Awake Chocolate is confident it can triple sales revenue for its caffeinated confectionery snacks in the next few years with fresh funding in hand.
The Canada-based maker of functional chocolate bites and bars has just secured an additional C$8m ($5.7m) through a capital raise led by the venture-financing arm of global conglomerate British American Tobacco (BAT).
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Adam Deremo, who set up the business in 2012 with two colleagues, told Just Food that Awake Chocolate set a target to achieve C$29m in sales this year, a goal that is on course to be met.
Chief executive Deremo confirmed that 80% of the company’s sales are currently generated in the US, a market where Awake is set to expand distribution later this year with a listing in Costco. It is already on shelf in some of Canada’s major grocers such as Loblaws and Sobeys.
With no plans yet to reach out beyond its two key sales markets, Deremo is confident Awake Chocolate can achieve C$100m in sales, probably within the next two to three years.
“We have a lot of distribution opportunities remaining in North America, in the US specifically, and beyond that, we also have some innovation opportunities to bring new products to the market. We think the combination of those two things will allow us to scale to C$100m in revenue in North America,” he said.
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By GlobalData“I found that in different product categories I worked in before starting Awake that the ten-to-one rule really holds up. If a product does C$10m of sales in Canada, it’s probably doing C$100m in the US.”
Awake Chocolate has so far raised C$15.5m from investors, with most of the capital secured since emerging from the Covid-19 crisis in 2021.
BAT’s Btomorrow Ventures (BTV) is a minority investor in the business after contributing four rounds to date in a similar number of years. Deremo and is co-founders, Matt Schnarr and Dan Tzotzis, together remain the majority shareholders.
It seems unusual for a tobacco conglomerate like BAT to invest in a food or CPG business.
Deremo explained: “We connected with BTV back in 2021 and part of their corporate strategy is to diversify their product mix beyond tobacco and tobacco-related items. And specifically, they’re interested in finding functional food and beverage brands that they can leverage their existing sales infrastructure to sell into retail, mostly in the convenience and gas channels.
“That was really attractive to us at the time because we were implementing a distribution diversification strategy.”
Awake Chocolate started out targeting college and university students who were looking for an energy boost beyond the caffeinated drinks on the market. We were a “campus-exclusive brand in Canada”, Deremo reminisced, before expanding its educational customer base into the US.
Through those engagements, the company entered the foodservice channel with the likes of Compass, Sodexo and Aramark, which then provided access to business canteens and hospitals, amongst others.
Retail listings in Canada also include Loblaw’s pharmacy unit, Shoppers Drug Mart, and Awake has recently launched in the convenience channel through Circle K and Shell forecourts, with 7-11 stores now on the cards, too.
Over in the US, Awake Chocolate will gain listings in Costco in the south east and Los Angeles regions in the next six weeks, adding to its presence in the Meyer chain, along with Fresh Market and Fresh Thyme .
“We’re in review with some national retailers as well. I’m optimistic we’ll be able to roll out some of those next year,” Deremo said. “We have the opportunity to grow our business three or four times from where it is today with those partners.”
With new funds on board, Awake Chocolate plans to expand its team to “accelerate growth” and increase production capacity through its two co-manufacturers, while new innovations are in the pipeline, including using functional ingredients other than caffeine.
“The state of the cocoa market right now is a real challenge for us and every other chocolate company, so I think the only prudent thing to do is look at other adjacent categories we might extend into where we can still make delicious snacks but where we might be less reliant on cocoa as a commodity,” Deremo explained.
