Shareholder Letter
June 2019 - May 2020 Fiscal Year Shareholder Letter
To our Potential Future Shareholders:
To open this year's letter we invite you to read the feedback being left by our customers online here.
This year is one that will never be forgotten at Mid-Day Squares. For one it was our first full Fiscal Year. We had over 600k bars consumed by our customers. We generated a total income of $------------ yielding a growth of 155% over the previous year with only two skus.
As we think long and hard on what’s to come, we can’t help but feel deep excitement for where we are as a company and where we are going. Spins data has “Total Snacking” worth $57.8 Billion dollars. Health and wellness snacking represents $17.5 Billion, along with conventional snacking representing $40.3 billion.
We transcend all those categories and MORE.
Conventional snacking is shrinking year over year, while healthy snacking is growing. What’s even more interesting is that “Fresh Snacking” is the fastest growing snacking segment.
Chocolate is the largest of all the snacking categories and Mid-Day Squares sits at the intersection of all the top trending consumer considerations. This enables us the opportunity to capture this explosive growth.
We truly believe we have an opportunity to cement ourselves as a global BRAND, in a new and powerful way, creating a legacy that lasts long after we leave this planet.
In fact, when we see the potential of the brand it looks closer to Nike and Lululemon in terms of community passion and tribe. We feel closer to our end customers and our reach is bigger than it’s ever been.
As far as moats being created, our brand communication through video, podcasting, and community events, is something that incumbents will have a very hard time breaking through. Their large, bloated and bureaucratic infrastructures simply do not let them speak the voice of authenticity.
This is something that Mid-Day Squares is uniquely positioned to compete on. Tribes are everything when it comes to our belief in true brand culture, and in order to create Tribe ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------. It will create higher capex early on but will create immense shareholder value and customer satisfaction over time.
What we achieved in 2019-2020 fiscal year:
-We completed our first financing round in order to continue building out our team in order to de-risk executional risks and optimize for growth.
-We built a fully automated manufacturing facility that can support us to $---------------- in revenue. We completed this plant in record time, for a cost of $--------------. We were told this was impossible by many of the top firms. We rose to the occasion and executed.
-We increased gross product margin from (------ to 2---- via supply chain and production cost optimization which continues to drop as we gain scale.
-We launched our second flavor, Almond crunch, which was a huge success and continues to represent ---% of our sales.
-We launched the brand nationally via the Natural Channel with distribution secured throughout Canada both nationally and regionally via four different distributors. We are now ready to support all Food Drug and Mass Stores in Canada.
-We secured top talent to continue growing our team.
What we want to achieve in 2020-2021 fiscal year:
Theme: Continued growth of Gross Margin and Revenue
This up and coming year is all about getting Gross Margin as close to ---% and launching the US.
Prior to Covid-19 we would normally invest in being where our customers are in the best mindset to discover new products: in store demoing, activations with trend setting fitness brands (ie Lululemon, Barrys bootcamps, etc), and being in partnership with micro influencers setting trends in regional geographies across North America.
-----------Market is one of the most influential retailers in LA due to the demographic that they attract. We are confirmed to launch in their locations as of September 1st 2020. We --------------------------------------- partner for the North East United States. We will have something announced in early Fall 2020.
Online continues to be our most important growth driver. Our unique know-how in digital allows us to not only drive customer acquisition directly through our online platform, but it also creates secondary demand that drives foot traffic in a meaningful way to our supporting retailers.
Our online retail finder is currently attracting ~400 unique people a day. The game plan remains simple: the more we win in the direct to consumer space, the more brand visibility we receive and the more people we drive to stores making us part of their regular shopping experience.
True omni channel brands will provide the highest value return to shareholders in the years to come.
Shipping remains our largest cost center when sending individual parcels. This upcoming year will be all about optimizing just that. We have begun to develop our internal system that will optimize routes and take advantage of strategic drop points for our product before they go out for the last mile. We will test an internal development dubbed “Micro Fulfilment Hubs”. We hope to finish this upcoming year with our DTC shipping costs at the same shipping/price ratio of sending products to retailers via our distributors.
Supply chain optimization presents great opportunity in the year to come. We have Identified realistic cost savings that we can execute on immediately that will lead to a ----% increase in product margin. Our streamlined manufacturing process will also add an additional -% product margin. That's an extra $------------- available for brand growth initiatives for every $1 million in revenue.
At this stage of our growth we do not believe in defensive play and over optimization of the bottom line. Offense is what we believe in. Offense will lead to the highest shareholder value over the long term.
Finally, we will continue to push the media chasm via instagram, facebook, and linkedin while also launching our Podcast: Mid-Day Squares Uncensored and Youtube channel. The goal is to continue to scale the humanization of the brand by creating an authentic human to human interaction. Authentic relationships equate to real relationships.
Closing Thoughts:
Mid-Day Squares is still in its infancy when it comes to understanding our exact value proposition to our consumers. What we do know is that our customers come for the product, stay for the story, and continue to buy because our product truthfully fulfills their needs and expectations.
2019 was a year of change. We built and moved into a production facility that can support us up to $---- million in revenue. We developed national distribution infrastructure in Canada, and launched the brand coast to coast while continuing to build out a great team.
2020 will be about winning Canada at a national level in both the “Natural/Independent Grocer” and “Conventional Grocer” channels, launching Metro, Sobey, and Loblaws.
Being the early days for us, it is not to say that there aren't real significant risks in front of us. There is still a large level of execution risk left in the business. We risk competition. We risk being a capital intensive business. We risk short term momentum disturbance via Covid-19 unknowns. We have supply chain risk due to being a refrigerated product.
Risk is something that is real, but every day we are de-risking the business in the right direction and the value that we will create by being patient, focused, and tactical will pay off for all of you that remain committed to the long term view.
We thank each one of you for entrusting us with your belief and for the support you continue to show us with your feedback and networks. Mid-Day Squares is here for the long haul and we are thrilled that you are part of our story.
Lezlie Karls, Jake Karls, & Nick Saltarelli
Founders
Mid-Day Squares, Inc.