Tap into a growing consumer market with strong demand and seemingly bulletproof. Go to the premium level. Start with big investments in products and branding, and let contractors do the manufacturing. Then, come back to making your score later as you take control of more aspects of your value proposition.
That’s the formula that’s worked for Renaldo Webb as he’s built Brooklyn, NY-based PetPlate into a maker of a high-end pet food brand with eight-figure annual revenue already, and aiming to double this year, capitalizing on pandemic-driven demand for home-delivered food for furry friends. It shows no signs of abating with the end of the pandemic.
“Pet food is the sexiest unsexy industry out there, growing at a 3% to 4% CAGR, and the only things in the CPG world growing faster than that are seltzer spirits,” Webb said. Chief executive. “It’s an exciting category that leans into the zeitgeist.”
Do you ever do it? Americans spent $50 billion on pet food and treats in 2021, the fastest-growing category among consumer packaged goods, up 13.6% over 2020, according to the American Pet Products Association. Overall pet industry sales reached $124 billion in 2021, the second consecutive record year for the industry.
The main reason for the boom is clear: hundreds of thousands more Americans became pet owners during Covid as they tried to make the shelter as comfortable as possible.
“It’s an extremely inelastic demand,” said Webb, who received $100,000 of equity in the Shark tank a few years ago, then in 2020 it managed to score a $9 million Series A investment in a round led by General Mills’ venture capital division. “During the Great Recession, people were bringing their pets to shelters. But now it’s more like parents almost take care of their children. They’re not giving up on those.”
PetPlate’s business model is to charge anywhere from about $150 to about $400 a month for extremely carefully crafted pet food, human-grade stuff made from whole meats and vegetables, and so on, at its facilities. approved by the Department of Agriculture, delivered to customers’ doorsteps—making it what Crunchbase called “The Blue Apron of Pet Food.”
Like many better-for-you food entrepreneurs, Webb started putting together ingredients—in his case, like beef and carrots—in a local commissary kitchen with advice from a nutritionist. Then, as the business grew, it sought best-in-class manufacturing, which is now done at a plant in Texas and may expand to other locations.
But Webb understands the importance of production control in a premium products business and may eventually consider making its own PetPlate.
“We’ve been a business focused on marketing and product development until now,” he said. “Focusing on being a producer as well – and everything that comes with that – is going to take some time and a bigger team and a bigger investment. But you get that extra quality and control.”
In addition to keeping a close eye on production, here’s how Webb built the business:
• Why not subscriptions? Webb said pet food giant Chewy.com “was a longtime favorite [pandemic] bubble and the trajectory for them is still strong. Pet food is heavy and people want to do the best for their pets but don’t want to [think] about it.
“I would argue that pet food is one of the best subscription businesses you can think of,” Webb said. “We do extremely well with our retention rate compared to Blue Apron and the human and beauty-based subscription products.”
• Premiumization is key. It is expensive to provide PetPlate for dogs, but then isn’t it worth it?
“Some people were nervous about whether people would be willing to spend a premium on something that many people already consider a premium,” Webb said. “As America has gone through its health transformation, it has come to children and pets. It’s a story line that makes sense to people. Big Food is giving you something that is bad, and [PetPlate] it is better because of the healthy ingredients. There’s actually more room for growth in this than in human nutrition.”
And many dog diets actually call for junk food. “There can be a misconception that this is a nice-to-have product,” Webb said. “But if a dog has a sensitive stomach, your options may be to find kibble with worse ingredients or cook for your dog. There is a limited set of options. And once you find something that works, there just aren’t that many reasons to leave as long as you can continue to afford it.”
• Prize can still be claimed. Even in a category that’s growing as fast and strong as premium pet food, Webb said, “We were nervous about raising prices” in America’s high-inflation environment these days. But PetPlate posted a price increase of just under 10% recently, the first in a few years anyway.
“It didn’t affect our business,” he said. So, as a businessman, you say, ‘Should we do more?’ But what really drove the price increase was [rising costs] in protein markets.