Loss-making US plant-based food business Tattooed Chef is actively seeking a buyer in the midst of financial difficulties within the food and beverage industry. The company, established in 2018, has announced plans to file for protection under Chapter 11 bankruptcy proceedings in California, while also expressing its intention to sell off most of its assets. Despite continuing operations for the time being, Tattooed Chef has provided notice of intended layoffs to undisclosed numbers of employees at its California and New Mexico plants. Prior to initiating the Chapter 11 proceedings, the company explored various funding possibilities, despite already receiving $12 million in unsecured loans from its chairman and CEO, Sam Galletti.
Tattooed Chef is not the only plant-based food business facing financial challenges during this time. UK-based The Meatless Farm also failed to secure new funding and consequently sold its meat-free brand to VFC Foods last month while remaining in a state of bankruptcy. Another plant-based business, The Very Good Food Company in Canada, collapsed in January.
While there has been a slight decline in global demand for meat-alternatives and plant-based foods, Tattooed Chef attributes its declining sales to multiple factors, as mentioned in a previous statement in May. These factors include macro-economic issues such as inflation, rising interest rates, recession fears, increased competition, and supply chain disruptions, which have potentially affected consumer behavior and demand for Tattooed Chef’s products.
In acknowledging the efforts of the company’s employees, Galletti stated, “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.”
In addition to the financial troubles, Galletti and CFO Stephanie Dieckmann have faced legal challenges. A class-action lawsuit was filed alleging that they “made misleading statements” in their account filings from March 2021 to October 2022. Furthermore, a separate “derivative complaint” was filed in a California court against certain officers and directors, accusing them of various breaches of fiduciary duty and mismanagement.
Tattooed Chef’s plant-based product portfolio includes ready-to-cook meals, acai and smoothie bowls, cauliflower pizza crusts, burritos, and quesadillas. The company reported a 12.7% decrease in net revenue to $59.1 million in the first quarter, with an adjusted EBITDA loss of $15 million. In the 2022 fiscal year, adjusted EBITDA losses amounted to $91.7 million, while net losses increased to $141.4 million from $87 million.
To salvage the company’s future, Tattooed Chef is currently marketing its assets and soliciting competing bids from interested parties as part of an expedited sale process. Simultaneously, the terms of debtor-in-possession financing are being finalized.
Galletti emphasized the goal of facilitating a swift and efficient sale process to maximize value, providing clarity for all stakeholders regarding the company’s future. The challenging circumstances faced by Tattooed Chef highlight the financial pressures and competitive landscape prevalent in the food and beverage industry.