Keto Brand Love Good Fats Raises $10.7M to Fund U.S. Growth

Canadian keto snack brand Love Good Fats has raised $10.7 million as it looks to weather the declines in the bar category caused by COVID-19 and ultimately make a deeper push into the U.S. market.

The funding round, which brings the brand’s total capital raised to over $20 million, was led by InvestEco Capital and Expert Development Canada, the brand’s first institutional capital. Founder and CEO Suzie Yorke said the keto bar and powdered shake brand had begun plans to conduct an even larger equity raise prior to COVID-19, working with investment bank RBC Capital Markets, but was forced to shift gears when the pandemic hit. Given the economic uncertainty caused by the pandemic, it ultimately decided upon a smaller round from current shareholders, raising $7.7 million, Yorke said, to which another $3 million was added from new partners.

InvestEco Capital, which focuses on health and sustainability companies in the food & agricultural sector, has previously invested in CPG brands including Sol Cuisine, Chickapea, Lesser Evil, Kuli Kuli and Vital Farms. Meanwhile, Export Development Canada is a government-owned export credit agency aimed at developing trade between Canada and other countries. Though not the company’s original plan, the round provided the brand with a “quick stopgap” to ensure that as it navigates “uncertain, unprecedented times” and ensures it “doesn’t get caught with liquidity issues,” Yorke said.

“We were kind of making sure we’re planning for the worst in terms of how long this [pandemic] can be, and how kind of painful the impact on the bar category could be,” Yorke said.

While the main concern for the brand was ensuring it would be “well capitalized” for the next few years, another goal will be to further grow the brand in the U.S. through digital advertising campaigns — as well as expanding distribution and deepening offerings at current retail accounts. Last year Love Good Fats began to diversify its portfolio, launching Fat Shakes, a line of keto-friendly shake mixes, and this year the brand added a new three-SKU Chewy Nutty Bar line. Though Love Good Fats does have fairly broad reach in the U.S. already, with its original bar line available in about 14,000 retailers including Walmart, Whole Foods Market, Sprouts, Kroger, CVS Pharmacy and Costco, Yorke wants to see more retailers pick up the new product offerings.

These products are key, given how the pandemic has impacted the bar category. While the brand planned to drive growth by doubling down on its bar offerings this year, the bar category as a whole “got hit really hard” at the onset of the pandemic, Yorke said. In March and April, a Sanford Bernstein report indicated drops in sales of performance nutrition bars (20%), meal replacement bars (17.9%), weight management bars (11%) and health and nutrition bars (5.8%). Yorke said these declines were felt particularly in Love Good Fats’ single bar sales, as consumers spent less time browsing in stores and made fewer grab-and-go purchases.

“You map out your list, where you’re going to go in the store, what you’re going to buy, and then you put on your mask and you wait in line, you kind of zoom in, zoom out,” Yorke said. “The beauty of the bar category was discovery and shopability, and that’s been dramatically compressed.”

The brand was just beginning to secure retail placements for the Chewy Nutty line when COVID hit, though Yorke said that ultimately was “pretty fortunate” timing as the brand had displays, ads and promos already in place in stores just as traffic levels surged. Like many brands, Love Good Fats did a “full court press” with its ecommerce business when the pandemic hit, and experienced record online sales April through June, though Yorke said this was not able to make up for retail losses since the majority of its business is still in stores.

For the next six months, Yorke said the brand will be “laser focused” on building awareness for the new shake lines and bars, which offer a low sugar alternative to typical granola and nut-based bars. While the brand will continue to work on innovation beyond bars and shakes, she said, it will have to reassess the pacing of innovation and be “very disciplined” to ensure that all product launches are well supported, particularly amid the uncertainty of the pandemic, which has also pushed back retailer resets and category reviews for new products.

Noting that there has been a recent shift in consumer interest toward indulgent products, particularly chocolate, Yorke said that confection could be a good candidate for Love Good Fats’ future expansion, fitting into its model of high fat, low sugar offerings. Fellow nutrition-focused brand Quest Nutrition just yesterday announced a similar path, launching a low-carb, low-sugar, high-protein peanut butter cup.

“It’s really all about supporting [our innovation] as we wait out the shift in consumer behaviors to kind of come back to on-the-go products,” Yorke said. “And to make sure that our brand has the awareness and trial to have a fast start, because we’re very grateful for the first year and a half we’ve had in the US.”