AWAKE Secures CAD $5M Investment and Ramps Up Distribution, Seeking to ‘Lead the Evolution of Chocolate 3.0’

Hot on the heels of significant distribution gains in both the U.S. and Canada, caffeinated chocolate brand AWAKE has closed a CAD $5 million (approximately $3.6 million USD) follow-on funding round from Btomorrow Ventures, the venture arm of British American Tobacco.

BTV first invested in the Ontario-based confectionery brand in 2021, at a time when the venture arm was still “pretty new,” AWAKE co-founder and CEO Adam Deremo told Nosh this week. The venture group – whose CPG portfolio also includes Blockhead energy gum, Moment adaptogen beverages, More Labs recovery shots and functional drink platform TRU – furthered its support in 2023 with a CAD$5 million follow-on round. Since launching in 2012, AWAKE has raised approximately $14 million.

The new capital, which Deremo expects to have a runway of between 18 and 36 months, will support AWAKE’s recent Canadian expansion at Costco and Loblaws, as well as in the U.S. with Stop & Stop and Giant. The brand’s products are currently available in 4,500 total doors and 10,000 points of food service distribution.

Founded by Deremo and fellow PepsiCo veterans Matt Schnarr and Dan Tzotzis, AWAKE was designed to provide consumers with the caffeine boost they desired without the polarizing taste of an energy drink.

“If you ask the general population, do you have a want or need for more energy in the day, an overwhelming majority say yes. But it turns out that only 70% of those people were buying products to meet the need and the reason the other 30% weren’t was because they wouldn’t make the taste trade-off,” said Deremo.

The company’s portfolio currently includes Bites (Peanut Butter, Caramel, Dark Chocolate, Milk Chocolate and Mint Dark Chocolate varieties), No Sugar Added Bites (Almond Sea Salt Dark Chocolate and Peanut Butter Dark Chocolate Varieties) and Bars (Milk, Caramel and Dark varieties), all of which are crafted using fairtrade chocolate.

The individually wrapped bites feature 50mg of caffeine each while the bars are packed with 100mg of caffeine. According to Deremo, there was “a ton of iteration trial and error” during the initial R&D process, but once AWAKE nailed its formula, they tapped into networks built through the founders’ jobs at PepsiCo and Kraft and were introduced to the Montreal-based co-manufacturer they have been partnered with for the past 12 years.

Though AWAKE has established a strong foothold in the U.S. market, things were not always smooth sailing. When the brand made its stateside debut in 2013, Wrigley had just halted production of its Alert caffeinated gum and the FDA began voicing concerns about the effects of caffeine on children and adolescents.

Though AWAKE’s products are not targeted toward or designed for children, Alert’s downfall caused “a couple of retailers who were interested in launching with [AWAKE] to back away,” said Deremo, creating a sizable headwind for the brand.

Retrospectively, however, Deremo said the development may have been “a blessing in disguise,” as it allowed AWAKE to focus on the primary channel the brand had launched into, colleges and universities. That focus helped the confectionary brand forge strong relationships with large foodservice companies like Compass, Sodexo and Aramark.

The foodservice channel remains the brand’s biggest revenue generator, accounting for approximately 50% of sales, followed by retail (25%) and DTC (25%). According to Deremo, “at its own peril,” AWAKE wasn’t terribly focused on ecommerce before the pandemic hit and colleges and universities shut down.

Now, the brand is gaining steady traction in ecommerce with online repeat purchase rates of roughly 40%. Additionally, AWAKE has grown its Amazon business 65% year-over-year.

Though arguably still an up-and-coming market, the demand for caffeinated snacks is definitely growing. According to market research firm IndustryARC, the global caffeinated snacks market was valued at $513 million in 2023 and is projected to reach $843 million by 2030, growing at a CAGR of 6.4%. Other brands in the space include Power Up Foods (PUF) caffeinated cookies and brownies, Pocket Latte coffee chocolates and VERB caffeinated energy bars.

Traction in chocolate could be just the beginning, though. Based on consumer surveys conducted in partnership with Holland University in Prince Edward Island, AWAKE discovered that consumers are seeking additional functional benefits from chocolate beyond caffeine and the brand believes “four or five of those” are very promising. For now, the brand hasn’t disclosed which ones will come to market.

“Bars and snacks have become functionalized. Even yogurt has become functionalized. I don’t think there’s any reason for consumers to believe that chocolate can’t also do something else for you,” said Deremo. “We really want to lead the evolution of what we call Chocolate 3.0.”