Since going public in July, after about a year in the market, Canadian plant-based food manufacturer Modern Meat has been acquiring mission-aligned businesses and securing distribution deals at home and abroad. Chief executive Tara Haddad speaks with NutritionInvestor about the strategy, product development and new markets on the horizon
By Murielle Gonzalez
Plant-based food manufacturer Modern Meat is the brainchild of Tara Haddad, its founder and chief executive. Based in Vancouver, British Columbia, Haddad came up with the idea three years ago and has built the company from the ground up. This is the story of how she is scaling up operations and building the Modern Meat plant-based food and wellness brand at home and abroad.
Haddad is a certified public accountant and worked for Ernst & Young on tax and risk management. Her accounting and financial analysis expertise have been key to her entrepreneurial mindset. In July, Modern Meat went public by a reverse takeover transaction with Navis Resources Corp., taking up the ticker symbol MEAT on the Canadian Stock Exchange. Within weeks, it announced the strategic appointment of former Mars executive Loree Khan as head of Canadian sales and distribution.
The company has been in expansion mode ever since, acquiring plant-based and wellness businesses at home, and securing co-packing, manufacturing and distribution deals in Canada, the US and Australia.
“I’m a mother of three children, and I wanted to incorporate more plant-based foods into our lifestyle and our diet,” says Haddad. She explains that when the idea of a plant-based food business was cooking in her mind, she couldn’t find any products with the nutritional profile she was comfortable with feeding her family – and she was particularly unhappy about the ingredients in those foods. “I decided to create plant-based meat alternatives that would be healthy, nutritious, and delicious,” she says.
Haddad argues that Modern Meat’s clean ingredient profile is what sets the brand apart from other plant-based meat alternatives on the market. “We use simple, natural ingredients in our products,” she says. “Modern Meat recipes are crafted from real whole foods, free of soy, gluten, nuts and GMOs. We avoid using any preservatives or chemicals in our products.”
Wholesome plant-based foods
R&D work began in June 2019, and Modern Meat has since developed an evolving portfolio of vegan products. Nutritionally, a 100-gram patty of the Modern Burger contains 14 grams of plant protein and only 6 grams of fat.
Today, the offering comprises a line of frozen products, including burgers, meatballs, ‘crab’ cakes, and crumbles, and a line of sauces in three flavours – onion relish, burger sauce, and tarragon remoulade.
The product line expanded this month with the acquisition of Canadian plant-based soup manufacturer Kitskitchen.
Kitskitchen has been in business since 2013, led by an all-female leadership team. Products are currently available at 135 retailers throughout British Columbia and Alberta. Kitskitchen has provided an expected revenue forecast of C$950,000 for 2021.
Production of the Modern Burger began in November 2019, and by July, the company had increased output to 6,000 pounds weekly. In August, Modern Meat announced the acquisition of a manufacturing facility in Vancouver, which is now operating at maximum capacity with an output of 100,000 pounds a year.
Modern Meat in expansion mode
Since commencing production, Modern Meat has expanded its distribution to an array of restaurants and grocery retailers throughout Western Canada. However, the onset of Covid-19 directly impacted the foodservice side of the business. “We had started a foodservice-only offering in February, so we had to pivot our model quickly to the retail market and e-commerce,” says Haddad, noting the effect of the Covid-19 pandemic is reflected in its sales for 2020.
The commercial pivot worked well, however. In August, the company said it had doubled its retail presence since going public and that products are available in more than 50 locations in Canada. Two months later, Modern Meat reported that its products had sold out for 15 consecutive weeks.
Haddad says she wants to have Modern Meat plant-based products in everyone’s kitchen, and to that end, it has secured a series of distribution deals. In November, Modern Meat announced a co-packing and distribution agreement with Real Vision Foods of California – its first foray into the US market.
Real Vision Foods agreed to produce Modern Meat products at its facility, worth up to a wholesale value of $25 million annually. Production is expected to commence in Q1 at volumes based on demand in the US through Modern Meat’s retail and wholesale partners.
Modern Meat inked a similar deal with Australian manufacturer SPQR Holdings, now operating as Viveri. Based in Adelaide, Viveri has a facility of approximately 21,000 square feet with full production staff. “We look forward to the first production and distribution in the second quarter of 2021,” says Haddad.
The M&A expansion spree has led Modern Meat to tap into other food categories, too. In November, it agreed to a $450,000 cash transaction with JDW Distributors for trademarks and distribution rights to the plant-based snack brands Snacks from the Sun and Sunsations – products are currently distributed across 7,000 retail stores in the US and Canada.
Modern Meat announced the deal with JDW two weeks after acquiring two retail locations in Vancouver from Victoria’s Health & Organic Bar.
Victoria’s Health & Organic Bar has been in business for 18 years, gathering a significant following among the health and good-for-you community. The company reported C$4.3 million in gross sales from its three locations, focusing only on health-related products.
Modern Meat intends to renovate and rebrand the acquired stores to Modern Health and Wellness Bar. Stores will be converted to focus solely on vegan products and supplements. The plan includes a significant increase in food services, serving premade meals and expansive to-go vegan menu.
Haddad says the company’s M&A strategy has been to target mid-range revenue-generating companies. “We have to share the same vision and can grow together,” she explains, noting that target companies are plant-based businesses that have a focus on health, wellness and sustainability.
Modern Meat filed its year-end financial statement for the period ending 31 August 2020 in December. The company generated C$82,144 in revenues at C$81,107 cost of sales, leading to a gross profit of C$1,057. The company registered a net loss of C$5.2 million, including C$3.4 million in listing expenses.
At the time of writing, Modern Meat shares were trading at C$3.99 at a market capitalisation of C$113 million. Analysts tracking the company noted that shareholders have been substantially diluted in the past year, with total shares outstanding growing by 108.9%.
The company has been partly funding its M&A activity by issuing shares. For example, the Kitskitchen acquisition was agreed at a purchase price of 300,000 shares and a finder’s fee of 9,000 shares to be issued. Modern Meat issued 350,000 shares connected to the acquisition of the two locations of the Vancouver wellness bar at C$4.00 each to the vendor. Modern Meat secured the option for five years to buy a third store for a cash purchase of $3 million in the deal.
Analysts tracking the company say the business has sufficient cash runway for more than a year based on its current free cash flow. The latest financials show that as of 30 August, the company’s current assets totalled C$3.2 million, including C$2.8 million in cash.
Haddad is optimistic about the outlook for the business in the coming months. She told NutritionInvestor that its sales forecast is not completed at this time, but the company is expecting accelerated growth, building on the distribution deals in the US, Canada, and Australia.
“Currently, our best-selling SKU is the Modern Crab Cakes because they taste better than the real thing!” says Haddad. “Pair them with our vegan tarragon remoulade sauce, and they are simply decadent – you will be converted,” she enthuses.
Modern Meat debuted the Modern Gyoza this month. Its recipe offers authentic Asian flavours while replacing traditional animal protein found in most recipes with healthy vegan protein.
Modern Meat has agreed to a co-packing agreement for the gyoza with an unnamed partner with the capacity to produce up to 100,000 units in a seven-hour shift.
Haddad says the company is on track to launch an alternative M*lk range in August. The plant-based dairy offering will hit the market in three versions – Oat M*lk, Almond M*lk, and Barista Edition Alternative M*lk. “These milk alternatives are made with ingredients that are all-natural, vegan and GMO-free, plus they offer a higher content of nuts than most brands currently offer,” says Haddad.
Further expansion plans are also on the horizon. “We have plans to expand to Europe in the very near future, and have many new products in the pipeline,” Haddad concludes.
Date published: 28 January 2021