Suppliers £20m out of pocket following Tree of Life and Heath Store collapse

• Read original article here

Hundreds of suppliers have been left almost £20m out of pocket by the collapse of Tree of Life and sister distributor The Health Store, with a number of start-ups struggling to survive the fallout.

Hopes of any rescue deal for Tree of Life were also dashed as a new report by administrators, seen by The Grocer, revealed talks with potential buyers had ended in failure.

The two companies – which together with parent group Health Made Easy formed the UK’s largest independent health food and wellness products distribution platform – filed for administration on 22 August, with almost 200 staff made redundant and suppliers left reeling.

The report into the collapse by recovery firm Interpath showed more than 1,000 trade suppliers across Tree of Life and The Health Store (with many brands working with both) were owed £18.4m: totalling £11.3m at the former and £7.1m at the latter.

The unsecured creditors are not expected to see a return on money owed.

Plant-based group Oatly is owed the biggest amount at £1.2m, with about £3.5m of the total relating to intercompany debts across Health Made Easy.

The group worked with hundreds of start-ups and challenger brands, which relied on it to get products into the likes of Morrisons, Asda, Amazon, Whole Foods and Planet Organic.

A number of brands have taken to social media sites such as LinkedIn and Facebook to express anger about behaviour at Tree of Life in the run up to the administration, alleging the wholesaler rushed through big orders in the weeks before its failure.

Arctic Power Berries, which makes a range of powders from berries, has this week joined forces with premium matcha tea brand OMGTea on LinkedIn to ask brands affected by the administration to join a campaign to hold the company directors to account. More than 20 brands have signed up so far, with evidence being collected to present to the administrators.

Arctic Power co-founder Anna Ojutkangas wrote in an open letter: “Tree of Life intentionally used us… by ordering totally unreasonably big amounts of our expensive, best-selling, long shelf-life product by pallet loads and rushed to deliver, when they must have known or suspected that the company was in difficulty, while coming up with numerous excuses why they were not paying their invoices.”

She added 15,000 units of the business’ product were sat in Tree of Life’s warehouse when the distributor ceased trading. Arctic Power, which is owed £61k, is unable to collect the stock as it failed to have a retention of title in its terms and conditions.

Health Made Easy chairman Michael Cole denied there was any deliberate policy to squeeze suppliers in the run up to the administration.

He told The Grocer the group held daily discussions with its advisors and kept them “fully informed” of the ongoing situation as it attempted to avoid a collapse.

“[Health Made Easy] prided ourselves as a focal point to allow small brands to emerge and get products on to shelves that they weren’t able to reach by themselves,” Cole said. “The group demonstrated success with that over a long period of time.”

Interpath sold all Tree of Life stock and plant & machinery to an independent company listed as BW (Gardening) Ltd for £120k on 30 September after its attempt to conclude a going concern deal were unsuccessful, according to the report by the administrator. Two bids for the business and assets fell through on 15 and 16 September, while another offer also failed on 29 September despite being at an advanced stage.

A sale, to an unnamed buyer, of the intellectual property has also been agreed and is expected to complete shortly.

Interpath agreed rescue deals for The Health Store, with the brand and assets sold to Hunt’s Food Group last month, and health and wellness brands Higher Nature and Peppersmith, picked up by private investment firm CGK Consulting in August.

The new report put the price tag of the two deals at £400k and £500k respectively.

Interpath was introduced to the group in January 2022 to run an independent business review following a request by Health Made Easy to lender HSBC to defer loan repayment and extend the term of the loan. The group, which generated record sales of more than £100m in the year ended 31 March 2021, was hit by the dual shocks of the pandemic and Brexit, which decimated its export business.

The review by the recovery firm identified a gap in the group’s finance and agreed the directors would attempt to find a solution.

But as sales continued to deteriorate, the directors started to explore alternative investment, refinance and sale options, hiring PwC in April 2022 to run a process.

Ultimately, no buyers or investors could be found, and a refinancing agreement could not be reached, leading to Interpath being appointed as administrators.

The new report showed HSBC were owed £1.9m across the group, with the bank also unlikely to receive a payment from the administration. HSBC is also owed about £3.6m for an invoice finance facility, which it is collecting from the group’s debtors.

Last month, The Grocer reported that Health Made Easy director blamed HSBC for failing to help the group survive.