Freshpet, Inc.

02. February 2021 Innovative Companies
Pet eating foot. Dog and cat eats food from bowl

ALPORA Global Innovation 
January 2021 

Freshpet, Inc. is an American manufacturer of fresh and refrigerated pet foods distributed throughout North America. The company specializes in the production and distribution of pet food and pet treats for dogs and cats. The innovation focus is on sustainable supply and production chains. The company plans to further expand its production capacity in the future and has already converted the last of its four production lines from five-day to seven-day production last year.

Pet eating foot. Dog and cat eats food from bowl

Innovationfocus

The innovative business strategy is expected to support and expand Freshpet’s growth in international markets with a capital investment of $120 million. This allows the Freshpet Kitchens 2.0 production facility in Pennsylvania to utilize advanced automation more efficiently, improving quality and occupational safety and reducing costs. According to their latest UK initiative, the company also has the potential to expand its network in international markets. Incremental product innovations are equally planned in the pet food sector.

Freshpet’s mission is to improve the quality of life for pets by providing high quality food and doing the right thing for pets, people and the planet at every production step from the farm to the refrigerator. Recipes contain real as well as fresh farm-raised chicken, beef, or fish and various combinations of natural fruits and vegetables, without the use of preservatives, additives, or artificial ingredients. All products, including kitchens and refrigerators, are sold under the Freshpet brand name and are manufactured in the United States. In addition, the company offers fresh treats under the brand names Dognation and Dog Joy. The products are available in a variety of packaging shapes, including chubs, rolls, plastic tubs, and bags.

FINANCIAL REPORT

Preliminary Q4 2020 Financial Results

Freshpet, Inc. continues to see strong demand in the fourth quarter of 2020. Despite challenges of COVID-related work interruptions, the impact of extreme weather conditions on the distribution network, and limited sales opportunities due to supply bottlenecks, the company is pleased with its preliminary fourth-quarter results.

The preliminary net sales for the fourth quarter of 2020 is expected to be $84.5 million which corresponds to a growth of 29% compared to the same period of the previous year, although the December snowstorm affected the final net sales results according to the forecast. Particularly noteworthy in Q4 is the significant year-on-year increase in e-commerce net sales of +192%. The company also updated its forecast for the adjusted EBITDA to be approximately $12 million and the adjusted gross margin is expected to be 46% for the fourth quarter as it was impacted by production shortfalls due to quarantine and higher beef costs.

Preliminary Fiscal Year 2020 Financial Results

For the financial year 2020, the company expects net sales of approximately $318.8 million and an adjusted EBITDA of approximately $46 million. This corresponds to a net sales growth of +30% year-on-year, and the adjusted EBITDA achieved year-on-year growth of over 58%. The increasing growth rate of net sales continues in 2020.

The company sees growth potential in purchase rates and household penetration of pet owners within the United States. Demographic trends are trending equally in the company’s favor with regard to U.S. dog households. The purchase rate realized by Freshpet is stronger than expected and has been characterized by permanent growth over the last five years. Rising purchase rates are intensified by very high consumer and product satisfaction. Their household penetration grew more than 20% in the last two years and more than half of the new customers have now become regulars. As a result, the company is considering additional investment in capacity expansion to meet growing demand.

Every month ALPORA presents an ALPORA Top Innovator for each innovation fund. For each company, a detailed innovation analysis was carried out based on the ALPORA-Methods and the resulting innovation efficiency score was determined.