Undercover Snacks Raises $13.7M to Fuel Marketing and Production Amid Retail Push

Amid a retail push that has seen the New Jersey-based chocolate brand grow its total retail footprint to 10,000 doors last month, Undercover Snacks announced yesterday it has raised $13.7 million in funding.

Investors in the round included company chairman, co-owner and CEO Michael Levy, who backed the company personally (alongside his wife and co-owner Diana Levy) and through his firm Octagon Capital Holdings. Also joining the round was 900 Chocolate Investors, an investment holding company led by Chicago-based investor Andy Bluhm. After this round, Michael Levy said, outside investors now hold 30.5% of the company.

“In a short timeframe, Undercover has not only created tremendous business momentum, but also the operational infrastructure to build a successful global brand,” Bluhm said in a press release.

Founded in 2017, Undercover Snacks markets a line of Chocolate Quinoa Crisps, offered in five permanent SKUs and a number of seasonal varieties, that are sold in singles, 2 oz. pouches and 12-pack bags.

Since launching at Whole Foods in the Northeast, the company has balanced its distribution strategy between the natural and conventional channels, according to Diana Levy. While natural retailers mainly merchandise the product as confection, conventional retailers buyers tend to slot it in the snack aisle, she said. Earlier this year, the brand launched in Wegmans, Shaws, Giant Food and CVS HealthHubs, and last month added 5,000 doors in Kroger, Rite-Aid, Stop & Stop and Loblaws stores. Given the rapid expansion, Diana Levy said, more capital was needed to support these launches through marketing initiatives that can drive trial and brand awareness.

“We want to be an accessible, better-for-you brand,” Diana Levy said. “Particularly with what happened in the last year and a half with COVID, a lot of the conventional grocery chains out there now really are building their natural portfolio and our product is a terrific product to bridge the gap.”

The brand also plans to continue building out its presence in alternative channels such as foodservice — including new partners Juice Press and Just Salad — corporate and travel, particularly for its individually wrapped products.

The brand’s growth ambitions are built on a solid manufacturing base, as it has built out its operational infrastructure to support high volume production to service major retailers both domestically and internationally, Michael Levy said. Undercover Snacks opened its own manufacturing facility in East Hanover, New Jersey in late 2018, which the Levys said has proved to be a major benefit for the brand during the COVID-19 pandemic, allowing it to grow while other brands faced production challenges.

“Were able to fill in a lot of gaps, any space available on trucks…and turn it around super quickly,” Diana Levy said. “We want to confidently be able to tell any retailer that we will not have any supply chain issues on our end.”

As it continues to rapidly grow its distribution footprint, the company is also aiming to double its capacity, adding new production lines and automation to its manufacturing facility.

Undercover Snacks is among several brands innovating in the better-for-you chocolate and confections segment, with brands like ChocXO, HighKey and SkinnyDipped recently rolling out low-sugar and keto-friendly innovations. The space has also seen notable M&A activity, including the acquisitions of Lily’s and Hu earlier this year. With this demonstrated momentum for better-for-you indulgences and snacks in mind, Undercover Snacks’ innovation pipeline includes the launch of a Milk Chocolate + Sprinkles quinoa crisp for Easter 2022 as well as an expansion beyond chocolate into other snack items.

“We really feel confident about the prospects of the business and want to invest more in building what we hope will have the opportunity to become a well known global brand,” Michael Levy said.