Mid-Day Squares secures CA$8 million debt financing to scale production ahead of US retail push

Canadian snack company Mid-Day Squares has secured CA$8 million in debt financing to expand manufacturing capacity as it prepares to increase its presence in the US market through Walmart and Costco.

• Mid-Day Squares secured CA$8 million in debt financing from Investissement Québec and Canada Economic Development for Québec Regions to support manufacturing expansion and US growth.
• The Montreal company planned to install a new production line and move toward round-the-clock manufacturing as it prepared for launches with Walmart and Costco.
• Mid-Day Squares said its No Bread PB&J range had broadened its addressable snacking occasions while reducing its exposure to volatile cocoa prices.

The funding package was led by Investissement Québec and Canada Economic Development for Québec Regions and will support an expansion of the company's production capacity.

Founded in Montreal in 2017 by Lezlie Karls, Nick Saltarelli and Jake Karls, Mid-Day Squares produces plant-based snack bars combining chocolate with protein and fiber.

Its core products provide 6g of protein and 5g of fiber per 35g serving, with flavors including Brownie Batter, Almond Crunch, Cookie Dough, Crunchy Peanut and Peanut Butter.

The latest financing will support an increase in manufacturing capacity as the company prepares to launch products through Walmart and Costco in the United States.

Mid-Day Squares currently estimates its production ceiling at approximately US$65-70 million worth of annual output. A new V2 manufacturing line is expected to increase capacity substantially, with the company targeting infrastructure capable of supporting approximately US$250 million worth of annual output.

The line is scheduled to become operational by the end of February, while the company is also moving toward 24-hour, seven-day production.

The additional capacity is intended to support a broader US retail footprint. Mid-Day Squares already sells through Walmart and Costco in Canada and expects its expansion with the two retailers south of the border to increase its US presence from approximately 10,500 stores to 13,000.

Walmart is expected to begin with four-packs in around 350 higher-volume stores, while Costco is set to introduce the company's No Bread PB&J products into approximately half of its US locations.

The investment follows a difficult period for the chocolate market, with sharp increases in cocoa prices putting pressure on Mid-Day Squares' margins after the company reached profitability following almost six-and-a-half years in business.

The resulting pressure contributed to the development of its No Bread PB&J range, available in strawberry and grape varieties.

The non-chocolate bars now account for close to 25% of company revenue and have enabled Mid-Day Squares to address a different afternoon snacking occasion at a lower price point without replacing sales from its chocolate-based portfolio.

“No-Bread PBJ has taken us to the next level and with the GLP1 tailwind we're feeling for our offering we feel very comfortable making this plant expansion come to life,” co-founder Nick Saltarelli said.

The company also expects easing cocoa prices to improve its economics as new purchasing contracts begin reflecting lower costs.

Saltarelli said Mid-Day Squares deliberately chose debt rather than another equity raise because the company had reached a stage where it could support repayments without further diluting existing shareholders.

“The business has matured to a point where we can handle the debt payments,” he said. “We try to make decisions that are the most accretive to our investors, and this causes zero dilution.”

Mid-Day Squares reported revenue of US$32 million for the fiscal year ending May 2024 and expects sales to reach approximately $45 million as its retail distribution expands.

The company is targeting US$100 million in annual revenue by late 2028 or the first half of 2029.

“It has been seven years of challenges, and I actually don’t see challenges ahead for the next 24 months,” Saltarelli said. “I find it’s going to be our time to scale.”

The financing follows further investment activity in the plant-based protein bar category. New York-based Mezcla raised US$9.5 million in March to expand distribution of its puffed protein bars, while Turkish food group Eti Gıda completed its US$173 million acquisition of Miami-based Trubar earlier this year.

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