Vegan All Black TJ Perenara is among investors in a glamour plant-based food brand under scrutiny after the collapse of its indebted sister company. Jonathan Milne reports.
Justin Lemmens is the face of one of New Zealand's best-known plant-based food companies – but he's also the owner of a less celebrated packaged meal producer.
The liquidation of Rosa Foods, which supplies supermarkets and fast food outlets with heat'n'eat pies, lasagne and macaroni cheese, now threatens to drag in Sustainable Foods Ltd and Plan*t, its big vegan food export brand.
The Kāpiti businessman broke the news to his 82 staff at Rosa Foods that they would be laid off last month. "I have had direct, open and honest communication with staff throughout the journey and especially from late January until early March when employment ceased," he says. "Rosa has always been a tight team, it’s been tough across the board but the whole team has been supportive with a large part of the team securing new employment."
READ MORE: * Govt scrutiny of $9m loan to struggling publicly-owned laundry * Police investigate deep discounting of alcohol by grocery stores * Grocery start-ups shut down in shadow of big supermarkets * NZ scrubbed 'plant-based' diets from climate report
It's not just those staff who will be concerned. Liquidators say it appears Rosa Foods had advances or related party transactions with other companies in Lemmens' stable, like marketing company Vertical Sales Ltd, holding company Anais Food Group Ltd, and Sustainable Foods Ltd itself. Any advances would have been unsecured.
Sustainable Foods has been a darling of investors and announced it had raised $2.15 million from them last year.
These include everyone from retired oil man Leo Lonergan and security operator Blair Malcolm, to Wellington-based media company Stuff, Taranaki medicinal cannabis firm Greenfern Industries (which supplies the hemp for the vege burgers) and former All Black halfback and committed vegan TJ Perenara, who serves as the company's brand ambassador.
When he bought into the company two years ago, Perenara said he had jumped at the opportunity to get involved. "Being vegetarian and vegan for more than five years, I wanted to be part of a project that enables me to have an impact in this space," he said. "Sustainable Foods has a definite edge being on the ground here in New Zealand."
In March last year, Sustainable Foods obtained a $1.25 million secured loan from Kānoa, the regional economic development and investment unit at the Ministry of Business and Innovation – now the ministry is treating the loan as higher risk.
Visiting the Kāpiti plant where Rosa Foods and Sustainable Foods produce their products, the regional development minister Stuart Nash (as he was then) proclaimed the company was "leading the charge to promote sustainability in the food and beverage market".
But Nash is now gone, and the loan looks somewhat shaky too.
"There was a connection between Rosa and Sustainable on a commercial basis, that Rosa would sell product back to Sustainable. And historically there had been some inter-company financial support. There are also significant funds owed to other entities associated with the director." – Jessica Kellow, liquidator
Kānoa investment director Paul Swallow said the loan request was evaluated and approved in March 2022, well before the issues with Rosa Foods Limited became evident. "The investment has been escalated in accordance with our risk escalation procedures and is being actively monitored accordingly," he now tells Newsroom.
It's the second Kānoa investment to be put at risk in a high profile business collapse: Kānoa had also loaned $15m to Ruapehu Alpine Lifts, the North Island ski operator whose future is now uncertain.
The risk escalation comes as BDO business restructuring partner Jessica Kellow confirms she and fellow liquidator Iain Shephard will now be looking more closely at Rosa Foods' sister companies.
At first they had been appointed administrators, but had been unable to find a buyer for the company. So, after an inconclusive watershed meeting with investors, they had eventually been appointed to liquidate the company.
"There was a connection between Rosa and Sustainable on a commercial basis, that Rosa would sell product back to Sustainable," she says. "And historically there had been some inter-company financial support. There are also significant funds owed to other entities associated with the director."
While it doesn't have the profile of Sustainable Foods and Plan*t, Rosa Foods also has its champions. "Rosa Foods has been a long-time partner of Foodstuffs supplying chilled, ready-made meals, lasagnes, noodles, pies and the like and will be missed by our customers," says Emma Wooster, the supermarket chain's head of public relations.
Across at Countdown, general manager of perishables Nikhil Sawant, echoes that: Rosa Foods' demise leaves a space on their shelves. "We’re working closely with our other local suppliers to fill these gaps as soon as possible and make sure there's plenty of options for our customers."
The liquidators are now auctioning off the factory plant, with a book value of just $110,000. Debts to secured creditors have been clearer; the next in line is Inland Revenue for $800,000, and the employees for $172,000.
With a forecast shortfall of $3m, there is likely to be little left for the remaining 143 creditors, many of them small New Zealand food businesses.
"The shareholders have invested significant funds into the business over the last three years ... Unfortunately, despite huge efforts and commitment the runway and resources available were not enough to get through successfully." – Justin Lemmens, director
According to their first report, Lemmens blamed Rosa Foods' failure on under-capitalisation. Labour-intensive manufacturing processes could not be resolved without substantial capital investment in machinery and equipment to automate processes; because of the lack of quality machinery, their production was falling 25 percent behind demand.
Cashflow shortages, exacerbated by the costs of moving from Porirua to a new factory in Kāpiti, resulted in reduced margins.
Lemmens agrees he's had extensive communication with Kānoa about his businesses' risk and value.
But he insists Rosa Foods' troubles will not rub off on Sustainable Foods – there is no ongoing material related party relationships between the two companies, he says. "Sustainable Foods is a very different business model focusing on high value nutrition, using NZ grown ingredients and significant investment in automated machinery that enables it to produce products with different methods and more cost effectively," he tells Newsroom.
Over 22 years, the businesses had earned almost $100m in combined revenues. "Rosa Foods has become a trusted brand in its category serving over 30 million meals, employing 1000-plus staff, and purchasing ingredients, packaging and associated services of $65 million from other New Zealand businesses," he says.
"The major challenge has been sourcing labour over the last three year period, the cost of ingredients and other services and supply chain interruptions. The move to new premises at significant cost (to scale the business up) put the business under additional pressure in a constrained labour market resulting in a business that needed further capital to grow.
"The shareholders have invested significant funds into the business over the last three years to provide it the runway to grow and move through the challenging period. Unfortunately, despite huge efforts and commitment the runway and resources available were not enough to get through successfully."
