Sustainable Foods owes the government $1.4m as potential buyer locked in

Sustainable Foods went into voluntary liquidation back in August. Now its administrator's report has revealed it owes the government $1.4 million.

The first administrators’ report for plant food manufacturer Sustainable Foods (which traded as Plan*t) has revealed it owes $1.4 million to the Government as it’s officially placed into liquidation, although a potential buyer is on the cards.

As reported back in August, the company, whose shareholders included former All Black TJ Perenara and media company Stuff, went into voluntary administration as its owners blamed tough market conditions.

Following a Watershed meeting, PWC’s Malcolm Hollis and Richard Nacey were appointed liquidators on November 22.

The administrators' report shows the business owes $2.93m to creditors, including first-ranking creditor Crown Regional Holdings.

The business received a $1.25m loan from the Government’s Regional Strategic Partnership Fund in 2022, administrated by the Kānoa unit within the Ministry of Business, Innovation and Employment (MBIE).

The loan was given to the company “to purchase and install additional manufacturing equipment/machinery to enable the scale-up in production capacity at the Sustainable Foods facility”.

Sustainable Foods Limited co-founder and business development manager Kyran Rei with co-founder and chief executive Justin Lemmens.

Former Regional Development Minister Stuart Nash said at the time the investment in Sustainable Foods was “part of a wider Government strategy to develop a low-emissions, highly skilled economy that responds to global demands”.

According to the report, the Crown holds a first-ranking general security agreement over the assets of the company. It also holds a specific security over a large asset of the company, although this is undisclosed.

There are nine other registered securities against the company, owed a combined $175,000, largely in respect of Purchase Money Security Interests (PMSI).

Wages owed upon appointment were paid as they would in the normal course of trade.

However, holiday pay entitlements were frozen upon appointment and those claims are now in the hands of liquidators, totalling $43,000.

The business also owes $113,000 to Inland Revenue for outstanding GST and Paye.

Claims from unsecured creditors totalled $1.19m.

No distributions have been made to any class of creditor as the business moves into administration.

Before entering administration and now liquidation the company was riding high, earning critical acclaim for its plant-based meat alternatives and earned the title of Business of the Year at the 2023 Electra Business & Innovation awards,

The company had revenue of $2.4m a year before being placed into administration and employed over 60 people.

However, the business’ relocation from Kāpiti to Ashburton at the beginning of 2024 was highlighted as a key challenge, alongside strained sales in supermarkets due to stocking issues.

Production using the company’s “High Moisture Extruder”, the largest and only commercial machine of its kind in New Zealand, was also too expensive for the business to scale up, impacting its cash reserves.

Lemmens said at the time the cost of living crisis led supermarkets to focus on supplying high-volume meat products to maintain customer traffic, crowding out shelf space Sustainable Foods could have filled.

Buyer interest

While in administration, the business continued trading to ensure it could maintain its value, albeit in a scaled-down manner.

Hollis and Nacey started the sale process and sought an external valuation, as an information memorandum was prepared and distributed to five interested parties.

They then received three non-binding indicative offers for the business, and all three were selected to advance to the next stage.

Following that, two formal offers were presented, with one party withdrawing from the sale process.

The business’s first liquidator’s report on December 2 shows an offer has been tentatively accepted and that a sale and purchase agreement is being drafted.

The liquidators expect to share more details on the potential buyer during the next reporting period.

Hollis and Nacey expect to complete their liquidation within six to 12 months.

Sustainable Foods chief executive Justin Lemmens with the coveted supreme award at the 2023 Electra Business & Innovation Awards. Photo / Captured by Friday

Familiar territory

It will be a feeling of deja vu for founder and chief executive Justin Lemmens, now the second of his business to enter liquidation.

Before starting Sustainable Foods, Lemmens founded another food manufacturer, Rosa Foods, which operated between 2000 and 2023.

That business was placed into voluntary administration and, eventually, liquidation in 2023, suffering from under-capitalisation, according to the final liquidator’s report.

Rosa had similar issues to Sustainable Foods, including a lack of investment in its labour-intensive manufacturing process, cash flow constraints caused by moving its factory, and shortfalls in meeting demand by 25% due to lack of quality machinery.

The company had debt to Inland Revenue of $725,000 and 62 unsecured creditors made claims totalling $1.28m.

Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.