When it comes to selling healthy fresh pet food to animal lovers, Freshpet has had some early success winning over dog owners. It still has to claw its way into the hearts of those that prefer cats.
Freshpet is saying it expects to sell a lot more of its freshly made, moist pet food to devoted animal lovers, and investors are buying into that story. The company’s stock jumped 34% on the first day of trading, recently trading above $20 per share.
“Pets are in about two thirds of all homes in this country,” Freshpet Chief Executive Richard Thompson told Fortune. “We think the lives of pets are well improved by taking preservatives out and sticking to fresh food.”
Founded in 2006, Freshpet sells refrigerated pet foods in company-owned refrigerators installed in 13,150 retail stores across North America. The company is angling for a slice of the $22.5 billion North American pet food industry, and has already established a pretty extensive retail presence with fridges at PetSmart (PETM), Petco, Wal-Mart (WMT) and other major big-box retailers. But Freshpet says it can eventually install 35,000 fridges across the country, and the current plan is to add about 2,000 per year.
Freshpet is still a relatively tiny player in the pet food aisle. It generated $63.2 million in sales in 2013, up 45% from the prior year.
One opportunity is to sell more of its food to cat lovers. Thompson said about 90% of the company’s products are consumed by dogs, with the rest sold to cats. But Americans own more cats than dogs: 95.6 million versus 83.3 million, according to 2012 estimates by the American Pet Products Association.
“We will work on the cat lovers of the next year or so,” Thompson said. Thompson knows a think or two about the cat pet foods business, as he was CEO of Meow Mix from 2002 to 2006.
A big component of Freshpet’s message to consumers is its focus on healthy ingredients, as it doesn’t use preservatives in the foods it produces. The Freshpet items have a roughly 20-week shelf life, while most dry pet foods can sit on shelves for years thanks to preservatives. Thompson said Freshpet is beloved by retailers, as its items are meant to be consumed within roughly 10 days of first use, and thus inspire repeat visits to stores.
“We bring more frequent traffic to the stores,” Thompson said. He said Freshpet also boosted sales for other pet items, like collars and treats.
The company is using the proceeds it generates from the IPO to install new refrigerators to stock its products in retail stores, as well as add to manufacturing.
