Clover Food Lab, the 12-unit chain that had hoped to lure non-vegetarians to plant-based food with the offer of a delicious menu, prepared for a sales recovery that never came and hoped for financing at a time when the markets dried up. Now it is in bankruptcy.
The Boston-based chain filed for Chapter 11 bankruptcy protection last week, the latest indication that consumers may be souring on the plant-based meat trend that was all the rage before the pandemic.
Clover was launched in 2008 as a food truck founded by Ayr Muir, a Harvard Business School graduate, and ultimately grew to a dozen locations across the state, supported by a commissary, along with a pair of kiosks in Whole Foods locations. The chain used as many in-season vegetables as possible and locally sourced ingredients. It boasted that as many as 90% of its customers were not vegetarian.
By 2019, the chain was part of a crop of concepts that hoped to ride the plant-based wave. Its units generated average unit volumes of $1.7 million and EBITDA margins, or earnings before interest, taxes, depreciation and amortization, of 18% of revenues, according to court documents. Former Panera Bread CEO Ron Shaich was an early investor.
The pandemic hit in 2020. The chain shifted its business to daily meal boxes, which now account for 20% of the company’s annual revenue. Clover believes that it remains a growth business.
Sales and traffic improved in 2022 and by 2023 Clover began investing in growth. It looked to raise growth equity and it also signed a lease and started construction on a commissary in Boston that was 2.5 times larger than its existing facility.
Two issues thwarted that plan: Expected sales growth never materialized. Neither did the financing.
“Unfortunately, Clover’s expansion plans and equity raise coincided with the failure of Silicon Valley Bank and the subsequent slowing of growth equity markets,” Julia Wrin Piper, CEO of Clover, said in a court document.
Sales and traffic likewise didn’t recover as expected and remain below pre-pandemic levels.
The company in May ultimately reached a deal that would raise enough money to fund 18 months of operations without an expansion. Clover received $1.8 million of those funds that month and also took steps to conserve cash, including a 43% cut in corporate labor costs. The company was expected to receive another set of funds in August, “but this did not come to fruition.”
Clover began working to renegotiate it lease for the commissary and for three stores with high rent and low sales, according to court documents. Those negotiations also did not come to fruition, ultimately leading to the bankruptcy filing.
Piper, the company’s former chief operating officer, replaced Muir as CEO.
Clover plans to use the Chapter 11 case to stabilize its finances and review its lease commitments and “examine additional financial restructuring,” either through cost cuts or operational efficiencies.
Other plant-based concepts have either closed or shrunk coming out of the pandemic. Veggie Grill closed 12 of its 29 locations earlier this year, and some notableplant-based restaurants have closed around the country. Beyond Meat, the publicly traded plant-based meat company has likewise seen its sales not meet sales growth expectations this year.
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