SECAUCUS, N.J. — Freshpet, Inc. reported another successful quarter May 6, with first quarter net sales for 2019 exceeding projected growth by nearly 3%. The company leveraged investments in its workforce, advertising, in-store fridge implementation, e-commerce and omnichannel capabilities, and plans to “dig deeper” with new million-dollar kitchens coming soon.
“We are off to a fast start in 2019,” said Billy Cyr, CEO of Freshpet. “The momentum behind our Feed the Growth strategy continues to grow, driving strong top line results, increased retail availability and significant cost leverage. We believe these results position us well to meet both our annual and longer-term growth goals and fulfill our mission of changing the way people feed their pets.”
Freshpet’s revenue in the first quarter grew 26.9% to $54.8 million from year-ago sales. Adjusted EBITDA totaled $2.8 million, reflecting growth of 54% “despite a $3.2 million increase in our media investment” compared to the first quarter 2018, Cyr said.
“The growth was broad-based, with Mega-Channel Nielsen measured consumption up 28%, behind 36% growth in grocery, 24% in mass and 18% in big box pet. Same-store sales velocity grew 19% and accounted for more than 70% of the year-on-year growth,” Cyr said.
Freshpet’s core dog food business, consisting of its dog rolls, roasted meals and Fresh From the Kitchen products, grew 29% over the first quarter, amounting to more than 90% of overall sales.
Household penetration for the company’s core business grew 18% to 1.49, repeat purchase rate for the segment increased one point to 71, and buying rate grew by 12% to $135.87.
Overall, Freshpet’s repeat purchase rate climbed one point to total 70, household penetration increased 10% to 2.01, and buying rate grew 16% to $113.31.
E-commerce and omnichannel sales, including curbside services, home delivery and AmazonFresh, grew 107% over the quarter to account for 2.2% of Freshpet’s overall business. The company utilizes in-store fridges for more than 80% of its e-commerce business, Cyr added.
The fresh pet food company continues to expand and update its network of in-store retail fridges. In the first quarter 2019, Freshpet added fridges to 554 stores, more than doubling its additions from the first quarter 2018 and bringing its total in-store fridge count to 20,053.
“We upgraded 203 fridges in the quarter, which when combined with the 805 upgrades in 2018, completes the 1,000 upgrades by the end of Q1 of 2019 goal that we committed to last year,” Cyr said. “Additionally, we now have 341 stores with two or more fridges and some of those have three fridges.”
An increase in demand has also been matched with an increase in Freshpet’s workforce; the company added more than 120 people over a 12-month period, an increase of 57%. This allowed Freshpet to convert two additional lines to 24/7 production and another line to 24-hour production for three-and-a-half days per week, resulting in a 14% increase in throughput compared to the fourth quarter 2018, according to Cyr and CFO Richard Kassar.
In mid-February, Freshpet implemented “very sizable price increases ranging from 7% to 17% on select items rather than taking a 2% price increase on the whole line,” according to Cyr, which are expected to add 2% to the company’s top line in the second quarter.
The company expects to break ground on its Kitchens 2.0 as soon as permits are issued. “This puts us on schedule to deliver the start-up in the second-half of 2020, as we previously indicated, and we are still projecting that we will spend approximately $100 million,” Cyr said.
“Our UK and Canadian business are still in their infancy,” Cyr explained. He added the company has validated its business model in the two markets and plans to build consumer awareness throughout 2019.
“We’re keenly aware that we must be both disciplined and patient in these markets, building out the fundamentals first before making major marketing investments. But everything we are seeing suggests that the long-term growth potential is significant,” Cyr concluded.
Cyr and Kassar agreed the company is well on track to meet its 2020 financial goals, which include increasing net sales by at least 24% to $240 million and growing adjusted EBITDA by at least 38% to $28 million.
Read more about corporate strategy, financial performance, mergers and acquisitions on our Business page.