Nightfood: Go ahead. Snack before bedtime.

Disruptive snack startup gives late-night eaters – and investors – a healthy alternative

 Takeaways

• Nightfood is pioneering the new food segment of healthy foods for late-night snackers
• Its premiere product is a lower-sugar, lower-fat ice cream branded Sleep-Friendly, which is already available in 2,000 grocery stores throughout the U.S.
• After a recent private equity placement, Nightfood is debt-free and had $1.4 million in dry powder

It’s old, familiar, dependable advice: Don’t eat right before bed. It’s also not necessarily true. Pigging out before bed is a bad idea because it can lead to weight gain, disrupted sleep and a bunch of other issues. But according to Healthline, a light, protein-packed nibble – especially if you’re legitimately hungry – might be the best thing for you.

Even so, a Harris Poll online survey found that more than half of those snacking at night associated their behavior with guilt and unhealthiness. They likely don’t even know that there might be an ideal, healthful-yet-satisfying snack. Many people won’t even know what it is their bodies are telling them they need to settle into restful, restorative sleep, according to sleep coach Sanchita Sen. Late-night junk food could just give you heartburn, but is it really nuts, berries and avocado toast you’re craving?

All this presents the market vacuum identified by Nightfood (OTC:NGTF). After 11 years in business – six as a public company – it plans to parlay the success of its ice cream into a broad-based category in which it Nightfood would have a first-mover advantage.

In addition to low fat and sugar contents, Nightfood’s nine flavors of ice cream also offers casein protein and prebiotic fiber to promote sleep and recovery. It has proven healthful enough to be chosen as the official ice cream of the American Pregnancy Association.

Nightfood has already gotten it into freezers at Walmart, Albertsons, Kroger and other grocers – nearly 2,000 outlets throughout the U.S.

Growth market

Of course, there’s more to late-night snacking than ice cream – although that’s as good a place as any to start. Nightfood estimates that Americans – eight out of ten of them – spend $50 billion annually on after-dinner snacks. The growth-stage company expects that to grow in the wake of the pandemic shutdown, as long-established sleep rhythms have neither settled into a new normal nor reverted to the old normal.

Nightfood, based in Tarrytown, N.Y., closed a $4.5 million round of Reg D financing in April. After retiring all debt and convertible notes, this left Nightfood with more than $1.4 million in cash for strategic opportunities. This provides some dry powder to enable the company to develop or acquire new product lines beyond the current ice cream offerings.

Meanwhile, Nightfood is trying out new distribution channels as well as new products. A pilot program is currently underway offering the company’s ice cream in the lobby shops of a global hotel group.

This awareness of market forces could be crucial to the company’s ability to thrive in the competitive food products industry. Its mega-caps are investing in their own late-night lines, which just tells the company’s executive team that they’re onto something.

“I take validation in PepsiCo launching their Driftwell sleep-supporting beverage,” CEO Sean Folkson told shareholders, “and by Unilever, the world’s largest ice cream company, launching a year-long research study to understand how sleep quality can be improved through diet and nutrition.”

Even before these conglomerates expressed any interest in this niche, though, he brought on board Dr. Michael Breus, a renowned sleep psychologist and now the company’s scientific advisor.

Just desserts

Nightfood has had a persistent issue with profitability and cash flow from operations. This has led to volatility in its share price, currently around $0.27 with a $21 million market cap. Still, even before April’s cash infusion, NGTF was rebounding off a trough. That likely had to do with improvement in fundamentals.

Folkson’s team had found ways to increase revenues by 28.7% last fiscal year, compared with the industry average 1.1%. Nightfood also cut SG&A expenses by almost one-third.

Has the company rebounded? Will Nightfood feast while its competitors sleep? The company is committed to improving the eating habits, sleeping habits and overall health of all late-night noshers everywhere. All it requires is a public with an appetite for nutritious bedtime snacks – and investors with an appetite for a little risk.