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INSIGHTS FROM PIPELINE
FOODS’ BANKRUPTCY:
LESSONS FOR THE FUTURE
By Harriet Behar
The stunning business failure of Pipeline Foods hit the
From its beginning, Pipeline Foods moved aggressively to
organic community in the upper Midwest hard. For five
place themselves as the business of choice for farmers
years, Pipeline specialized in buying, cleaning, and selling
and grain buyers, with a stated goal of investing $300-
of organic, and non GMO corn, soybeans, and small
500 million over time. They started by offering higher-
grains for the food and feed markets. Founded in 2017
than-market-value prices to attract farmers to sell to
and located in the Twin Cities area of Minnesota, the
them. In addition, they acquired numerous facilities to
original founding partners, by most accounts, wanted to
process and store the grain by buying their strongest
help build and strengthen the sustainable agriculture
competitors. Eric Jackson, the original CEO of Pipeline
supply chain. They also saw the rapidly growing niche
Foods, was quoted by PRNewswire in Sept 2017: “We
organic market as an opportunity to build a thriving
will put more profits back into the hands of the farmers,
domestic business, especially since much of the organic
create
grain used in the U.S. is imported. The company reported
companies, and offer unique investment opportunities
$189 million in assets and $147 million in liabilities at
for financial partners.”
dependability
and
transparency
for
food
the time they sought Chapter 11 protection under the
federal bankruptcy laws in early July of 2021. At the
In addition to their presence in the U.S., they also had a
time of this article, more than one bankruptcy lawsuit is
regional headquarters in Winnipeg, Canada and Buenos
still pending, including one that states the value of their
Aires, Argentina.
assets was overvalued when applying for loans.
Their stated business values included a strong
commitment to environmental and social outcomes
STRATEGIES TO PROTECT YOURSELF
FROM A BANKRUPTCY CLAWBACK
through investments in assets, people, and encouraging
Sell smaller amounts to multiple buyers
rather than one large sale
the adoption of organic and regenerative farming
practices as well as offering full traceability and
Be aware of the rules and protections in
your state, and the state into which you
are selling
transparency. This optimism drew employees, suppliers,
and buyers to work with Pipeline.
Their ambitious business model resulted in Pipeline
Organize with other farmers within your
state to gain additional protections
hiring a large staff, including support for farmers with
production issues, especially for those transitioning to
Seek an attorney who is familiar with
Use the “ordinary course of a business
relationship” statement to avoid the
clawback payment
organic. They offered help with seed and fertility
choices, and then provided a ready buyer for the
farmer’s organic grain. Their rapid growth included the
purchase of grain cleaning facilities in Canada and the
U.S. specialty grain division of SunOpta, among others.
The SunOpta acquisition in 2017 cost Pipeline Foods
over 65 million dollars. SunOpta was well established in
At the time of the bankruptcy, Pipeline Foods owned
the region, with loyal farmers/suppliers and buyers.
facilities in Hope, MN, Moorhead, MN, Ellendale, MN,
Lignite, ND, Cresco, IA, Bowbells, ND, Atlantic, IA, and
To grow quickly, Pipeline Foods obtained funding from
two facilities in Saskatchewan, Canada (Wapella and Gull
AMERRA Capital Management, an asset management
Lake). In 2020-2021, Pipeline had contracted with 1,460
firm that provides capital to the agriculture sector.
growers and was promoting its services to another 1,800.
Rabobank provided capital as well, and offered financial
They also had agreements and investments with railways.
help to farmers to transition to organic. Compeer
Financial was also a significant lender, supporting much
Pipeline
of the infrastructure purchases.
marketplace, and pushing into the established organic
was
an
aggressive
competitor
in
the
market took capital. As the company borrowed more and
more, their lenders became more concerned. AMERRA
personnel were in the office weekly and slowly took over
the running of the company. In 2019, a new CEO,
“Pipeline was an aggressive
competitor in the
marketplace, and pushing
into the established
organic market took
capital. As the company
borrowed more and more,
their lenders became more
concerned.”
Anthony Sepich, was installed, which gave AMERRA
more confidence that their money was being handled by a
more seasoned leader. Sepich came from Compass
Minerals (under review for violations of Federal
Securities laws), with limited experience in the niche
organic market. Former Pipeline employees (who prefer
to remain anonymous), state that the overall growth of
the organic sector was used as a benchmark to gauge the
expected growth of Pipeline’s business.
Comparing the consumer marketplace comprising all
The rapid growth, the unrealistic expectations of the
sectors of the food industry, to an expectation of the
organic
growth and profitability for the organic grain market
challenges, as well as those brought on by the COVID-
was problematic. Each sector in agriculture has its own
19 pandemic, caused the two main investors, AMERRA
challenges and opportunities, and it seems this supply-
and Rabobank to become nervous. By some accounts,
chain-focused company should have been savvier to
these two entities did not have the same goals for the
know that using consumer demand for the wider
company, and did not get along. As the finances became
industry as an indicator of potential success would not
shakier, the relationship between these two lenders
be a true picture of what should be expected for
became strained. This then caused Pipeline Foods to
profitability in their smaller commodity sector of that
declare bankruptcy, since their line of credit to run the
industry.
business was no longer sufficient to do day-to-day
marketplace
and
normal
supply
chain
business. At the time of the bankruptcy, many farmers
When SunOpta was purchased, many of those
had delivered grain and were waiting for payment.
employees came to Pipeline. Since organic grains are
Many farmers had also received payment, but some of
limited in their availability, those employees learned
those whose payment was made within the 90 day
over time to build strong and trusted relationships with
period before the bankruptcy declaration received
their farmer-suppliers.
clawback letters. These letters were meant to require
farmers to return those payments to Rabobank.
Many of those former SunOpta employees stated that
they felt farmers they worked with were their friends,
There are many lessons to be learned from the Pipeline
and that they worked hard to build and retain their trust.
bankruptcy and some are self-evident. Avoid fast
This led to SunOpta having a reliable pool of high-quality
growing companies that are funded by outside capital
grains. Unfortunately, this was not the culture at
who will want quick payback, for example. Organic
Pipeline. As the company’s debts rose, Pipeline did not
farmers and businesses need to be careful to not
pay on time, lowered the prices they offered to farmers,
assume that everyone we work with has the same
were picky with charging extra fees or discounting grain
understanding and commitment to organic as the
for the smallest infraction, such as a little bit higher
farmer who has deep beliefs in organic agriculture.
moisture content than contracted. Many of the
Perhaps this Pipeline bankruptcy also illustrates that
employees that came from SunOpta, or who were
the financial aspect of organic business cannot function
enticed to join Pipeline by their support of organic
within the conventional financial model, just as organic
agriculture, became disillusioned and left. They were
production methods do not fit well within the non
replaced with employees who had very little knowledge
organic system of agriculture.
of the organic marketplace, and no reason to challenge
Pipeline’s actions by advocating for a better deal for
farmers. Many of the former SunOpta employees
expressed how badly they felt to see the farmers be
treated so poorly by Pipeline. They were saddened to
watch the relationships they built with farmers over
decades be destroyed.
Harriet Behar runs organic Sweet Springs
Farm in Gays Mills, Wisconsin. She serves
on the OFA Governing Council and Policy
Committee and has been involved with
federal, state, and local policy advocacy for
over 30 years.