Loss-making US plant-based food business Tattooed Chef is seeking a buyer after failing to raise funds to secure its future.
The private-label and branded manufacturer, set up in 2018, plans to file for protection under Chapter 11 bankruptcy proceedings in California, and “intends to pursue a sale of substantially all of its assets”, Tattooed Chef announced in a statement on Friday (30 June).
While the company will continue to operate for the time being, an undisclosed number of employees at its plants in California and New Mexico have been “provided notice of intended layoffs”. Just Food has approached Tattooed Chef to clarify the numbers involved.
Before initiating the Chapter 11 proceedings, Tattooed Chef said it “evaluated a wide range of funding possibilities”, despite receiving $12m in unsecured loans from chairman and CEO Sam Galletti.
Tattooed Chef joins UK-based The Meatless Farm, which also failed to raise new funds and consequently ended up selling its meat-free brand to peer VFC Foods last month with the company remaining in a state of bankruptcy. Another plant-based business, The Very Good Food Company in Canada, collapsed in January.
While global demand has eased for meat-alternatives and other plant-based foods, Tattooed Chef cited other factors in May when it warned that sales would decline this year as the company also stressed the need to raise cash.
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As it reported continued EBITDA and bottom-line losses for the first quarter to 31 March, Tattooed Chef said in May: “The company’s business and operations continue to be affected by a variety of macro-economic issues, including inflation, rising interest rates, recession fears, increased competition, and supply chain disruptions, and their potential impact on consumer behaviour and consumer demand for our products.”
Galletti added in Friday’s statement as he acknowledged the efforts of workers: “Despite their commitment to our mission and our best efforts to maintain the operations of Tattooed Chef, our business has continued to be impacted by a challenging financing environment and an inability to raise additional capital.
“These factors, among others, in the view of the management team and board of directors, necessitated the Chapter 11 filing.”
Along with the businesses’ financial troubles, Galletti and CFO Stephanie Dieckmann had faced a class action lawsuit alleging they “made misleading statements” in its account filings from March 2021 to October 2022.
In addition, a separate so-called “derivative complaint” was filed in a California court in March “against certain of our officers and directors”, including accusations of a “breach of fiduciary duty; unjust enrichment; abuse of control; gross mismanagement; [and a] waste of corporate assets”.
Tattooed Chef’s plant-based portfolio features ready-to-cook meals, acai and smoothie bowls, cauliflower pizza crusts, burritos and quesadillas.
First-quarter net revenue fell 12.7% to $59.1m, with an adjusted EBITDA loss of $15m.
In the 2022 fiscal year, adjusted EBITDA losses were $91.7m, while net losses ballooned to $141.4m from $87m.
The company said on Friday it “will market its assets and solicit competing bids from interested parties” as Tattooed Chef “seeks to complete an expedited sale process”.
Meanwhile, the terms of so-called debtor-in-possession financing are being finalised, it said.
Galletti added: “The actions we are announcing today are designed to promote a fast, efficient, and value-maximising sale, which will allow us to provide clarity on the future of the company for all our stakeholders.”