- Tattooed Chef — best known for its plant-based frozen bowls, zucchini spirals, riced cauliflower, and veggie pizza — intends to file for protection under Chapter 11 of the US Bankruptcy Code.
- The California-based firm, which entered the public markets through a merger with a SPAC in 2020, intends to pursue a sale of “substantially all of its assets.”
- SC&H Capital will seek qualified bidders for the assets of the company, which expects to continue operations during the Chapter 11 process. Notice of intended layoffs has been given to employees in California and New Mexico.
- “Our business has continued to be impacted by a challenging financing environment and an inability to raise additional capital,” said CEO Sam Galletti.
A shift in focus ‘from growth to profitability’
In calendar year 2022, Tattooed Chef posted a $141.5 million net loss on revenues up 11% to $230.9 million.
While its chief growth officer told reporters in March 2022 that Tattooed Chef was “on a rocket ship,” sales started to decline in the third quarter, which was attributed to deteriorating sales at a “tier-1 club and retail account.”
In the first quarter of 2023, net revenues fell 12.7% to $59.1 million, while net losses topped $19 million, said the firm, citing higher raw materials, packaging, and labor costs.
In mid-May 2023, Galletti said the focus had “shifted from growth to profitability” with the expectation of becoming cash flow neutral in the third quarter of 2024. Plans to achieve operating profitability included “various margin improvement initiatives, the optimization of our pricing strategy, and new product innovation.”
By late June, the company was informed by Nasdaq that it had failed to hit the $1/share minimum bid price required for continued listing on the exchange and given 180 days to comply before delisting.
Chief restructuring officer Ed Bidanset said he could not comment on the bidding process or current staffing arrangements as Tattooed Chef is a public company.
However, one former member of staff, who was laid off earlier this year, told AgFunder News (AFN) that there had been several rounds of layoffs over the past year at the company, which he claimed was “poorly run.” He added: “They could not pay their bills, causing supply chain issues.”
Multiple lawsuits
According to its annual report, Tattooed Chef is fighting a series of lawsuits including a purported class action alleging it overstated revenue and understated losses. Its Italian subsidiary is also facing a lawsuit related to the death of an independent contractor who fell off the roof of its premises while performing pest control services.
Tattooed Chef owns a processing facility in Prossedi, Italy, and leases processing facilities in California, New Mexico, and Ohio. While its initial focus was on private label, products under the Tattooed Chef brand now have national distribution in leading retailers across the US.
While US retail sales of plant-based meat have declined* over the past year, Tattooed Chef does not focus narrowly on meat alternatives, but has a broad portfolio of plant-forward dishes, from veggie sides (rice cauliflower, zucchini spirals) and pesto harvest bowls (pictured above) to cauliflower crust white pizzas.
*According to Circana data crunched by 210 Analytics, US retail sales of meat alternatives fell -5.2% to $1.1 billion in the 52 weeks ending April 2, 2023 (total US, MULO, integrated fresh).
Founded in 2009 as an importer of Italian vegetables, Tattooed Chef (originally Stonegate Foods) shifted its focus towards frozen private label meals and other products in 2015. Sarah Galletti (a.k.a. the ‘Tattooed Chef’) then led the transition towards a branded strategy, with branded products accounting for 51% of net revenues in 2022.
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