AppHarvest ousts CEO as creditors continue to knock

AppHarvest is shuffling leadership in hopes of changing the tide and recovering from a quick succession of compounding financial issues, the most recent of which includes a lease dispute at its Berea, Ky., farm with creditor and landlord Mastronardi Produce.

In a public filing released July 11, Mastronardi Produce disclosed that it planned to terminate AppHarvest’s lease on the property. In December 2022, AppHarvest sold its salad green greenhouse facility in Berea to distribution partner Mastronardi in a lease-back agreement. As a part of this deal, Mastronardi agreed to distribute AppHarvest’s greenhouse-grown produce to retailers.

The Mastronardi’s termination filing on July 5 alleges that “minimum production volumes” had been violated and cites this reason as cause for AppHarvest to vacate the facility.

Related news: Mastronardi funds AppHarvest to grow greens, expand farms in Appalachia

In a statement, AppHarvest Chief Communications Officer Travis Parman maintained that operations will continue as usual and rebutted Mastronardi’s lease termination claim.

“AppHarvest believes it has met the terms of its lease agreement for the Berea farm and recognizes that such notices from creditors are not uncommon as a strategy for firms attempting to push their way to the front of the line in case of an actual default,” Parman said in the statement.

The Berea farm is one of four farms in the Kentucky-based AppHarvest’s farm network in Appalachia. In recent months, AppHarvest also has faced creditor and foreclosure issues at its Richmond, Ky., farm.

Due to loan terms, closure of any one of AppHarvest’s four farms could trigger a domino effect at its other farm locations. Terms that funded the construction of AppHarvest’s Morehead, Ky., tomato farm — the company's oldest farm facility — included a loan agreement with Rabo AgriFinance with a cross-default provision.

Related news: AppHarvest faces foreclosure of its Richmond tomato farm

Shuffling the deck

As the concerns mount regarding the stability of AppHarvest’s leases and its ability to repay its debt, the company has ousted founder Jonathan Webb as CEO, replacing him with controlled environmental agriculture industry veteran Tony Martin.

Webb is to transition from chairman and CEO to chief strategy officer and will remain on the board as a director, according to a news release.

“While I will continue to support the company, I am confident that Tony’s leadership, extensive background in CEA and track record for optimizing revenue growth will provide the guidance the company needs at this inflection point,” Webb said in the release.

Martin has served on AppHarvest’s board since October 2022 and has acted as as chief operating officer since January this year. He brings a wealth of experience in CEA-grown fresh produce, which includes 12 years at Windset Farms, where he supported both significant infrastructure and revenue growth, according to the release.

Additionally, Martin served as a consultant in the CEA sector and is a board member of the Fruit and Vegetable Dispute Resolution Corporation. He also serves on the board of Natureripe Farms and is a partner in GA Partners, which consults on agricultural operations and assisting businesses in transition, according to the release.

Kevin Willis, who has served on the AppHarvest board since February 2022, will assume the position of board chair.

Turning over a new leaf

Martin takes the helm with a strategy for refocusing the company that he calls Project New Leaf, according to the release.

“AppHarvest is at an exciting inflection point transitioning from a construction and development mode to an organization focused on core operational excellence,” Martin said in the release. “I believe AppHarvest has a tremendous opportunity to leverage its world-class CEA network at a time when both changing climate and major grocery retailers are demanding it. We’re working to ramp up production and revenue by ensuring efficient, cost-effective delivery of high-quality produce to major grocers and restaurants.”

Related news: Financial woes surface in investor report, but AppHarvest says it's ramping up

According to the release, Project New Leaf is focusing on the following key pillars over the next five years:

• Improving labor efficiency.

• Better leveraging industry relationships and expertise.

• Implementing disciplined cost control.

• Improving the feedback loop across the organization.

• Aligning the workforce to the plan.