maker Sunfed Meats, is shutting up shop after burning through some $10 million in investors’ cash without reaching profit.
Its founder blames the pandemic and (in her view) impatient investors who refused to tip in more funds, but the shutdownhas also occurred during a worldwide slump in consumer interest in pricey plant-based meat, plus an ongoing venture capital crunch in the face of high interest rates.
In a post on her social accounts this afternoon, founder Shama Sukul Lee said: “Hello Sunfed guys. I owe you an update, which is that I’m in the process of shutting down.”
Lee said her firm had raised $5 million in 2018 from Australasian venture capital firm Blackbird Ventures and another $5m from other investors (she did not name them, but other backers include Crown agency NZGCP and Sir Stephen Tindall’s K1W1).
She said her business had reached $4m in revenue and entered the Australian market with deals inked with Coles and Woolworths. The firm was on the verge of making a profit, by her account.
But then came the pandemic. “Those Covid years are a blur, as we went into chronic business survival mode just to keep production going. There was one crisis after another, with staff shortages, supply chain disruption and skyrocketing cost, but we managed to keep things running all through Covid hell,” she said.
The company was “battered and bruised” and needed fresh capital, but “Sunfed’s existing investors were no longer interested in supporting the business”. (And beyond her investors’ shifting view of plant-based proteins, the broader venture capital market has been laid low by high interest rates.)
She added: “VC investors had written Sunfed off. A lot of investors jumped into the plant-based gold rush, thinking they could get fast valuations similar to what they’re used to in the virtual world.
“But manufacturing and FMCG [fast-moving consumer goods] are in the physical world with a lot more complexity and moving parts. It’s a longer-term play if you have to build real things.”
Sunfed has not responded to Australian customers' questions on its Facebook and Instagram posts asking about its products' disappearance from supermarket shelves.
Beyond criticising her exiting investors, she acknowledged that the “plant-based bubble burst and the category has been undergoing a reality check. Fuelled by easy VC money, the category became saturated with junk food masked as [being] healthy, and people now see through that”.
She said the shutdown would be “in a solvent and orderly fashion”. It was the reason her firm’s product has disappeared from Australian supermarket shelves. New Zealand supermarkets had about two months’ stock remaining.
35 staff at height
Lee told the Herald the business had 35 staff at its height. As of today, only two remained to assist with the wind-down.
Her update followed news the firm’s products had been dropped by Australia’s big two supermarket chains, Coles and Woolworths.
The firm had not responded to questions posted by Australian shoppers on its Facebook and Instagram accounts, including: “WHAT IS GOING ON WITH SUPPLY TO AUSTRALIA?? Several attempts to contact your company and no replies!”
But Coles and Woolworths both confirmed to the Herald they had stopped stocking Sunfed. The Woolworths spokeswoman said Sunfed was “best-placed” to address questions about why the brand was dropped.
The Sydney Morning Herald’s Business Briefing newsletter reported on January 30 that Blackbird had slashed its valuation to zero.
Blackbird, which holds a 10.74 per cent stake, would not comment to the paper (or to the NZHerald when approached this morning).
Interest ‘fallen off’
Shama Sukul Lee and her husband and business partner Hayden Lee, who co-founded the company in 2015, hold 56 per cent of shares.
Taxpayers also have a small stake in Sunfed via Crown agency NZ Growth Capital Partners (NZGCP), whose Aspire fund holds 2.44 per cent of shares.
“A lot of the strong interest in this sector from a couple of years ago has now fallen off ... “With the cost of living crisis, a lot of people are having to tighten their belts." - NZGCP chief investment officer James
“Their products are great, in my opinion. But a lot of the strong interest in this sector from a couple of years ago has now fallen off somewhat. Growth didn’t quite accelerate as a lot of people predicted,” NZGCP chief investment officer James Pinner told the NZ Herald this morning, before Lee announced the shutdown.
“I’m sure their time will come, especially as the costs get closer to parity with existing proteins.”
After Lee confirmed the wind-down, Pinner added, “With the cost of living crisis, a lot of people are having to tighten their belts. A cost-premium is always going to affect customer demand in times like these.”
Fake meat, real price difference
Woolworths and Foodstuffs-owned New World - both still listing Sunfed products on their websites - have a 300g pack of the chickpea-based Chicken-Free Chicken for $12.99 and $13.49 respectively.
At the latter price, Chicken-Free Chicken works out to $4.50 per 100g, or a recession-unfriendly $45 per kilogram.
New World sells a kilo of skinless chicken breast for $15.49. Costco Westgate sells a whole rotisserie chicken for $8.99.
A spokesman for Woolworths NZ confirmed it continues to stock Sunfed. New World and Pak’nSave owner Foodstuffs did not immediately respond to a request for comment.
Sector under pressure
In the US, plant-based meat firm Beyond Meat was listed on the Nasdaq in May 2019, with its shares cling to US$234.90 soon after for a US$3.8 billion market cap. The stock closed Friday at US$7.41 for a US$479 valuation on disappointing sales.
Some academics, including New Zealand’s Dr Jacqueline Rowarth, have questioned the environmental and health benefits of plant-based meat, but it could be Pinner’s price issue that’s putting off more punters.
A Financial Times report says plant-based meat has so far reached less than 1 per cent of its total addressable market, in part because of its “luxury good” level pricing and also because although 25 per cent of carnivores say they want to become “flexitarians” who cut back on meat, few have.
Start-ups have also faced competition from multi-national brands that have experimented with plant-based lines.
Air New Zealand experimented with burgers made by Beyond rival Impossible Foods for business passengers on its Auckland-LA route pre-Covid (Sunfed, which also makes Bull-Free Beef, complained at the time about NZ’s national carrier going with a US firm for its plant-based burger).
Air New Zealand said today: “In 2018, we gave customers a taste of the future when we introduced the Impossible Burger. While the burger is no longer part of our in-flight menu, we do regularly include plant-based proteins, and recently offered Sunfed Chicken Tikka Curry with Turmeric Rice and Eggplant Chutney in our premium cabins. This will be back again on board in a few months.”
“Long-term, the possibilities offered by lab-grown flesh may threaten what little market share it [plant-based meat] has,” the FT says.
Players in the nascent vat-grown or “cultivate meat” sector include Kiwi start-up Opo Bio.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
