Innovative food brand enters Chapter 7 bankruptcy liquidation

Good intentions don’t pay the bills. 

A company might be working hard to make the planet better, which is noble but not a business model. If it wants to succeed, it must have more than just good intentions; it needs a customer base and sustainable sales.

Creating a successful business that’s also giving back or improving the planet has been notoriously difficult. Toms, the shoe brand that famously gave away one pair of shoes for every pair it sold, ended up being taken over by its creditors in 2020 after the company could not pay back a $300 million loan.

Related: Beloved fast-food chain files for Chapter 11 bankruptcy

Toms still exists, so that’s a victory, but doing good as a marketing strategy (even one the company’s founders believe in) goes only so far. That’s been made clear over the past few years as companies like Beyond Meat — a brand marketed around the good plant-based meat will do for the planet — have struggled to survive. 

In a similar situation, offering healthy vegetarian food might be good for people and the planet, but low sales led vegetarian fast-food restaurant chain Clover Food Lab to file for Chapter 11 bankruptcy on Nov. 3. 

That chain could still survive, but another food-based company, KDC, which operates the Do Good Foods brand, has moved from Chapter 11 bankruptcy to a Chapter 7 liquidation.

Beyond Meat has struggled despite its noble mission.

Image source: Beyond Meat

KDC filed for Chapter 11 last summer

KDC Agribusiness, a food-waste recycler, filed for Chapter 11 protection in Delaware back in June. At the time, the company reported that it had more than $100 million in debt. 

“Affiliates accompanying KDC into Chapter 11 include seven Do Good units, which collect spoiled or surplus food, otherwise wasted, for processing into animal feed,” Law 360 reported.

Do Good, like its parent, had a noble mission that the company struggled to turn into a viable business. The company shared its purpose on the KDC website.

“Over 40% of the food we grow in the U.S. is thrown away. Think about that. All the water, resources, fuel, and hard work that went into that food ends up in a garbage bin. But we’re out to change that,” the company said.

Do Good Foods took previously wasted food and turned it into “wholesome, nutritious, and cost-effective livestock feed,” the company posted. “By creating a 100% closed loop, waste-free system nationwide, we can keep food waste out of our landfills and nurture a big win for farmers, consumers, and our planet.”

The company literally headlined its description of its Do Good brand with the tagline “Turning sustainability from a rallying cry to a business strategy.”

That was the goal, but it was clearly not what happened.

KDC, Do Good Food move into Chapter 7 bankruptcy

While it had planned to sell the company under Chapter 11 bankruptcy protection, that did not happen and KDC filed to move into a Chapter 7 liquidation. A Delaware judge approved that filing on Nov. 29 despite objections from a company vendor, which asked to be paid before the conversion, Law 360 reported. 

The company, had it survived, faced a $300 million “intellectual property and trade secret misappropriation lawsuit filed against it in Delaware Chancery Court by California Safe Soil LLP, a food-waste-to-fertilizer recycling company,” according to the website.

Judge Craig T. Goldblatt in August removed automatic Chapter 11 bankruptcy protections that froze the lawsuit, according to Law 360. That led KDC’s lender to not allow it to draw any more money from its $30 million bankruptcy funding agreement.

Despite objections from Admentum, a creditor that employed workers of KDC’s Pennsylvania waste recycling plant, the judge approved the liquidation, noting that the aggrieved company could pursue its money as part of the Chapter 7 liquidation process.

KDC did not answer a request for comment from TheStreet. 

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