Good morning, everyone. Welcome to The Very Good Food Company's Second Quarter 2021 Earnings Call for the period ended June 30th, 2021. At this time, all participants are in a listen-only mode. A brief question- and- answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press the star followed by zero on your telephone keypad. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Sabina Srubiski, Director of Investor Relations of The Very Good Food Company. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining us today for The Very Good Food Company's second quarter 2021 financial results conference call. My name is Sabina Srubiski, Director of Investor Relations. Joining me today on the call are Mitchell Scott, Co-founder and Chief Executive Officer of The Very Good Food Company, and Kamini Hitkari, the company's Chief Financial Officer. After preparing management's remarks, we will hold a question and answer session. A replay of this call will be archived on the investor relations section of Very Good's website at www.verygoodfood.com/investor. Listeners are reminded that certain matters discussed in today's conference call, or answers that may be given to questions asked, constitute forward-looking statements within the meaning of applicable securities laws that are subject to the risks and uncertainties relating to The Very Good Food Company's future financial or business performance.
These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. These risks and uncertainties are detailed in Very Good's annual information form for the fiscal year ended December 31st, 2021, and other periodic filings with Canadian securities regulatory authorities available on Very Good's SEDAR profile at www.sedar.com. Forward-looking statements made on this call are made only as of today and will not be updated as events unfold other than as required by applicable securities laws. Please also note that on today's call, management will refer to adjusted EBITDA, adjusted general and administrative expenses, and adjusted gross profit, which are non-GAAP financial measures.
While Very Good believes that these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. For definitions and reconciliations of the non-GAAP measures discussed to the relevant reported measures, please consult our second quarter 2021 MD&A as filed on SEDAR. I would now like to introduce Mitchell Scott, Co-founder and Chief Executive Officer of The Very Good Food Company. Please go ahead, Mitchell.
Thank you, Sabina. Good morning, everyone. Welcome to Very Good's second quarter 2021 earnings call. We have had another exciting quarter, highlighted by a triple-digit increase in revenue across our e-commerce and wholesale channels from the same period last year. Very Good is growing in every direction. Our top key priorities in 2021 are to commission our Vancouver-based Rupert facility to increase our production capacity to meet demand, to strengthen our North American e-commerce sales through digital market initiatives and the use of social media influencers, to deepen our wholesale distribution in Canada and to expand our retail reach into the U.S., and to introduce our new Butcher's Select gluten-free and soy-free range of plant-based meat that will compete with the likes of Beyond Meat and Impossible this fall.
While we focus on our North American growth strategy, we have also made inroads into new markets with our recent U.K. e-commerce launch. Our success is driven by our ability to execute on our growth strategy and the continued demand for plant-based food products. Since we last spoke to you in May, increasing our production capabilities remains one of our key focuses for 2021 and beyond. Line one at the Rupert facility is now producing four times the daily production volume of our Victoria facility. We commissioned Line one in April 2021 and began producing limited saleable products in May 2021 while testing seven SKUs of the popular The Very Good Butchers product lineup, which will initially be produced on Line one. Currently operating five days a week with three shifts per day, Line one will be producing an average of 13,000 pounds per day starting in late August.
Production volume is increasing week over week from continuous operational and process improvements in conjunction with increased production hours. We expect the ramp-up of capacity of line one to continue into the fall as we target 40,000 pounds per day on average in Q4 2021, gradually increasing to an average of 60,000 pounds per day in early Q1 2022. The second production line at the Rupert facility is planned to be commissioned in late Q4 2021, with testing and food production starting in early Q1 2022. Line two is expected to initially produce +6 SKUs of our newly announced gluten- and soy-free Butcher's Select a line of plant-based meat alternatives. Line two will also allow for expansion into the North American food service channel, an exciting new market that I will touch upon in a few minutes.
With both line one and two fully operational, the Rupert facility will be able to produce 37 million pounds of product on an annualized basis. We recently announced that food production will begin at our Patterson facility in California starting in September 2021 on commercial-graded kitchen equipment in order to fast-track the production of Taco Stuffer, one of Very Good's most in-demand SKUs, while the installation of the facility's first major production line is underway and targeted for completion before Q2 2022. Once commissioned, Patterson line one will produce The Very Good Butchers' various unique products, which have not yet been scaled, including our popular holiday roast, the Stuffed Beast, and our jackfruit-based ribs.
It will also have the capability to make the brand's original suite of products. The production of Taco Stuffer will also be transitioned to line one once commissioned, which is expected to produce an average of 27 million pounds of product per year when fully operational. The Patterson facility can accommodate up to four production lines, allowing for a potential capacity of up to 98.5 million pounds of product per year. The commissioning of production lines at both the Rupert and Patterson facilities is experiencing some challenges due to the pandemic. We are experiencing delays in the receipt of production equipment from Europe from the manufacturer and shipping setbacks. In both Vancouver and California, we are experiencing delays in hiring due to labor shortages as COVID-19 restrictions lighten and businesses open up once again.
We anticipate that these challenges will continue in the near term and potentially slow the targeted ramp-up plan to meet the fast-growing demand for our products in North America. We continue to see strong growth in e-commerce sales year-over-year as we work with new marketing firms to find creative ways to attract new customers to our platforms, increase conversion rates, and reduce customer acquisition costs, including partnering with social media influencers. So far, we have partnered with over 40 social media influencers who have 55 million followers combined across various platforms, including YouTube, Facebook, Instagram, and TikTok. To date, we have fulfilled 47,206 e-commerce orders, which is more than what we shipped in all of fiscal 2020. Since the privacy updates implemented by Apple in April and the changes Facebook made to their advertising tools shortly after, the data collection features used by advertisers have become less effective.
As a result, Very Good, along with other direct -to-consumer businesses, has been limited in the ways we can target consumers and measure the success of specific ad campaigns. Even with these rapidly shifting policies, we continue to steadily grow the e-commerce channel quarter-over-quarter in 2021. During the quarter, we announced the launch of two exciting e-commerce platforms, an Amazon U.S. storefront and a U.K. e-commerce website. Consumer demand for plant-based foods is growing at a rapid pace across the pond. Google Trends listed the U.K. as the number one growing country searching for veganism. A recent survey conducted by Finder shows that the number of vegans increased by 40% in 2020. Very Good's expansion into North American retail continues to be a key focus in our growth strategy.
During the second quarter, we entered into new partnerships that deepen our wholesale distribution within Canada and accelerate our retail reach into the U.S. In Canada, we entered into a distribution agreement with Horizon Grocery + Wellness, where the company signed on with Save-On-Foods, Canada's largest Western-based grocery retailer, to carry The Very Good Butchers suite of products in 184 of its retail stores across Canada earlier this month. In addition to our new broker arrangement with Green Spoon Sales, we entered into two new distribution agreements during the quarter with United Natural Foods, the largest publicly traded wholesale distributor of health and specialty food in North America, and KeHE Distributors, a top pure-play U.S. whole food distributor of natural, organic, specialty, and fresh food brands across North America.
Together, these two distribution partners represent over 50,000 food suppliers and distribute to more than 60,000 natural food stores, chains, and independent grocery stores throughout North America. During the quarter, we increased our points of distribution by 147% to 1,869 at the end of the quarter compared to the same period in the prior year. We just announced last week that Very Good is now in 754 retail outlets across North America, with more than 100 stores in the U.S. set to carry Very Good's suite of products under its core brand, The Very Good Butchers. During the second quarter, we also hit a major milestone in our growth strategy with our debut into the food service meal kit industry.
In June, we announced two collaborations, one with Vancouver-based homegrown meal kit company Fresh Prep, which is adding Very Good's innovative plant-based food products to its extensive menu of recipes and meal kits. The second arrangement is with Copper Branch, the world's largest plant-based restaurant franchise, with over 40 locations across North America. Copper Branch will make The Very Good Butchers' delicious and nutritious plant-based products available to its customers to purchase from branded in-store freezers in eight of Copper Branch's locations across Canada this summer. We also launched our new brand, The Very Good Cheese Co, and its lineup of five newly reintroduced plant-based cheese products during the quarter. This exciting new brand came to us from our acquisition of The Cultured Nut in February.
These Very Good Cheese Co. products were made available in the U.S. and Canada in June through our e-commerce platforms and will be available in retail stores in Q4 2021. Very Good also recently announced the launch of our gluten-free and soy-free Butcher's Select a product line of plant-based meats in the third quarter of 2021. The Butcher's Select product range is a premium line of extra -meaty artisanal meats made with real, minimally processed ingredients, offering up more than just taste. The new product line will diversify Very Good's portfolio of plant-based meat and position The Very Good Butchers brand in the alternative meat substitute category, which has been largely dominated by Beyond Meat and Impossible Foods. The products pack an extra meaty taste and texture and will initially be available through limited release on Very Good's e-commerce platform, with the retail rollout across North America to follow.
With more consumers interested in plant-based products due to a focus on health and sustainable habits, more than half of U.S. households are now purchasing plant-based foods. According to SPINS data released by The Good Food Institute and the Plant Based Foods Association in April, plant-based meat sales have outpaced conventional animal product sales for the third consecutive year. The Butcher's Select line will not only appeal to households interested in a more plant-based diet but also extend the company's consumer base to the estimated 30% of Americans who avoid gluten. With that, we'd like to turn the call over to our CFO, Kamini Hitkari, to review our financial results in more detail. Kamini, please go ahead.
Thank you, Mitchell, and good morning, everyone. In the second quarter of 2021, we achieved revenue of CAD 2.8 million, representing a 156% increase from revenue of CAD 1.1 million in the same period in fiscal 2020. The increase in revenue was driven by higher e-commerce and wholesale sales, resulting from the company's scaling of production and distribution to meet demand in both sales channels. Compared to the previous quarter- end, revenue increased 5% or CAD 138,000 for the three months ended June 30th, 2021, mostly due to higher wholesale revenue resulting from an increased number of points of distribution achieved during the quarter. Year-to-date revenue grew to CAD 5.4 million for the period ended June 30th, 2021, an increase of 280% or CAD 4 million compared to CAD 1.4 million for the period ended June 30th, 2020.
E-commerce revenue increased 161% to CAD 2.2 million in the second quarter of 2021, compared to CAD 846,000 in the same period of fiscal 2020, and remained relatively flat compared to the first quarter of 2021. E-commerce sales comprised 79% of total revenue, resulting from 24,000 orders in the second quarter of 2021, an increase of 114% or 13,000 orders from the same period in fiscal 2020. Year-to-date e-commerce orders fulfilled were 47,000 for the period ended June 30th, 2021, exceeding the 40,000 orders fulfilled in all of fiscal 2020. The increase in e-commerce orders was driven by the scaling of production and distribution to meet demand, and an increase in key marketing initiatives to drive higher sales volume in both Canada and the U.S.
Even with the changes previously highlighted to both Apple's and Facebook's privacy settings, we expect e-commerce sales to continue to be a significant component of the company's revenue during the year. Wholesale revenue increased 168% to CAD 455,000 in the second quarter of 2021, compared to CAD 170,000 in the same period of fiscal 2020, an increase 32% from the first quarter of 2021. Wholesale distribution points increased 147% to 1,869 at the end of the second quarter of 2021, compared to 757 distribution points in the same period of fiscal 2020, an increase 32% from the first quarter of 2021. We expect to be on the shelves of many more stores by the end of the year, more so in the first quarter of 2022 after major retailers' fall 2021 product category review periods. We continue to execute on our manufacturing strategy to increase our operational footprint.
During the second quarter of 2021, we sold 307,000 units of product, an increase of 132% when compared to the same period of fiscal 2020. Quarter-over-quarter, we sold 42,000 more units, resulting in a 15% increase. Adjusted gross profit was CAD 1.1 million, or 39% of revenue, in the second quarter of 2021, compared to an adjusted gross profit of CAD 469,000 or 43% of revenue, in the second quarter of 2020. The decrease in adjusted gross margin was primarily driven by the timing of certain procurement expenses recorded in the prior year. Adjusted gross profit was 39% of revenue in the second quarter of 2021, compared to 37% in the first quarter of 2021.
The improvement in adjusted gross margin was mainly due to increased sales volume, achieved through maximizing the production footprint at the Victoria facility, as average weekly production output increased 20% from 20,000 pounds per week to 24,000 pounds in May 2021. Adjusted general and administrative expense was CAD 2.2 million in the second quarter of 2021, compared to CAD 498,000 in the same period in fiscal 2020, and relatively unchanged from the first quarter of 2021. The increase in adjusted general and administrative expense was due to the company becoming public in June 2020 and the related expenses, as well as building out the team and functions to meet Very Good's strategic growth objectives.
Adjusted EBITDA was a loss of CAD 5.7 million in the second quarter of 2021, compared to a loss of CAD 1.2 million in the same period of fiscal 2020, and a loss of CAD 5.4 million in the first quarter of 2021. Adjusted EBITDA was impacted by an increase in fulfillment expense and marketing and investor relations expense. The increase in fulfillment expense directly correlates with the increase in revenue this quarter as we continue to scale manufacturing and distribution to meet demand. The increase in marketing investor relations expense is a result of our brand awareness efforts to increase e-commerce traffic to our website and conversion through digital marketing initiatives. The cost of effective digital marketing initiatives continues to increase with the lightening of COVID restrictions as more businesses come back online.
With respect to cash flow for the six months ended June 30th, 2021, net cash used in operating activities was CAD 14.1 million and in investing activities, CAD 8.3 million, offset by cash received from financing activities of CAD 3.2 million. The net cash used in investing activities was primarily used for capital expenditures and leasehold improvements for the commissioning of line one at the Rupert facility. In addition to cash paid for the acquisitions of The Cultured Nut and Lloyd-James , CAD 1.25 million. Cash received from financing activities was from the exercise of warrants and stock options during the quarter. As we continue to strengthen our operational and distribution capabilities to meet the strong demand for our product, both in North America and globally, we do anticipate this having a positive impact on our continued financial growth.
During the quarter, we also achieved a key milestone by entering into a CAD 70 million credit facility with Waygar Capital and Ninepoint Partners. This facility provides financial flexibility to support our growth and expansion initiatives and is a testament to our ability to access favorable financing while diversifying our capital structure. The credit facility consists of a CAD 20 million revolving line of credit and a CAD 50 million senior secured asset-backed term loan. All amounts drawn under the credit facility are subject to specific borrowing requirements and will pay an interest rate of 9.95% per annum and will be repaid in full upon maturity. The credit facility has a term of 24 months with an option to renew upon mutual consent for another 12 months. We also added strength to the balance sheet and closed an oversubscribed CAD 20.7 million bought -deal public offering in early July.
Proceeds from this will be used to start operations at the Patterson facility and to support wholesale expansion in the U.S., as well as international e-commerce launches. I'd like to turn the call back to Sabina for the Q&A section of this call. Thank you.
Thank you, Kamini. The first question we have today is, Is Very Good significantly increasing its production over the next two years? Are you seeing the demand to meet this production?
Good question. Since James and I founded Very Good a few years ago, one of our biggest issues has always been meeting the demand for our products. I still remember when we had to close the Victoria shop for a week after our grand opening in order to restock. Plant-based diets are no longer a trend and are now part of many consumers' mainstream diets. A recent study by Meticulous Research indicated that the plant-based food industry will grow to $74.2 billion globally by 2027. Our production expansion decisions were made as a result of research into the growth of the industry, in addition to feedback through discussions with major retailers. The significant increases in our production capacity and distribution ensure that we can meet this future demand.
Thanks, Mitchell. Our next question is, can you touch on the line one commissioning process at Rupert? Did you learn any lessons that will help make for a smoother process going forward?
Thank you for the question. We were very happy with the line one commissioning process, and it ramped up as we had planned. One thing that I wanted to touch on is the testing phase of our commissioning process. This is a crucial part as we need to make sure that we are always producing the high-quality products our consumers have come to expect from us. During this testing phase, saleable products are sometimes manufactured in limited quantities, as it was in Q2 2021. It is important to note that as we commission additional lines, we will continue to adhere to our testing process in order to iron out any issues and make sure we can manufacture high-quality, saleable products. We will be using the experience gained through the commissioning of the Rupert facility as a blueprint for the commissioning of the Patterson facility.
Thanks, Mitchell. Our next question is regarding revenue. Kamini, it's for you. When do you expect to see revenue increase on a quarter-to-quarter basis?
Thank you for the question. We are certainly moving in the right direction as we continue to build out our production capacity in order to meet the strong demand for our products. Like many other businesses, we are subject to the evolving impacts of the COVID-19 pandemic, and in this quarter, we experienced delays in the delivery of production equipment as well as a tightening of local labor markets, which made it more challenging to secure the production staff needed to ramp up operations. All of this has, at times, had a decelerating effect on our overall expedited ramp-up and slowed our ability to get product to the market.
We expect revenue to continue to increase each quarter as we find ourselves on the shelves of many more stores throughout North America, especially in the U.S., which we anticipate will be towards the end of the year and into the first quarter of 2022, fitting in with major retailers' product category review periods.
Thank you. The next question we have is regarding Very Good's e-commerce and retail channels. Where do you see the most room for growth, and what do you see as the optimal split between these two revenue streams?
That is a great question. E-commerce will always be an important platform for us, as it is a strategic tool that not only allows us to launch our new innovative products quickly into the market but also allows us to move into new geographical markets and enter into new retail partnerships, as we are able to raise brand awareness and showcase the demand for our products before we hit their shelves. Two excellent examples of this are the upcoming limited launch of our new Butcher's Select gluten-free and soy-free product line of plant-based meats on our North American e-commerce platforms before we roll it out into retail locations and our recent introduction of our products to U.K. consumers through our new U.K. e-commerce platform.
At the same time, we clearly see room for growth in the retail segment, specifically in the U.S., given the sheer size of its grocery market, which is estimated to be $875 billion, of which only 6%-7% represents online grocery shopping. It makes perfect sense that we are pursuing as much growth in this channel as possible. As we move forward, we see e-commerce revenue comprising roughly 80% of total revenue, estimated to fall to 15% in the next three years. Thank you.
Thank you, Kamini. I'd like to turn the call back over to Mitchell for concluding remarks.
Very Good has had a great year so far, and our incredible progress is made possible by our amazing team. I want to thank our employees for their hard work and dedication to making Very Good a leading plant-based food technology company. I would also like to thank our investors and consumers for their continued support. We are committed to continuing to bring you innovative, high -quality, nutritious, and delicious plant-based products. Thank you for attending today, and we look forward to having you on our third quarter financial results call in November.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.