Freshpet, Inc. · NASDAQ:FRPT
Freshpet — Investor Presentation (January 2019)
49 slides from Freshpet's investor presentation, Jan 14, 2019
Slide 1: Investor Presentation: January 2019
Investor Presentation:January 2019 Exhibit 99.1
Slide 2: 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 3: 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 4: Intersection of Two Very Powerful 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 5: Fresh ingredients and fresh food
We start with FRESH ingredients & finish with FRESH food. No preservatives, no additives...only the WHOLE NURISHMENT pets need.
Slide 6: Competitive advantages of Freshpet
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 Only national refrigerated pet foo
Slide 7: We Operate Differently
We Operate Differently Delighting consumers with fresh food & our company ideology Environmentally Focused Employee Engagement Community & Consumer Engagement
Slide 8: In 2017, we launched our new strategy
In 2017, we launched our new strategy
Slide 9: Growth goal: $300 million net sales as soon as 2020
HIGHLY CONFIDENTIAL Growth Goal:$300 million net sales as soon as 2020 Future Economic Model Projected FY 2016 2020 Growth Rate 15% 15-20% Stores 16,609 23,000 ACV % 40.4 >50 Adj. Gross Margin 50.9% 52% Adj. EBITDA Margin 13% 20% Media Investment ~6% of sales ~9% of sales Advertising Payback 1.5 yrs
Slide 10: Accelerated growth in mega-channel
Accelerated growth in mega-channel 14.8 12.1 13.3 15.3 17.8 21.8 21.6 23.0 27.7 25.0 30.8 29.3 12.0 7.4 8.2 8.0 7.3 5.9 6.3 6.5 6.7 7.4 6.8 6.5 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 JAS 18 - W/E OND 18 - W/E 09/29/1812/29/18 JFM 16 - W/E AMJ 16 - W/E JAS 16 - W/E OND 16 - W/E JFM 17 - W/E AMJ 17 - W
Slide 11: Steady distribution growth and accelerating velocity
Steady distribution growth & accelerating velocity 15% 15% 14% 9% 7% 8% 8% 6% 6% 6% 6% 7% 7% 7% 6% 4% 2% 3% 3% 6% 6% 11% 15% 12% 15% 16% 22% 21% 19% 0% 5% 10% 15% 20% 25% Freshpet Distribution and Velocity Progress (Growth vs. YA) 0% 4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4 W/E4
Slide 12: 2018 Key Developments
freshpet 2018 Key Developments
Slide 13: Expect to deliver our 2018 guidance
Expect to deliver our 2018 guidance 2017 Actuals 2018 Guidance Change vs. YA Net Sales ($ millions) $152.4 >$190 >25% Adjusted EBITDA ($ millions) $17.6 >$20.0 >14%
Slide 14: Advertising drove penetration gains which drove growth
Advertising drove penetration gains which drove growth Nielsen HH Panel date for Freshpet Core Dog (Rolls, Roasted Meals and Fresh from the Kitchen) – Rolling 52 week penetration data $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 1 1.1 1.05 1.15 1.2 1.25 1.35
Slide 15: Innovation drove revenue but margin mix impact
Highly successful innovation drove revenue but margin % mix Since 2016, mix has hurt core gross margin by >120 bps. Will be addressed in 2019. 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 14,000,000 16,000,000 J F M 1 4 - W / E 0 4 / 0 5 / 1 4 A M J 1 4 - W / E 0 7 / 0 5 / 1 4 J A
Slide 16: Growing pains: increased staffing ahead of demand
$150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000 $35,000,000 $37,000,000 $39,000,000 $41,000,000 $43,000,000 $45,000,000 $47,000,000 $49,000,000 $51,000,000 $53,000,000 Q1 Q2 Q3 Q4 Labor Productivity Revenue Produced $Revenue Per FTE Growing pains:Increased staffing ahead of d
Slide 17: Encouraging progress in Canada and the UK
UK Advertising Test Results WeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeekWeek 2122232425262728293031323334353637383940414243 FP Merch & TV StoresTV OnlyAll Other Tesco Encouraging progress in Canada and the UK Advertising Test On-track to become a meaningfu
Slide 18: E-commerce strategy showing significant upside potential
E-commerce strategy showing significant upside potential 2016 2017 2018 2019P 2020P Freshpet E-Com Sales E-commerce Strategy: Grow with winning fresh players Doubled e-commerce sales to 1.5% of net sales in FY18 Q3 vs. FY17 Q3 >70% of e-commerce sales utilize Freshpet Fridges
Slide 19: Dig Deeper 2019
fréshpet DIG DEEPER 2019
Slide 20: Freshpet 2019 growth priorities
Freshpet 2019 growth priorities Expand the Freshpet consumer franchise Increase HH penetration Expand buying rate Strengthen Freshpet’s retail presence Increase ACV and TDP’s Upgrade Fridges Install 2nd Fridges Strengthen Gross Margin/Adjusted EBITDA Margin Pricing Product Innovation Efficiency gain
Slide 21: Expand the Freshpet consumer franchise
Expand the Freshpet consumer franchise Increase advertising $$ investment vs. 2018 (same % of sales as 2018) More weeks Higher media weights
Slide 22: Expand Freshpet's retail presence
Expand Freshpet’s retail presence Strong velocity growth is driving increased retailer interest >20% velocity growth at many top retailers (avg. 17% in XAOC) Fastest growing pet food brand in many top retailers High productivity per square/linear foot vs. category average Double digit market shares
Slide 23: With aspirations to change the category forever
With aspirations to change the category forever Good Better Best
Slide 24: Strengthen gross margin/adjusted EBITDA margin
Strengthen gross margin/adjusted EBITDA margin Pricing Targeted bag items Increase margins on lower margin items Improve mix Innovation Increase appeal of rolls Higher margin bag items Improve mix COGS Increase yield/throughput Grow into staffing Break ground on Kitchens 2.0 SG&A Scale benefits in f
Slide 25: Continue measured development in Canada & UK
Continue measured development in Canada & UK
Slide 26: Driving net sales towards $500+ million and beyond
0.00% 0.50% 1.50% 1.00% 2.00% 2.50% 3.00% 4.00% 3.50% 4.50% 5.00% $- $200.0 $400.0 $600.0 $800.0 $1,000.0 $1,200.0 2016 2019 2020 2025 Freshpet Growth Potential 20172018 Media Spending ($ millions) Buying Rate 20212022 Revenue ($ million) 20232024 Core Dog HH Penetration Driving net sales towards $5
Slide 27: Delighting pet parents, pets, shareholders and employees
Delighting pet parents, pets, shareholders and employees . . .
Slide 28: Appendix
Freshpet eS Appendix PUG OFF, PROPYLENE 4 GLYCOL y 4 »
Slide 29: Consumption, Distribution and Penetration Data
Consumption, Distribution and Penetration Data
Slide 30: Growing faster than the category in all classes of trade
Growing 25 pts. faster than the category in all classes of trade % Change vs YA by Class of Trade Nielsen: Freshpet RFG $ Latest 4 Week Data as of 10.6.18 JFM 18 AMJ 18 JAS 18 OND 18 $ % Chg YA Total xAOC+Pet+WFM 25.0 27.7 30.8 29.3 Total US xAOC 27.6 29.0 32.7 31.9 Total US Food 32.1 32.6 37.5 38.8
Slide 31: Growing distribution reach (ACV) and depth (TDP)
Growing distribution reach (ACV) and depth (TDP) with significant room to grow Nielsen Mega-Channel % ACV for 13 week periods 4/5/14 through 12/29/18 Nielsen Mega-Channel TDP for 13 week periods 4/5/14 through 12/29/18 Freshpet % ACV Trend 50.0 45.0 40.0 35.0 30.0 25.0 20.0 Freshpet Total Distributi
Slide 32: Strong velocity growth regardless of fridge vintage
Strong velocity growth regardless of how long the fridge has been in place 18.0% 17.8% 20.1% 28.2% 31.5% 2018 Same Store Sales Growth by Vintage Representative Customer Original2013201420152016 Y T D % C H G 19.4% 21.5% 21.6% 22.4% 24.1% 23.9% 30.8% 2018 Same Store Sales Growth by Vintage Representa
Slide 33: Increased penetration and buying rate
Increased penetration & buying rate Source: TTL FP RFG, 52 weeks ending 10/6/18, Nielsen HH Panel, Internal Buy Rate Calculation, Repeat NBD-Adj Nielsen HH Panel $62.86 $81.73 $88.78 $91.39 $101.36 52 W/E 10/11/14 52 W/E 10/10/15 52 W/E 10/07/17 52 W/E 10/06/18 Total Freshpet Buying Rate, Penetratio
Slide 34: Adding new buyers who behave like previous buyers
Adding new buyers who behave like previous buyers $28.20 $74.48 New in 2016 Retained into 2017 $31.75 $76.64 New in MY 2017 Retained into MY 2018 New User Buying Rate: Freshpet Core Dog MY= 52 weeks ending June $29.13 $86.33 New in 2015 Retained into 2016 Nielsen HH Panel date for Freshpet Core Dog
Slide 35: Consumer Insights
Freshpet Consumer Insights RESCUE ME FROM PROPYLENE GLYCOL ry
Slide 36: Reasons to start buying Freshpet
Copyright © 2017 The Nielsen Company (US), LLC. Confidential and proprietary. Do not distribute. 39 31 28 25 43 27 22 22 21 22 21 27 21 More like real food Wanted to give my dog higher quality nutrition Healthier Made with the freshest ingredients Dog was a picky eater Wanted to give dog something s
Slide 37: Barriers to purchasing Freshpet
AWARENESS FP PROPOSITION COMPLACENCY INCONVIENENT AVAILABILITY PRICE/VALUE 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, F
Slide 38: Freshpet pet parent segments
Visitors (Use Occasionally) Loyal (Use Exclusively or Most Often) Freshpet pet parent segments Source: Nielsen 2017 NLR Custom Survey, 2016 A&U, Nielsen Demos 2017, 2018 Mini A&U, 31% of FP Buyers 53% of FP $ FP Spend: $167 40% of FP Buyers 15% of FP $ FP Spend: $37 Mixers (Use FP Regularly, but Use
Slide 39: Encouraging franchise longevity
Source: Visible Difference Survey, September 2018; 2016 FP A&U, green highlight notes statistical difference at least at 80% confidence level Encouraging franchise longevity 1 Dog, 51% 2+ Dogs, 49% Freshpet Number of Dogs in HH Dog Age 10% 11+ yrs old 62% 1-4 yrs old 14% 6-11 mos 5% under 6 mos 36%
Slide 40: Freshpet feeding behavior by size of dog
79% 61% 67% 38% 21% 39% 33% 63% Less than 1010-24 pounds 25-50 pounds pounds Over 50 pounds Freshpet: Meal vs Mixer (1 Dog HHs) As the MealAs a Mixer 71% 36% 31% 12% 29% 64% 69% 88% Less than 10 pounds 10-24 pounds25-50 pounds Over 50 pounds FreshPet Loyalty ExclusiveRegular Freshpet feeding behavio
Slide 41: Pet parents notice a visible difference
Freshpet Pet Parents are significantly more likely to have experienced a visible difference in their dog(s) Freshpet Dog Food Feeders Competitive Dog Food Feeders % % Yes 83 62 No 17 38 Source: Visible Difference Study, Sept 2018. green highlight notes statistical difference at 95% confidence level
Slide 42: Growth Potential
Freshpet “TOCOPHEROLS Growth Potential MAKE MY HAIR STAND ON END. ’
Slide 43: Just scratching the surface of HH penetration potential
Just scratching the surface of HH penetration potential Prime Prospects With Top 2 Box Purchase Interest in Freshpet Concept PP’s with Positive Interest (53%) By 2025, there will be 7.5 million HH’s who have expressed top 2 box purchase interest in the Freshpet idea – and we have reached <2 million
Slide 44: Pricing Data
Fréshpet (f Pricing Data
Slide 45: Grocery and mass select cost to feed a 30lb dog
$3.80 $3.30 $2.40 $2.40 $2.14 $1.92 $1.77 $1.73 $1.62 $1.55 $1.28 $0.61 $0.61 $0.49 $- $1.00 $2.00 $3.00 $4.00 $8.00 $7.47 $7.05 $7.00 $6.00 $5.31 $5.00 Grocery and Mass Select is middle of the pack on cost to feed Cost to Feed a 30lb Dog Daily
Slide 46: Pet specialty cost to feed a 30lb dog
$4.50 $4.44 $4.37 $4.00 $3.80 $3.77 $3.75 $3.26 $3.09 $2.81 $2.50 $2.42 $2.12 $2.00 $1.00 $- $3.00 $4.00 Pet Specialty Vital is an economical choice in Pet Cost to Feed a 30lb Dog Daily Title $8.00 $7.47 $7.00 $6.48 $6.00 $5.50 $5.00
Slide 47: Business Model
Freshpet Business Model RESCUE ME FROM PROPYLENE GLYCOL ry
Slide 48: How We Service Our Customers
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
Slide 49: 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