Freshpet, Inc. · NASDAQ:FRPT
Freshpet — ICR Conference 2020
61 slides from Freshpet's conference presentation, Jan 13, 2020
Slide 1: ICR Conference January 13, 2020
Exhibit 99.1 ICR Conference January 13, 2020
Slide 2: Freshpet Management Team
FRESHPET MANAGEMENT TEAM HEATHER POMERANTZ Co-Founder, COO BILLY CYR DICK KASSAR SCOTT MORRIS CFO Vice-Chairman on 10/1/20 CEO EVP Finance CFO on 10/1/20
Slide 3: Slide 3
Slide 4: Safe Harbor Forward Looking Statements
Safe Harbor Forward Looking Statements This presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the Company’s results may differ materially from those expressed or imp
Slide 5: Freshpet has the potential to change the way people feed their pets
WE FUNDAMENTALLY BELIEVE THAT FRESHPET HAS THE POTENTIAL TO CHANGE THE WAY PEOPLE FEED THEIR PETS . . . FOREVER
Slide 6: Freshpet at the Intersection of Two Macro-Trends in CPG
Freshpet Lives at the Intersection of Two Very Powerful Macro-Trends in CPG Humanization of Pets Fresh, Wholesome, All-Natural Foods
Slide 7: Until Freshpet, a dog's choices were really limited
Until Freshpet, a dog’s choices were really limited Dry Kibble Canned Mystery Meat
Slide 8: A totally different approach to nourishing pets
A totally different approach to nourishing pets
Slide 9: Delivering a noticeable impact on pet's wellbeing
Delivering a noticeable impact on pet’s wellbeing 82% of Consumers Report Visible Health Difference Source: Freshpet Visible Difference Study 2018 n= 202
Slide 10: Creating very high satisfaction
Even my dad knows that Freshpet is really good Creating very high satisfaction Source: Freshpet Quality and Satisfaction Study, July 2018 % Extremely/Very Satisfied on Product Satisfaction % Agree Completely/Somewhat on Good Value
Slide 11: We operate differently
pets. The power of fresh natural & simple foods Less processed Acts of kindness people. Our team Our partners Our families planet. Renewable energy Carbon footprint offset Conservation – land fill free Sustainable practices WE OPERATE DIFFERENTLY Delighting consumers with fresh food & our company id
Slide 12: A difficult business to replicate
A difficult business to replicate High Brand Loyalty Alignment with deep pet parent emotional motivations Differentiated Innovative forms, technologies, and appearance Manufacturing Proprietary technology, processes, and infrastructure Freshpet Fridge Branded, company-owned real estate Supply Chain
Slide 13: Goal: $300 million in net sales as soon as 2020
Goal: $300 million in net sales as soon as 2020 2017: Launched Feed the Growth
Slide 14: Media investment re-accelerated growth
Media investment re-accelerated growth +18% +27% +26% +14% 23.7% CAGR
Slide 15: HH penetration gains accelerate
HH penetration gains accelerate . . . but are still a small share of the pet universe +6% +16% +14% +22% Source: Nielsen HH Panel data ending September 2019
Slide 16: Buying rate continues to grow
Despite rapid influx of new buyers, buying rate continues to grow Total Freshpet Buying Rate +9% +3% +11% +4%
Slide 17: Feed the Growth Progress: expanding consumer franchise
“Feed the Growth” Progress Expanding consumer franchise . . . that is increasingly loyal Source: Nielsen HH Panel and internal company data 2016 Today Growth Awareness 35% 46% +31% Penetration 1.54% 2.45% +59% Buying Rate $81.73 $105.19 +29% Repeat Rate 67% 70% +300 bps
Slide 18: Inflection point: velocity gains become biggest driver of growth
Inflection point: velocity gains become biggest driver of growth Source: Nielsen Mega-Channel Data through 12/28/19
Slide 19: Created growth and scale for retailers
25.3% CAGR since 2016 Created growth and scale for retailers Source: Nielsen Mega Channel (xAOC + Pet) Latest 52wks end 12-28-19 : Fresh Only 2016 Today 52wk Dollars (Nielsen) $172.7M $339.7M ACV Adj. Share Dog Food 4.5 6.9 Avg. Dollars / Store / Week $244 $365 Average Unit Price $7.45 $8.36
Slide 20: Growing distribution and velocity
Growing distribution and velocity . . . with significant room to grow Source: Nielsen Mega Channel (xAOC + Pet) Latest 52wks end 12-28-19 and internal company data 2016 Today Growth Store Count 16,609 21,570 +4,961 % ACV Distribution 41 52.3 +28% Total Distribution Points 517 734 +42% Velocity ($/MM
Slide 21: Media investments driving distribution gains in Canada and UK
Media investments are beginning to drive distribution gains in Canada and UK .. ~7% ACV ~23% ACV ~1000 stores ~400 stores
Slide 22: Feed the Growth Progress: growing into our scale
“Feed the Growth” Progress Growing into our scale . . . and reinvesting for growth 2016 Today* Growth Net Sales $130M >$244M +88% Adj. SG&A (excl. media) 31.2% 25.3% +590 bps Media Spending $8M $29M +263% Media Spending % of Sales 6.3% 11.9% -560 bps *2019 Guidance
Slide 23: Scale is beginning to turn into profits
Scale is beginning to turn into profits Feed the Growth progress Freshpet Financial Performance 2017 2018 2019 Guidance* Net Sales ($ millions) $152.4 $193.2 >$244 vs YA +17% +27% >+26% Adj. EBITDA ($ millions) $17.6 $20.3 >$29 vs YA -1% +15% >+43% *Excluding incremental investments in Canada/UK and
Slide 24: Kitchens 2.0 to open in Q3 2020
Kitchens 2.0 to open in Q3 2020
Slide 25: Rapid growth will require incremental capacity in 2022
Rapid growth will require incremental capacity in 2022 Current Kitchens Kitchens 2.0 Midwest Expansion
Slide 26: Strong distribution gains continued in Q4
Strong distribution gains continued in Q4 and will set us up for a good start in 2020 ACV distribution grew +6.7 pts. vs YA to 52.3% Store count grew +791 stores in Q4 delivering 2,071 net new stores in 2019 vs. goal of 1500-1600 Incremental 249 upgrades and +29 double chillers in Q4 2019 Update: Di
Slide 27: 2019 Update: Consumption
2019 Update: Consumption Continued strong consumption growth driven by both velocity and distribution gains
Slide 28: Small Dog success accelerated mix shift towards bags
Success of Freshpet Small Dog has accelerated a mix shift towards bags Creates need for incremental bag capacity and the opportunity for specialized production lines Delivers lower % adj. gross margin but higher $ adj. gross margin due to higher selling price/lb. 2019 Update: Mix Shift Small Dog Imp
Slide 29: Installing an incremental bag line in Q1 2020
Installing an incremental bag line in Q1 2020 to enable strong growth in 2020
Slide 30: 2019 Update: Reiterate Guidance
2019 Update: Reiterate Guidance Expect Net Sales consistent with guidance of >$244 million Recall, Q3 net sales were aided by 100-300 bps to catch-up on shipments from Q2 so Q4 will be comparable to Q3 and up >25% vs. YA Expect Adj. EBITDA consistent with guidance of >$29 million (+43% vs YA) Freshp
Slide 31: 2019 Update: Capacity Expansion
2019 Update: Capacity Expansion Kitchens 2.0 remains on track Expect to be under roof in late January/early February New specialized small-piece size bag line is on track to start-up this month and ship product next month Long-term, we expect this to create higher throughput on bags lines through sp
Slide 32: 2020 Expectations: Beginning of 2025 Plan
2020 Expectations: Beginning of 2025 Plan Freshpet’s long-term growth opportunity is significantly bigger than our 2016 projections suggested Once-in-a-lifetime opportunity to change the way we feed our pets and we will pursue it aggressively 2016 market potential was estimated at 7.5 million Prime
Slide 33: 2020 Expectations: Investing to capture long-term opportunity
2020 Expectations: Beginning of 2025 Plan In 2020, we will invest to capture the long-term growth opportunity, including: US Advertising Investment: Modestly higher than previously projected US advertising spending in 2020 to drive growth Will end 2020 with an accelerating growth rate Long term adve
Slide 34: 2020 Expectations: Adjusted gross margin
2020 Expectations: Beginning of 2025 Plan Near term adjusted gross margin will be a bit lower than previously projected due to: Mix shift towards bags Rapid growth of Small Dog product creates mix shift and reduces gross margin % but improves gross margin $ per pound Sub-scale production on speciali
Slide 35: 2020 Expectations: Significant Adj. EBITDA growth
2020 Expectations: Beginning of 2025 Plan We expect significant Adj. EBITDA growth in 2020 and beyond EBITDA growth significantly in excess of net sales growth in 2020 Incremental near-term investments/expenses (i.e. advertising, sub-scale manuf., systems, etc…) to support accelerated long-term grow
Slide 36: Bringing the power of fresh food to pets
bringing the power of fresh food to pets
Slide 37: ICR Appendix — January 2020
fréshpet ICR Appendix — January 2020 mh thi bringing the power of fvesh food to pets r Freshpet dit. : | !
Slide 38: 2019 Results: Continued strong top line results
2019 Results: Continued strong top line results driving bottom line gains Freshpet Q3 Financial Results Q3 2018 Q3 2019 Net Sales ($ millions) $50.8 $65.3 vs YA +27% +28% Adj. EBITDA ($ millions) $6.7 $12.0 vs YA +20% +78% Freshpet YTD Financial Results (Sept 30) 2018 2019 Net Sales ($ millions) $14
Slide 39: Strong growth across all classes of trade
Nielsen measured $ consumption for 13 weeks ending 12/28/19 and 12/29/18 compared to the same period prior year Strong growth across all classes of trade Freshpet Consumption Growth vs YA Q4 2018 Q4 2019 Mega-Channel +29% +27% XAOC +32% +31% Food +39% +34% Big Box Pet +20% +9%
Slide 40: Grow with winning players in fresh e-commerce
Strategy: Grow with winning players in fresh e-commerce e-commerce sales grew +93% vs. YA to 2.5% of sales in Q3 2019 >85% of e-commerce sales utilize Freshpet Fridge Continued strong growth in fresh e-commerce Curbside Online Fresh Retail Home Delivery
Slide 41: 21% growth in total Freshpet HH penetration
21% growth in total Freshpet HH penetration vs. YA; 4% increase in buying rate Total Freshpet Buying Rate, Penetration and Repeat Rate Penetration 1.47 1.54 1.77 2.02 2.45 Repeat 67 68 69 70 70 Nielsen HH Panel Data for 52 Week Periods ending September 2019; Buying Rate is internal calculation based
Slide 42: 31% growth in Core Dog HH penetration
31% growth in Core Dog HH penetration vs YA; flat buying rate Penetration 0.93 1.01 1.15 1.44 1.89 Repeat 69 70 71 71 71 Nielsen HH Panel Data for 52 Week Periods ending September 2019; Buying Rate is internal calculation based on company sales data
Slide 43: "Fresh First" is driving strong distribution gains
“Fresh First” is driving strong distribution gains
Slide 44: Adjusted gross margin bounced back from Q2 dip
Adjusted gross margin bounced back from Q2 dip and on-track for 50% goal in 2019 Freshpet Q3 Adjusted Gross Margin Progress Q3 2018 Q3 2019 Adj. Gross Margin 49.7% 49.8% Freshpet Q3 Adjusted Gross Margin Progress Q1 2019 Q2 2019 Q3 2019 YTD 2019 Adj. Gross Margin 50.4% 48.5% 49.8% 49.5%
Slide 45: Delivering significant leverage from scale in SG&A
Delivering significant leverage from scale in SG&A Freshpet Q3 SG&A Leverage Q3 2018 Q3 2019 Y-o-Y Change Adj. SG&A % Excluding Media 27.8% 24.6% +320 bps Media % 8.7% 6.8% +190 bps Total Adj. SG&A % 36.5% 31.4% +510 bps Freshpet YTD SG&A Leverage (Sept 30) YTD 2018 Q3 YTD 2019 Q3 Y-o-Y Change Adj.
Slide 46: Cost to Feed – Grocery & Mass
Cost to Feed – Grocery & Mass HIGHLY CONFIDENTIAL
Slide 47: Cost to Feed – Pet Specialty
Cost to Feed – Pet Specialty HIGHLY CONFIDENTIAL
Slide 48: High Quality Products at Accessible Price Points
High Quality Products at Accessible Price Points HIGHLY CONFIDENTIAL $19.99 30 lbs. $9.29 30 lbs. $9.29 30 lbs. $10.79 30 lbs. $10.99 30 lbs. $12.99 30 lbs. Approximate daily cost to feed for medium-sized dog $4.00 $2.40 $1.94 $1.35 $0.69 Medium-sized dog assumed to be 35 pounds. Price/day based on
Slide 49: Very little price sensitivity
Very little price sensitivity Out-of-stocks 14% Retail Price Increase
Slide 50: Media investment drives HH penetration gains
Media investment drives HH penetration gains
Slide 51: Focused innovation drives HH penetration
Focused innovation drives HH penetration *HH’s may purchase both new and old items. Total exceeds net HH penetration. Source: Nielsen HH Panel
Slide 52: Focused innovation adds unique users
Focused innovation adds unique users Source: Nielsen HH Panel
Slide 53: Premium innovation helps drive buying rate
Premium innovation helps drive buying rate Freshpet Core Dog Product Mix Source: Nielsen XAOC Data 52 weeks through 11/2/19; Freshpet Select only
Slide 54: How We Service Our Customers
Produced in Freshpet Kitchens Shipped to Third Party Warehouse Delivered to Pet Channel Distributor Transported via Third Party Carrier DSD Delivery to Pet Specialty Store Delivered to Grocery, Mass and Club Stores Delivered to Customer’s Warehouse How We Service Our Customers
Slide 55: Capturing significant benefits of scale and velocity
Capturing significant benefits of scale and velocity Fixed Cost Pick-Up Manuf. overhead absorption G&A overhead absorption Logistics More cases per pallet More pallets per order/full trucks More straight pallets Ultimately, fewer miles per order Retail Presence Lower % sales to service fridges Highe
Slide 56: Reasons to start buying Freshpet
Reasons to start buying Freshpet Source: 2019 A&U, Top 10 reasons, users could select more than one, New Users = 1st purchases in the past year
Slide 57: Barriers to purchasing Freshpet
Source: 2016 FP Brand Tracker, 2016 FP A&U, TTL Aware Non Users/Prime Prospects Main Reason Not Purchasing, Shop-A-longs, n=202 Barriers to purchasing Freshpet (among prime prospects) 43% Aided Awareness Making the Strange, Familiar It’s freshER Roll looks like a Sausage/”Gross Factor” ~40% Content
Slide 58: Freshpet pet parent segments
Visitors (Use Occasionally) 40% of FP Buyers 15% of FP $ Loyal (Use Exclusively or Most Often) 31% of FP Buyers 53% of FP $ Freshpet pet parent segments Source: Nielsen 2017 NLR Custom Survey, 2016 A&U, Nielsen Demos 2017, 2018 Mini A&U, FP Spend: $167 FP Spend: $107 FP Spend: $37
Slide 59: Encouraging franchise longevity
Encouraging franchise longevity 1-4 yrs old 6-11 mos under 6 mos 5-10 yrs old Source: FP Panel, FP134, FP Users,, n=424, APPA data
Slide 60: Encouraging franchise longevity
Encouraging franchise longevity Freshpet Number of Dogs in HH Freshpet Age of Dogs in HH Source: FP Panel, FP134, FP Users,, n=424, APPA data
Slide 61: Freshpet feeding behavior by size of dog
Freshpet feeding behavior by size of dog Source: FP Panel, FP088, n=123 Single Dog HHs, FP Regular Users