Canada’s Mid-Day Squares Nabs $8M in Govt Funding to Scale Up Plant Protein Snack Bars

Canadian startup Mid-Day Squares has raised $8M in debt financing to expand production of its high-fibre, high-protein vegan snack bars ahead of launching at major US retailers.

Mid-Day Squares, the viral snacking company that took on Big Chocolate, has secured a new investment to expand the production and distribution of its plant-based bars.

The Montreal-based startup has secured $8M in a debt funding package led by Investissement Québec and Canada Economic Development for Québec Regions, taking its total raised to $25M since it was founded nine years ago.

The financing round, first reported by Nosh, will enable the firm to boost annual production to around $250M of output as it prepares for a rollout at Walmart and Costco in the US and battles the volatility of the cocoa market.

Fighting Big Chocolate and the cocoa supply crisis

Founded by Jake Karls, Leslie Karls and Nick Saltarelli in 2017, Mid-Day Squares makes plant-protein-filled snack bars that deliver 6g of protein and 5g of fibre per 35g serving. The products contain no artificial ingredients, preservatives or fillers, keying into the clean-label trend that is increasingly informing Americans’ food purchases.

The company began with protein bars disguised as chocolate snacks, with the current cocoa lineup including flavours such as brownie batter, almond crunch, cookie dough, crunchy peanut, and peanut butter.

Its marketing strategy relies heavily on social media, where its team routinely shows the inner workings of the business. Mid-Day Squares went viral after a high-profile legal clash with The Hershey Company, which claimed its orange peanut butter bar packaging was too similar to the iconic Reese’s Peanut Butter Cups.

Hershey’s made a multimillion-dollar offer to acquire the startup, which rejected the offer and opted to instead work towards an IPO. In response to the chocolate giant’s pressure, Mid-Day Squares released a music video of a hip-hop-style diss track called Chocolate Gone Crazy, inspired by Eminem’s 1999 hit My Name Is.

It had a similar run-in with Kellanova’s Rxbar. But its bigger problems came in 2024, when the climate-change-hit cocoa market began suffering from global shortages and record-high prices.

The company, which had reached profitability after nearly six-and-a-half years, had its gross margin virtually wiped out as the cost of cocoa ballooned. In fact, Jake told Forbes earlier this year that the cocoa crisis had “almost destroyed the entire business”.

This led to a strategic shift for the firm, which forayed into indulgent afternoon snacking with the launch of its No Bread PB&J bars, which come in strawberry and grape flavours.

These non-chocolate products now make up nearly 25% of its revenue and have become its “premier” range, with Saltarelli telling Nosh that the lower price point and 130-calorie content have enabled the brand to expand to a different snacking occasion without cannibalising its chocolate products.

Mid-Day Squares on track to hit $100M in sales by 2028-29

With the expansion of its snacking portfolio and the new investment, Mid-Day Squares is gearing up for a new phase focused on broader distribution and higher profits.

The company recorded $32M in revenue in the fiscal year ending May 2024, which was set to rise to $45M this year. As the chocolate economy relaxes, it’s seeing prices come down. “That means our contracts, effectively as of September, are going to start to reflect the new cocoa prices,” Saltarelli told Nosh. “Now, all of a sudden, you’re going to see those tailwinds hit.”

Another of those tailwinds is the rise of GLP-1 drugs, which have boosted appetite for smaller portions, but also foods high in protein and fibre. Polling shows that 73% of GLP-1 users want to eat more protein, since they witness a 25-40% decrease in muscle mass (several times more than non-medicated weight-loss approaches and age-related muscle loss).

Mid-Day Squares, which estimates its production ceiling at $65-70M worth of annual output currently, is installing a new V2 production line, which is set to be operational by the end of February. It’s also moving towards 24/7 production to accommodate its near-term growth.

The company already sells its bars in Walmart and Costco in Canada, but its expansion to their US stores will take its footprint in the latter country from around 10,500 to 13,000 stores. Walmart will initially launch four-packs of the snack bars at 350 higher-volume Tier A stores, while Costco will bring the No Bread PB&J line into roughly 50% of its US sites.

Mid-Day Squares chose to raise debt instead of equity because of the terms available through the Quebec government-backed programmes and the business’s own financial maturity. “The business has matured to a point where we can handle the debt payments. We try to make decisions that are the most accretive to our investors, and this causes zero dilution,” Saltarelli said.

“It has been seven years of challenges, and I actually don’t see challenges ahead for the next 24 months. I find it’s going to be our time to scale,” he added. The company says it’s on track to reach $100M in revenue by late 2028 or the first half of 2029.

It’s the latest plant-based protein bar startup to attract investment in recent months. In March, New York-based Mezcla secured $9.5M to expand distribution of its puff-crispy bars. That came a month after Turkey’s Eti Gıda completed its $173M purchase of Miami-based Trubar, which sells 50 million plant protein bars annually.