Why Renewcell failed according to Elsa Wenzel Special Projects Editor
March 22, 2024 of Greenbiz.com
https://www.greenbiz.com/article/3-lessons-bankruptcy-circular-fashion-startup-renewcell
This time last year, Renewcell CEO Patrik Lundström appeared to have everything he needed to end the fashion industry’s dependence on emissions-heavy virgin cotton and replace it with Circulose, his company’s sustainable alternative made from recycled clothing:
The company had $29 million in financing from H&M over seven years to get production off the ground. The product itself was “world changing,” and looked and felt great, according to those who worked with it.
Renewcell had the clients: H&M, Tommy Hilfiger parent PVH and Zara parent Inditex each agreed to buy the product in multi-year “offtake” agreements. Levi’s launched its Circular 501 model jeans in 2022 with Circulose. The company’s factory in Sundsvall, 235 miles north of Stockholm, had a production capacity of 10,000 metric tons per month.
And the stock market agreed. In September, Renewcell’s stock hit a high for the year of about $9 per share. But by February, Renewcell had fired Lundström. The company lost its financing and filed for bankruptcy. The stock now sits about 50 cents, having lost 95 percent of its value.
When the end came, Renewcell’s chairman of the board, Michael Berg, blamed everybody else: “This is a sad day for the environment, our employees, our shareholders, and our other stakeholders, and it is a testament to the lack of leadership and necessary pace of change in the fashion industry,” he said in a statement.
Partners, analysts and employees are still sifting through the wreckage to figure out what went wrong. There were multiple factors, of course. But sources who spoke to GreenBiz cited these major reasons:
Circulose was too expensive
Management stumbled
Sales nosedived
Everyone wanted it, and no one wanted it
It is difficult to build a supply chain from scratch.
Amen!