UPDATE May 6: According to BusinessDen, filings in Adams County District Court indicate Meati has assigned the business’ assets to attorney Aaron Garber to prepare for a sale to a new company called Meati Holdings for just $4 million.
Garber wrote that this would “preserve the operational value of the company, maximize recovery for creditors, and reduce collateral damage to stakeholders and interested parties when compared to a liquidation.”
Colorado-based alt meat startup Meati has secured some bridge funding that is enabling it to maintain operations, temporarily averting a financial crisis that had threatened to sink the company, AgFunderNews understands.
The firm has had the sword of Damocles hanging over it since late February when an undisclosed lender swept two-thirds of its available cash following a technical default.
Meati, which sells fungi-based cutlets and steaks in 7,000+ stores across the US, issued a WARN notice to staff on March 7 explaining that production would cease on May 6 (tomorrow) with all 150 employees to be terminated unless the company could secure additional funds.
Staff have since been kept informed of the company’s efforts to avert the crisis on a regular basis through all-hands meetings and have continued to show up for work in challenging circumstances, AgFunderNews understands.
CEO Phil Graves, who has been working with the board, investors, and key stakeholders to explore a path forward since the bank pulled the rug out from under the company on February 28, has not commented on the latest developments.
‘Gut-wrenching’
The crisis began earlier this year when Meati breached a financial covenant tied to revenue and gross profit, what’s known in banking as a technical default, although it was current on all of its payments.
According to one source, the bank had assured the company in late January that it would not sweep cash unless fraud was involved.
But things changed rapidly although Meati had term sheets coming within weeks, rather than months, added the source. “I’ve never seen that in my career, where a lender sweeps that much cash because of a technical default, where you jeopardize a company’s financial future without a conversation. It’s inexcusable and gut-wrenching.”
According to the source, staff had been optimistic about the company’s future despite several rounds of layoffs given some recent retail distribution gains and revenue growth, so the news was a “big surprise.”
Accelerating the path to profitability
A high-profile player in the meat alternatives space with over $365 million in funding from backers including Grosvenor Food & AgTech and Prelude Ventures, Meati has engaged in four rounds of layoffs over the past couple of years in a bid to streamline operations and accelerate the path to profitability.
However, things had been moving in the right direction, according to Graves, who spoke to us in January after launching a new line of breakfast patties.
While sales of meat alternatives continue to decline in the US, Meati is tapping into demand for simpler products with fewer ingredients and less processing, claimed Graves, a former Patagonia executive who took the helm at Meati last February following the departure of CPG veteran Scott Tassani.
Meati now has products in 7,000 locations across Kroger, Whole Foods Market, Meijer, Sprouts and Wegmans and others, and has been picking up traction following moves to improve retail execution, Graves explained in January.
“We just launched in some new retailers and we’re seeing really good commercial traction. Thanks to our team and the product itself, we have increased our distribution by 130% year over year, from 23 to 24. We’ve also engaged a firm to audit more than 1,000 of our stores and ensure that the product is consistently in stock, priced appropriately, and that any signage that’s there is as it should be.”
‘Overly exuberant goals’
However, Graves acknowledged that former CEO Scott Tassani had raised eyebrows in 2023 after predicting Meati would generate $1 billion in retail sales in five years.
“We’ve put some overly exuberant goals out there publicly in the past and we own that. So today we are setting goals that are grounded in reality. What I am seeing in the market now is an increased sense of urgency. Can you show profitability not in 10 years, but in 12-18 months?
“And how we were set up when I arrived, the answer was no, so we needed to make some changes, as the market has dramatically shifted. We had raised a large amount of capital and brought in a lot of uncommonly talented individuals, but ultimately, we were overstaffed and we were very siloed. Instead of behaving like a scrappy startup, we were operating more like a big CPG.”
Further reading:
Meati plans “gut-wrenching” mass layoffs amid “bank-induced crisis”
