ISOLATES manufacturer Australian Plant Proteins has entered voluntary administration, with hopes that a buyer or investor can step in to continue operations.

Founded in 2016 by Brendan McKeegan and Phil McFarlane, APP employs more than 30 people at two Victorian locations, a research-and-development site at Werribee near Melbourne, and a commercial fractionation facility at Horsham in the Wimmera district.

Horsham currently produces plant-protein isolates, mostly from faba beans, but APP also produces yellow pea, mungbean and yellow and red lentil isolates upon request.

Isolates are sold directly to plant-protein businesses and the food ingredient distributors domestically and overseas to be used in retail products, such as meat and dairy alternatives, bakery goods, snack and convenience foods, and pet food.

Melbourne firm Romanis Cant has been appointed as administrator for APP, and is in the process of restructuring the business and finding a suitable buyer or investor.

It is preferred that the company be sold as a going concern.

Grain Central understands APP directors have been working collaboratively with administrators to work through the process, and that considerable goodwill exists in the pulse industry from growers through to traders who would like to see APP trade on.

Information on creditors and debtors is expected to come to light after the first meeting of creditors scheduled for July 3 in Melbourne.

Australian Securities & Investments Commission documents list Mr McKeegan, Mr McFarlane, Michael Scalzo and Christine Gilbertson as directors of APP.

Other shareholders in APP are listed as:

Scalzo Plant Proteins, an ingredient reseller and manufacturer based in West Melbourne;

Evans Agribusiness Trading, or EAT Group of Horsham, Vic;

PB Commercial of Horsham, Vic;

Alcatt of South Yarra, Vic;

Coutts Corporation, Horsham, Vic; and,

Global grain trader and agrifood company Koninlijke Bunge BV.

Factors behind move

Currently, there is no clear indication what market or business factors have caused APP to enter administration, although it appears there have been some interruptions to operations at APP sites, with a reduction in production and trading.

Trade talk says the business has recently been in discussions to move from the buying of split faba beans to cheaper-priced whole product sourced direct from growers in order to lower APP’s cost of production.

A State of the Industry report prepared by think tank Food Frontier indicated there had been a slight contraction in plant-protein retail sales, but significant growth in the food-service sector.

Modelling by Deloitte Access Economics presented in the report also downgraded the forecast market size of the industry.

It now sees the market as being worth $1.65 billion by 2033, down from the 2019 estimate of $2.9b by 2030.

An April 2024 submission prepared by Mr McFarlane for a Federal Government inquiry into Food & Beverage Manufacturing presented an optimistic view of APP’s future.

“APP is now entering an extraordinary growth phase due to its reputation both domestically and internationally for the production of a range of high-quality protein-powder isolates,” the submission said.

“This is supported with the accelerating global demand for plant-protein ingredients in a multiple suite of food categories.

“Given that APP is the only protein powder-isolate manufacturing facility in the Southern Hemisphere, it presents the company (and Australia) with an unique opportunity to expand the Australian protein powder (both isolates and concentrates) manufacturing industry and become the dominant player in protein-powder manufacturing and distribution both domestically and internationally.”

Potential roadblocks

One area of concern for APP could be its stymied plans to expand its manufacturing base into South Australia.

APP was leading a partnership with international pulse trader Australian Milling Group and major southern Australian meat processor Thomas Foods International to construct three fractionation facilities which would each process about 8000t of pulses each year.

Total cost of the project amounted to $230 million, with $107M to come from joint Federal and State Government grant funding as part of the Modern Manufacturing Innovation (MMI) Collaborative initiative.

According to the submission, the terms of legal agreement offered by the Federal Government contained “material non-commercial clauses” which would have prevented additional funding to be raised by third parties to support the project.

“After repeated requests to change the agreement or give time to find a better solution, the Federal Government withdrew their offer mid-2023, which was duly followed by the South Australian Government withdrawing their support some months later with little consultation.

“Despite this, APP have continued to advance their expansion plans that will aim to meet the needs of its customers.”

The submission also highlighted that the withdrawal of government support was “viewed negatively” by international investors, which may have previously shown interest in APP.

Market challenges

In the submission, Mr McFarlane raised issues with the current capital investment space and availability of low cost facilities and utilities which create challenges for start-ups and companies pioneering new industries.

“Raising investment capital for early stage or growth businesses in Australia is very challenging at the best of times.

“In general, the Australian private investment market is ultra-conservative and risk adverse.”

He said there was also a “lack of utility services that are both efficient cost-wise and readily available to support the scale up that food manufacturing needs”, in particular water, electricity and gas.

“These assets are generally under invested in and therefore it is left to the food manufacturer to cover the ‘gap’ investment and cost-wise in order to have a sustainable supply of utility services to their business.

“APP was forced to build its own water-management solution and gas ‘bullet’ tank bunker to service its own needs.

“In addition, we are currently investigating ways renewable energy can be directed to our site.”

Industry reacts

As a market leader in plant protein-ingredient production, APP’s financial issues could have flow-on impacts for the confidence of the wider sector.

Food Frontier chief executive officer Simon Eassom said the news demonstrates the potential problems faced by plant protein companies, but should not be interpreted as the beginning of the end of the industry.

“[The] announcement shouldn’t be seen as the failure of an individual company, but it is really a warning that building a long term and sustainable industry takes time, a lot of ongoing investment particularly in up-front cap-ex and commitment from the whole sector,” Mr Eassom told a recent Food Frontier webinar.

“This is especially important in regional areas…where employment and value-added industries are desperately needed.

“Plant-based protein production is a sustainable industry; it benefits our consumers, it benefits our primary producers and it benefits the environment.

“Food Frontier is positively supportive of continued attempts to invest in this crucial area.

“There is probably requirement for at least ten facilities in groups such as APP around the country.

“This is a temporary setback and we are doing everything we can to find out more information.”

Other than APP, Unigrain in Vic and Integra Foods in SA are the only other Australian companies which are known to operate commercial-scale plant-protein fractionation facilities.

There are also some smaller companies working with lupin and hemp: Wide Open Agriculture, Eighth Day Foods, and Hemp Harvests.

Australia has one manufacturer of soy textured vegetable protein (TVP), Ben Furney Flour Mills at Dubbo in New South Wales, using Australian-grown soy.

While wheat-gluten milling and supply chains have been well established Australia due to gluten’s common application in other food categories like baking, noodles, cereals, snack foods and pet foods, there is one company producing wheat TVP, Harvest B.

 

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