Jessica Kellow and Paul Manning, both of BDO, have been appointed liquidators of chicken-free chicken maker Sunfed – the firm that until recently employed 35 staff and supplied supermarkets on both sides of the Tasman.

Financials won’t be revealed until the pair’s first report.

On April 10, founder Shama Lee said the firm – one of NZ’s highest-profile plant-based “meat” start-ups – was shutting up shop after burning through about $10 million in investors’ cash without reaching profit.

Iain Shephard, also of BDO, was named voluntary administrator on April 17.

Lee blamed the pandemic and (in her view) impatient investors who refused to tip in more funds, and a manufacturing process that proved trickier to scale than she anticipated.

READ MORE: Hamilton hydrofoil bike maker Manta5 up for urgent sale

But the shutdown also occurred during a worldwide slump in consumer interest in pricey plant-based meat, plus an ongoing venture capital crunch in the face of high interest rates.

Since April 10, the backlash against alternative proteins has only gathered steam, with Florida Governor Ron DeSantis signing a bill to ban lab-grown meat on May 1, following farmer pressure.

But perhaps the biggest factor was that Sunfed – whose plant-based “chicken” sold in 300g packs at the equivalent of $45 per kilo – was on the wrong side of the cost-of-living crisis, New Zealand Growth Capital Partners chief investment officer James Pinner told the Herald. The Crown-backed NZGCP was one of Sunfed’s backers.

In an April 10 post on her social accounts, Lee said: “Hello Sunfed guys. I owe you an update, which is that I’m in the process of shutting down.”

Lee said her firm had raised $5 million in 2018 from Australasian venture capital firm Blackbird Ventures and another $5m from other investors (she did not name them, but other backers included NZGCP and Sir Stephen Tindall’s K1W1).

She said her business had reached $4m in revenue and entered the Australian market with deals inked with Coles and Woolworths. The firm was on the verge of making a profit, by her account.

But then came the pandemic. “Those Covid years are a blur, as we went into chronic business survival mode just to keep production going. There was one crisis after another, with staff shortages, supply chain disruption and skyrocketing cost, but we managed to keep things running all through Covid hell,” she said.

The company was “battered and bruised” and needed fresh capital, but “Sunfed’s existing investors were no longer interested in supporting the business”. (And beyond her investors’ shifting view of plant-based proteins, the broader venture capital market has been laid low by high interest rates.)

She added: “VC investors had written Sunfed off. A lot of investors jumped into the plant-based gold rush, thinking they could get fast valuations similar to what they’re used to in the virtual world.

“But manufacturing and FMCG [fast-moving consumer goods] are in the physical world with a lot more complexity and moving parts. It’s a longer-term play if you have to build real things.”

Beyond criticising her exiting investors, she acknowledged that the “plant-based bubble burst and the category has been undergoing a reality check. Fuelled by easy VC money, the category became saturated with junk food masked as [being] healthy, and people now see through that”.

35 staff at height

Lee told the Herald the business had 35 staff at its height. As of today, only two remained to assist with the wind-down.

She and her husband and business partner Hayden Lee, who co-founded the company in 2015, hold 56 per cent of shares.

Blackbird, which declined comment, was the next largest shareholder with a 10.74 per cent stake.

The Australasian VC firm had written down its stake to zero some months before Lee’s announcement, the Herald understands.

“Their products are great, in my opinion. But a lot of the strong interest in this sector from a couple of years ago has now fallen off somewhat. Growth didn’t quite accelerate as a lot of people predicted,” NZGCP’s Pinner told the Herald as Lee announced the shutdown.

Pinner added, “With the cost of living crisis, a lot of people are having to tighten their belts. A cost-premium is always going to affect customer demand in times like these.”

Fake meat, real price difference

Woolworths and Foodstuffs-owned New World both listed a 300g pack of the chickpea-based Chicken-Free Chicken for $12.99 and $13.49 respectively.

At the latter price, Chicken-Free Chicken works out to $4.50 per 100g, or a recession-unfriendly $45 per kilogram.

New World sells a kilo of skinless chicken breast for $15.49. Costco Westgate sells a whole rotisserie chicken for $8.99.

Sector under pressure

In the US, plant-based meat firm Beyond Meat was listed on the Nasdaq in May 2019, with its shares cling to US$234.90 soon after for a US$3.8 billion market cap. The stock closed Friday at US$7.41 for a US$479 valuation on disappointing sales.

Some academics, including New Zealand’s Dr Jacqueline Rowarth, have questioned the environmental and health benefits of plant-based meat, but it could be Pinner’s price issue that’s putting off more punters.

A Financial Times report says plant-based meat has so far reached less than 1 per cent of its total addressable market, in part because of its “luxury good” level pricing and also because although 25 per cent of carnivores say they want to become “flexitarians” who cut back on meat, few have.

Start-ups have also faced competition from multi-national brands that have experimented with plant-based lines.

Air New Zealand experimented with burgers made by Beyond rival Impossible Foods for business passengers on its Auckland-LA route pre-Covid (Sunfed, which also makes Bull-Free Beef, complained at the time about NZ’s national carrier going with a US firm for its plant-based burger).

Air NZ subsequently adopted Sunfed Chicken Tikka Curry with Turmeric Rice and Eggplant Chutney, but dropped it before the firm announced its closure.

An FT analysis of the plant-based protein sector had a grim summary.

“Long-term, the possibilities offered by lab-grown flesh may threaten what little market share it has,” the paper said.

Players in the nascent vat-grown or “cultivated meat” sector include Kiwi start-up Opo Bio.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.