A $30 million flax oil crushing and bottling plant has closed, leaving many stunned that a new, state-of-the-art operation and promising business model could get into trouble so quickly.
Shape Foods was placed into receivership after weeks of rumours that all was not well at the plant and that sales to the crucial U.S. market were not meeting targets.
Edible Oil, a farm group representing 15 farm families in southwestern Manitoba, had been contracted to supply the Brandon plant with quality clean flax seed. Its initial demand was 40 tons per 36 hour production cycle as of last spring.
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“We’re not sure that the company will end up surviving in any form or not,” said Gary Nestibo, a member of Edible Oil.
The group was paid for all but one Super-B load of flax that it shipped in early spring.
“We’ll have to see at the end of the day if there’s any money left over,” Nestibo said.
“They hadn’t needed any more for this fall, so we hadn’t done any contracting with them, thank goodness.”
He was surprised by Shape Foods’ sudden failure, noting its products had received good reviews from industry experts.
“It was a phenomenal product compared to anything else in the marketplace,” he said.
“We’re hoping that they can find a new owner and go forward.”
Calls to the plant were picked up by an answering machine, and no responses were received.
Half the company’s 60 employees were laid off this summer.
It was forced into receivership in late October and the remaining employees let go after a local credit union called in an outstanding loan for more than $4 million.
Deloitte and Touche of Winnipeg is handling the receivership.
Wayne Buhr of Vanguard Credit Union’s corporate office in Brandon said he couldn’t comment on particulars of the loan extended to Shape Foods for confidentiality reasons.
“There’s a lot of parties involved,” he said.
“Receivership was the decision that was made.”
He referred questions to the receiver and declined to speculate when asked if the lender might recover some or all of the money it loaned to Shape Foods if a new owner buys it.
“Everybody hopes to see a business succeed,” Buhr said.
“If something can be put together to achieve that, that’s great. But the receiver is in control of the situation.”
The company had reportedly borrowed $9 million to build the 70,000 sq. foot facility, of which $4.5 million came from Vanguard Credit Union and $4.1 million under the provincial government’s Manitoba Industrial Opportunities Program.
A further $2 million was raised from local investors.
