- Freshpet refrigerated dog food `tastes just like Thanksgiving'
- Premium dog-food sales soar 45% in six years to $10.5 billion
Richard Thompson cuts into a tube of Chunky Chicken and Turkey Recipe, just off the manufacturing line. The chief executive officer of a small gourmet-food manufacturer is obsessed about the quality of his products, so he uses only fresh ingredients, eschews preservatives and limits the time meals sit on shelves to make sure they’re eaten while still exploding with flavor.
His manufacturing chief, Michael Hieger, picks up a slice and pops it into his mouth to prove just how delectable it can be. Says Hieger: “Tastes just like Thanksgiving.”
We’re talking dog food, of course. The impromptu tasting occurs on a tour of the Freshpet Inc. factory in Bethlehem, Pennsylvania, which cranks out the only industrial refrigerated pet food on the market. The company is among a group of fast-growing innovators in the $23.7 billion pet-food industry that is winning the hearts -- and opening the wallets -- of dog and cat owners with healthy chow you’d almost believe is as good as what you put on your dining-room table.
“This is the next level of how people are going to feed their pets,” Thompson says.
Premium dog food is nothing new. Companies have been blending lamb and salmon into their kibble and offering organic grain-free food for years. But now traditional pet-food makers are stepping up their marketing game in the face of competition from upstarts like Freshpet and Blue Buffalo Co. as the healthy and fresh movement transitions from human to pet victuals.
Colgate-Palmolive Co. has dog food to help your pooch lose weight. Nestle SA’s Purina has a website where pet owners can customize special blends because “the best nutrition is personalized,” according to the site. Mars Petcare, the global leader in pet-food sales, is tapping into the farm-to-table trend with its Nutro Farm’s Harvest line, made with blueberries and cranberries that are “harvested at just the right time and freeze dried to lock in the nutrients.”
Mars’ Cesar Home Delights line sells lasagna and beef stroganoff for dogs with the tag line “he’ll have what you’re having.” And Milo’s Kitchen, part of J. M. Smucker Co.’s $5.8 billion acquisition of Big Heart Pet Brands earlier this year, sells duck jerky and grilled beef burger dog treats made without artificial flavors and colors.
“They’re constantly trying to come up with that latest innovation that pet owners have to have,” said George Puro, president of the Puro Research Group.
The eat-like-your-owner strategy appears to be working. Sales of premium dog food have surged 45 percent to $10.5 billion in the U.S. since 2009 and now account for more than half of the market. Blue Buffalo, one of the first to sell kibble and canned food that mixes whole grains, fruits and vegetables with Rover’s lamb and chicken, went public this summer, and analysts expect its sales to top $1 billion this year.
The big companies are fighting back with innovations and acquisitions. In July, Purina bought Merrick Pet Care, the first certified organic producer of dry and wet dog food. The purchase was announced a few months after Merrick introduced its Backcountry line, which includes recipes such as Game Bird and Pacific Catch.
There’s even a market for senior dogs. Purina has been pushing its Bright Minds, a recipe made with medium-chain triglycerides, a type of fat sourced from coconut oil that the company says is easier for older dogs to metabolize, leaving more energy for Fido’s game of fetch.
Freshpet is breaking into new territory with its refrigerated dog meals. All of Freshpet’s products are sold in their own branded refrigerated display cases inside nearly 15,000 stores, including some Wal-Marts, Targets and Whole Foods Markets.
Its high-end Vital Raw line taps into the popular industry trend of Paleo Diets for pets: Feed your dog what his wolf ancestors were eating in the wild a few hundred years ago and your pooch will be a whole lot healthier. The meals include raw chicken and beef mixed with natural probiotics and ingredients such as kale, spinach and sweet potatoes. They’re grain-free, the better to “mimic the ancestral eating habits of dogs,” according to the company.
Double the Cost
Feeding your dog Freshpet, which smells more like people food than odoriferous canned dog food, can set you back more than double the cost of the lower-priced canned stuff. Yet sales of the gourmet chow have climbed 37 percent, to more than $103 million, in the last year, according to researcher IRI. That’s still just over one percent of the premium pet-food market, and analysts expect the company, which went public last year, to post its fifth straight loss this year.
Using fresh chicken and beef is expensive, and Wall Street remains skeptical of the company’s prospects. Freshpet, priced at $15 at the time of its IPO, has lost more than half of its value this year and more than 50 percent of its float is held by short sellers who are betting the stock will fall, according to data compiled by Bloomberg. The shares slumped 25 percent Thursday to $6.28 after the company reported a wider-than-expected loss for the third quarter.
Freshpet’s Thompson says the company will turn a profit in 2016. The way he sees it, there’s a compelling reason the brand will succeed: “If your family is into health and wellness, and you treat your pet like family: bingo.”