Oats Overnight $35M Series B to Support Retail, Production

Oats Overnight announced today it has raised $35 million in a Series B funding round intended to help the high-protein oats brand continue to expand its manufacturing capabilities and grow its footprint in retail stores.

The round follows a $21 million raise from last year when the company reported around 250 full time employees and a footprint in over 2,000 doors nationwide. Speaking to Nosh today, Oats Overnight founder and CEO Brian Tate and chief strategy officer Nina McKinney said the company has since hired around 100 more team members as it builds out its production facilities in Arizona and Ohio.

The Series B was led by Enlightened Hospitality Investments (EHI). Tate said that the firm has strong connections to the foodservice channel, which the brand is “currently exploring.” The round also included financing from another first-time investor, Sonoma Brands Capital, as well as existing partners Impatient Ventures, Singh Capital Partners, Morrison Seger Venture Capital Partners, and BFG Partners.

“[There’s] lots of growth anticipated ahead as we continue to build into retail and grow digital,” Tate said. “We are also putting a lot of investment into retail sales direction that in the [Series A round] was even more nascent. It’s still just a slice of our business given we just went into retail a few years ago, but we are investing heavily into that team and that direction as well.”

Oats Overnight was founded in 2016 with a focus primarily on direct-to-consumer sales, which still makes up the majority of the business. The company has relied heavily on subscription customers and regularly produces new flavor innovations through LTO offerings for subscribers, in addition to its core oatmeal offerings.

Last year Tate told Nosh that the business’s revenue stream was around 80% DTC, 10% Amazon and 10% retail, but he said today that brick-and-mortar sales are now trending ahead of Amazon. However, growth across all three segments has meant the makeup of the revenue breakdown has not changed drastically, even as the company looks to invest deeper into retail where it has a presence in chains like Walmart, Target and Whole Foods.

According to McKinney, retail sales are now growing around 200% year-over-year, with expansion both to new points of distribution as well as “significant increases in velocities” and a focus on conventional grocery as well as club and other “alt-channel opportunities.”

“As we have increased door counts nationally, and as we’ve increased SKU counts on shelf, we’ve seen our dollars per SKU, per store, per week actually increase through that period,” she said.

The financing is also going towards improving manufacturing. Last year, Oats Overnight opened a 62,000 sq. ft. facility in Ohio, and last month it opened a new 86,000 sq. ft. facility in Arizona. The Series B is poised to continue scaling these facilities and build out vertical integration to support the company’s supply chain. Tate also said the company “definitely intends to hire hundreds more [team members] in the coming years.”

“What differentiates us most from our peers is that we own the process, we own all the input, so we can be very intentional with these formulas,” Tate said. “It’s a heavy business; there’s a lot of assets to deliver in a vertically integrated way. Managing so many SKUs creates a lot of complexity on the supply chain side.”

While it’s always been consistent on delivering new flavor innovations, Tate said the company also plans to do more R&D, pointing to recent trends like protein and functionality as areas the brand can compete more. He cited the rise of GLP-1 drugs as an opportunity for Oats Overnight to create better protein products that will appeal to wellness-minded consumers.

“We do feel that’s a great tailwind ahead of us, but [we’re] big believers in protein, even aside from that current trend,” he said.