Nightfood is pioneering a potentially multi-billion dollar snack category that could put them in the elite class of being a "category of one." That's a big deal. In fact, a company establishing itself as a category of one is the holy grail of marketing. In Nightfood's case, the "holy grail" can be worth billions in market capitalization. And for a company trading at microcap levels, it presents a value investment opportunity that may simply be too good to ignore.
At roughly $0.05 a share, is NGTF a high-risk and high-reward play? Absolutely. But the interest is justified. Remember, brands that become a "category of one," like Nightfood, get there because they create their own category, not by entering somebody else's. In Nightfood's case, they sell products that consumers are biologically hardwired to consume daily.
NGTF solves a significant and chronic consumer problem, which could be the primary driver to turning ambitions into dollars. But here's another contributing factor to the Nightfood proposition- its path to category control comes from having the insight, vision, and entrepreneurial spirit to create a nighttime snack arsenal that seems primed to force a tipping point in the hospitality sector.
Nightfood is forcing every single hotel in the United States to make a decision. Are they on #TeamJunk or #TeamSleep? Hotels can’t get away from selling snacks entirely…but can they escape directly impairing the sleep quality of their guests with lobby markets full of high-sugar, high-fat, sleep-disruptive options?
It seems that if Nightfood can continue to increase hotel distribution by providing sleep-friendly snacks for hotel guests, that the company is poised for a dramatic increase in value. That includes getting piquing the interest of global food giants who know how lucrative the nighttime snack category can be.
The Benefits Of A Category of One
Don't rule out NGTF earning that attention sooner than later. And don’t underestimate the impact of being a "category of one" brand. The precedent tells why. "Category of One" all-stars include AirBmB (NASDAQ: ABNB), Cirque de Soleil, CarMax, Uber Technologies (NYSE: UBER), Netflix (NASDAQ: NFLX), and Medifast (NYSE: MED). You can probably think of others…maybe even some you considered early on but decided not to invest. The common denominator to each example is that one-time long-shots can become billion-dollar enterprises.
Nightfood certainly has that potential. Their innovation has led to a "proof-of-concept" test with global food powerhouse Nestlé (OTC Pink: NSRGY) that could lead to international expansion.
Unlike other healthy options that can be chalky and tasteless, Nightfood snacks taste great, averaging over 4.3 stars across over 10,000 online reviews. That’s impressive for a better-for-you snack brand.
But, Nightfood delivers much more than just great taste. Its snacks are formulated by sleep and nutrition experts to be a better choice for anybody snacking before bed (hint: most of us!) In fact, Nightfood is so good that their ice cream pints often outsell Ben & Jerry's and Haagen Dazs when head to head in hotel lobby shops.
So, don't be misled by a $0.05 share price. As a category of one player, Nightfood is doing the right things with the right products at the right time to drive potentially exponential growth in the back half of 2023 and beyond.
Additionally, having first-to-market and first-mover advantage can accelerate their leadership position, validating the market and, perhaps more importantly, creating high entry barriers for subsequent competitors. Admittedly, other players may want to enter the market, and some already are, which is not surprising considering the size of the market is well over $50 billion in the United States and multiples higher globally.
In 2019, Nestlé launched a candy-type sleep aid called GoodNight. In 2020, Pepsi announced the launch of a "relaxation" drink called Driftwell. Both products are no longer on the market. In January 2023, Post Holdings introduced a cereal called Sweet Dreams which includes a "nighttime herbal blend." Will Sweet Dreams last longer than the others? Nobody knows. What is clear, however, is that these global companies, with their massive and multi-million dollar research departments, have identified the obvious need for better options for nighttime snackers. And they aren't the only ones.
Executives from global snack giants Mondelez (Oreo, Ritz), Kellogg's, Pepsi (NYSE: PEP), and Unilever (NYSE: UL) have commented either on nighttime snack habits or the link between nutrition and sleep. There definitely seems to be a multi-billion-dollar niche category there. And many believe Nightfood has already cracked the code. The results are just starting to show, but only if you look closely.
Sleep-Friendly And Nutritious Snacks on the Rise
And Nightfood is in the sweet spot of the developing opportunity. Moreover, its powerful partnerships and distribution relationships can expedite NGTF growing bigger faster. Frankly, it's difficult to find such a small company the caliber of relationships Nightfood has already established. Nightfood is aligned with the biggest and the best.
In addition to their Nestlé relationship, Nightfood ice cream is already available in select locations of Courtyard by Marriott (NYSE: MAR), Hyatt House (NYSE: H), Holiday Inn Express (NYSE: IHG), Sonesta, and many other global hotel chains. And momentum behind those placements is growing. In March 2023, Nightfood announced it had attained qualified vendor status with Choice Hotels, which recently acquired Radisson. Their 7,500 hotels globally make them one of the largest lodging franchisors in the world, and Nightfood is being promoted to their franchisees as a better option for their guests, both as a product for sale in hotels and as a giveaway amenity.
It just makes perfect sense that sleep-friendly snacks would thrive in hotel retail.
Independent point-of-purchase sales data from industry leader Impulsfy showed that in hotels where Nightfood was head-to-head with Haagen Dazs, and no other pint brands were sold, Nightfood captured an impressive 38% of pint sales against the legendary 60-year old global brand, outselling Haagen Dazs in many of those hotels. But wait, ask yourself…how is a completely unknown brand selling almost pint-for-pint with Haagen Dazs, with zero advertising and a higher average retail price? The explanation is easy.
A Perfect Hotel Snack Option
Nightfood sleep-friendly snacks are perfect for hotel guests.
Travelers wander into that lobby market shop at night like zombies, trying to satisfy those powerful hardwired biological cravings. They're buying snacks for immediate consumption, and they know they'll be going to sleep very soon.
From the hotel's perspective, guest comfort is a top priority. That's why they've invested billions to deliver the best quality sleep experience. That includes upgraded beds, mattresses, pillows, linens…blackout curtains, white noise machines, eye masks, and even ear plugs. Rightly so, good sleep is at the core of the hotel experience.
So it begs the question: why would global hotel brands want to stuff their valued guests full of unhealthy and sleep-disruptive excess sugar, fat, and calories right before bed when there are healthier, sleep-friendly options available?
Clearly there’s no good answer.
It makes no sense for hotels to do that…everybody knows regular cookies, chips, and ice cream can kill your sleep quality. But without better options, what choice did hotels have? Guests demand snacks, so they needed to sell SOMETHING…and junk will always sell to the masses.
BUT...knowing that eating junk at night is a key contributor to poor sleep, hotel operators can now address the issue head-on. And they are.
Nightfood is leveraging hotels to change the multi-billion dollar nighttime snacking landscape. Many believe sleep-friendly snacks will soon become industry standard across the entire hotel industry.
BUT...knowing that eating junk at night is a key contributor to poor sleep, hotel operators can now address the issue head-on. And they are.
Responding To New And Changing Demand
In May, 2023 HOTELS Magazine reported on a survey that showed frequent business travelers are unhappy with the snacks available in most hotel lobby markets. 55% of guests reported being dissatisfied with the typical hotel snack selection. 92% reported wanting healthier snacks in hotels. And 71% specifically reported that snacks formulated to support better sleep would influence their decision to buy.
The fix is easy.
Providing what guests want, more nutritious and satisfying snacks, is vital to maintain a high level of hotel guest satisfaction.
Remember, every guest that walks out of that lobby shop dissatisfied can do more than lower potential brand loyalty; it has the potential to multiply by word of mouth. That combination, especially with digital content able to go viral in seconds, is a brand's biggest fear. Thus, being proactive instead of reactive can be a critical competitive advantage. That's no exaggeration considering the speed of viral messaging.
Conversely, what will happen when more and more hotels step up their lobby markets and add Nightfood sleep-friendly nighttime snacks? You guessed right: other hotel chains will follow. In fact, many hotels are upgrading and expanding their lobby shops today. Of course, that can be excellent news to Nightfood and its investors' ears and eyes. Why?
Pioneering The Nighttime Snack Category
Nightfood is pioneering what can be a massive category.
Hotel distribution has the brand well positioned to earn a significant share of America's nighttime snack spend. Obviously, only a small portion of the nighttime snack billions is actually spent in hotels. But hotels represent a critical strategic piece in controlling the category.
Leveraging hotel distribution can position Nightfood to dominate the nighttime snack market because of the power of brand awareness and brand credibility. When a consumer sees Nightfood sleep-friendly snacks in all the major hotels when traveling, what will happen when that same consumer sees various nighttime snack options in the supermarket? Of course, Nightfood will have a significant competitive advantage. That advantage is already accruing to Nightfood.
And now, as a result, the largest snack companies in the world are being forced by this tiny company to weigh this strategic market opportunity (and risk). Some estimates show over $50 billion is spent annually on nighttime snacks. Other estimates peg the market at closer to $65 billion.
A recent Sleep Foundation study showed that the average American adult snacks before bed 3.9 nights per week. Knowing that there are almost 260 million adults in the USA, it's easy to do the math and see that over one billion snacks are consumed before bed every week. And that number keeps growing. There’s no argument that billions in snack revenue are now at stake. More importantly, there's the opportunity for one brand, and only one brand, to own the nighttime snack occasion.
The big snack companies know it. More importantly, from an NGTF investor's perspective, the global snack industry is fiercely competitive. Like so many consumer goods categories, the probability is that one brand will dominate the category while the rest fight for the scraps.
Baking Itself Into This Opportunity
That can be excellent news for Nightfood, noting that as a category-of-one, it's already claiming that valuable territory. Nightfood recently introduced cookies in addition to their ice cream. The mid-range goal is for hotels to have sleep-friendly versions of all the popular nighttime snack categories: ice cream pints, cookies, chips, candy, single-serve ice cream novelties, snack bars, and more. This would set the company up in a powerful strategic position.
Deep and wide hotel distribution can set a powerful foundation for expansion into mainstream retail. Hotel distribution provides the awareness and credibility that serves as a significant competitive and strategic advantage over other brands, even those that might be launched by much larger food companies. Nightfood announced it was entering a proof-of-concept test phase with Nestlé START and CO. Iberia earlier this year.
The objective of Nestlé START and CO is to "identify and select startups that want to grow by exploiting synergies and thus create new paths and future businesses in partnership with Nestlé." Remember, Nestlé is the largest food and beverage company in the world. If Nightfood starts to gain traction and has a relationship with Nestlé, things could get very interesting.
But while all the above are reasons to enjoy NGTF products and appreciate the investment opportunity, there's more to the story, including the potential for a quick and significant increase in high-margin revenue.
Nightfood recently announced that an international hotel chain with hundreds of locations in the United States has begun testing Nightfood cookies as a check-in amenity across the country.
The best part about amenity revenue is that the hotels would buy in bulk and then give the product away to guests. That means much faster and more predictable income than securing retail placement in hotel lobby shop stores that might sell a few units per week.
The potential is there to quickly reach six-figures in monthly revenue, with hundreds of thousands of frequent travelers receiving a Nightfood cookie as a gift at check-in, which can have an enormous impact on brand awareness, company awareness and accelerate adoption in lobby shops across the industry.
"Category Of One" Can Be A Tasty Proposition
Combining the sum of its parts as a "category of one" company, Nightfood presents an extraordinary ground-floor investment opportunity. Remember, don't judge this company by its microcap share price. Many investors famously laughed off companies like AirBnB (NASDAQ: ABNB), Uber (NASDAQ: UBER), and Netflix. Those same investors learned an expensive lesson. Many won't make a similar mistake given a chance, and with Nightfood, they may be getting another similar opportunity.
This company has significant retail placement in the hospitality sector, is testing with the largest food company in the world and is pioneering a new category in a market that already generates over $1 billion in consumer spending weekly. And keep this in mind when appraising the NGTF opportunity. Global food and beverage companies don't typically pioneer categories. They prefer to let upstarts be the pioneers…the big guys will wait, watch a category develop a bit, ensure that there's consumer demand, and then swoop in and enter the category through acquisition.
In other words, if Nightfood keeps adding to its already impressive list of hotel partnerships and distribution, investors shouldn't be surprised if companies already exploring the space, such as Nestlé, Mondelez, and Kellogg's, among others, come knocking on Nightfood's door for a partnership, minority investment, or outright acquisition offer. After all, it would be the fastest way for any of those companies to put themselves in a position to dominate the category.
That would present more than a win-win proposition; it would likely give a tasty windfall for early investors who recognized Nightfood's recipe for success.
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