This article was published in Pet Food Processing's 2019 Resource Guide. Read it and other articles from this issue in our Resource Guide digital edition.
The number of pet food and treat products on the US market has reached an all-time high. In 2018, GfK estimated the number of brands grew to 630, a 71% increase from 2011, and the number of stock-keeping units (SKUs) reached 22,000, an 88% increase over the same period.
The battle for shelf space is critical, and as these products continue to proliferate, some big names in the industry are lending a hand to businesses looking to get a leg up and achieve rapid growth. Accelerator programs, innovation centers and incubators are giving these companies a boost with specialized programs, funding opportunities and strategic mentorship.
Pet Care Innovation Prize
One of these programs is Nestlé Purina’s Pet Care Innovation Prize, which invites innovative startups in the pet industry to participate in a competition for up to $20,000 in funding, strategic support and publicity. The annual Pet Care Innovation Prize program began in 2016 as a venture to help early-stage companies establish themselves in the marketplace.
Applications for the program are open from March to September, then five companies are chosen to participate in a month-long “business acceleration boot camp,” where they work with industry experts, brand managers and product developers to tweak their products and pitches. At the end of the program, each company presents a brief pitch during a ceremony at Global Pet Expo, where a panel of judges votes for the grand prize winner. All companies that participate in the boot camp are awarded $10,000, and the grand prize winner receives an extra $10,000.
In 2019, two finalists with innovative ideas for pet food and treat products were given the opportunity to pitch their brands during the Pet Care Innovation Prize competition. One of them was Shameless Pets, which introduced its concept of upcycling viable ingredients from secondary streams that might otherwise have been thrown away and utilizing their nutritional value in dog treats. The other company, Boulder, Colorado-based Bond Pet Foods, is developing a method of growing synthetic animal protein cells through oxygenation, therefore eliminating the need to use livestock animals.
A subsidiary of Nestlé Purina dedicated to accelerating growth for new pet food and treat brands, called 9-Square Ventures, co-sponsors the Pet Care Innovation Prize program alongside Active Capital, a third-party firm providing education, consulting and event-focused support to the entrepreneurial community. The subsidiary is run by people working in various departments of Purina, including finance, marketing and the legal team.
Purina’s Pet Care Innovation Program also offers webinars, business development and networking events across the US year-round to support emerging pet industry companies.
Leap Venture Studio & Kinship
Leap Venture Studio is a startup accelerator sponsored by Mars Petcare’s Kinship division and Michelson Found Animals, and supported by Los Angeles-based consulting company R/GA. It identifies budding pet care companies with innovative ideas utilizing science and technology, connecting them with award-winning strategists, technologists and designers. The program, which began in 2018, selects six to eight of these businesses from a pool of applicants to participate each year.
The 12-week program begins in spring and ends in May. At the end of the program, each company pitches their brand to investors, industry leaders and the local startup community in Los Angeles. After the pitch, companies may receive up to $200,000 in investments to further grow their brand. The program is currently accepting applications for its 2020 cohort, which will be announced in December 2019.
Six companies were chosen to participate in Leap Venture Studio’s 2019 cohort, including three pet food and treat companies — Jiminy’s, Smalls and Shameless Pets — and one hemp-infused pet supplement brand, Pet Releaf. During the program, Jiminy’s worked on a complete-and-balanced, sustainable and hypoallergenic dog food formulated with insect protein. Smalls continued developing its brand of human-grade cat foods that offer ingredient transparency. Shameless Pets, which also participated in the Pet Care Innovation Prize, continued its focus on developing dog treats from upcycled ingredients.
Leap Venture Studio also provides resources to pet industry companies through Leap Venture Academy, which began in May 2019. The Academy offers continuous development through in-person and online courses, meetings, webinars, bootcamps and other resources.
Mars established Kinship Partners, LLC, under its Petcare division this year as a coalition built to provide emerging pet industry companies with exclusive access to data, science and technology to drive innovation and growth. Kinship supports companies in three areas: companion animal healthcare, pet nutrition and science-based pet care products. Leap Venture Studio is one of the resources Kinship companies have access to.
Kinship operates six consumer businesses across the pet care industry, from overall health and wellness to nutrition and veterinary care. Puppo, for example, is a platform where dog owners can create customized nutrition for their pets by answering a series of questions, which are delivered direct-to-consumer on a subscription basis. In addition, Kinship supports Pet Plate, Wild Earth, Smalls and Jiminy’s, all of which were participants in Leap Venture Studio’s 2018 and 2019 cohorts.
With $250 million in investable capital, Factory LLC is an accelerator program for brands across a wide range of industries, including pet treats. Located in a renovated Bethlehem Steel Corp. factory built in 1940 in Bethlehem, Pennsylvania, Factory provides these brands with the collective wisdom of a robust team of consumer packaged goods professionals.
Factory was founded by Rich Thompson, an experienced business mogul with a knack for creating enterprise value and a veteran of the pet food and treat industry himself. In 2001, Thompson teamed up with a private equity investor to purchase Meow Mix from Nestlé S.A. for around $160 million. Thompson’s focus on innovation and fast change paid off in 2006 when Del Monte purchased the Meow Mix brands for approximately $705 million. After that sale, a core group of the Meow Mix management team started Freshpet. Although Thompson was not one of the founders of Freshpet due to a non-compete agreement, he joined the company as CEO in 2010 and helped take Freshpet public in 2014. Thompson left Freshpet in 2016, raised money and started Factory.
The center is actively looking for successful entrepreneurs with high-potential food, beverage and pet treat brands to form a partnership with Factory and move to its innovation center in Bethlehem. Thompson said that finding the right entrepreneur to work with is a crucial part of the equation. The second most important factor is whether or not the product is scalable, differentiated, and, of course, tastes good.
However, Factory is not meant for emerging businesses, as it specifically seeks companies with an annual bottom line of at least $2 million. This market experience assures Thompson and his team that the entrepreneur they are partnering with has “gone through some trials and tribulations,” as he puts it.
Although Factory doesn’t manufacture products, they practically do everything else in support of their brand partners, including digital and social media, packaging design and innovation, sales and merchandising, product and flavor development, food safety and quality analysis, supply chain and distribution logistics, e-commerce, finance and more.
In an effort to find future Factory partners in the pet care space, Factory and New Hope Network, a business-to-business media firm for healthy lifestyle products, co-sponsored a Pet Innovation Challenge, where industry leaders and 10 selected companies came together to share problem-solving ideas. Participating companies had the opportunity to win prizes totaling more than $50,000 that included funding and support, as well as media exposure, a booth at Natural Products Expo East in 2020, a spot in the New Product Showcase at SuperZoo 2020 and six months of services from Factory.
Factory invited pet industry innovators working with alternative proteins, functional nutrition, wellness and supplements, and pet care technology, to apply for the program. Six of the 10 companies chosen are focused on developing pet food, treats or other nutritional solutions.
President and CEO John Kuenzi describes his nimble team of experienced pet industry professionals as guides at Manhattan, Kansas-based NQV8. The consulting company brings together innovation in the form of product development and incubation that encompasses processes, product launches and steady state production oversight.
In addition to working with individual brands for start-ups and relaunches, NQV8 also provides independent consulting services to co-producers addressing operational process improvements, facility assessments and program reviews.
Kuenzi says NQV8 helps fill a void in the industry. “There is a tremendous need for guided ‘incuvation’ in the pet space,” he shares. “If it touches the pet food or treat industry, we’re up for the challenge.” Several members of the NQV8 team bring experience with multi-million-dollar and multi-national businesses. Both early-stage and established companies benefit from working closely with NQV8’s brand strategists, product development experts and pet industry veterans to take their product to the next level.
The pet food industry is very challenging and isn’t for the faint of heart. Kuenzi points out that the best food companies in the world see the pet space as critical to their business success. “No one gives up market share without a fight,” he says. “Having unique capabilities; significant funding and a boat load of resolve are necessary just to be in the game. Our goal is to come along side and help make the most of the resources available while having a little fun along the way if possible.”
Pet food and treat brands can utilize accelerator programs, innovation centers and seasoned professionals like some of those mentioned to get connected in the industry, develop diversified, successful brands and stimulate long-term growth. With exposure to industry leaders, marketing moguls and product development experts, pet food and treat brands can set themselves apart in an increasingly crowded market.
Stay up to date on news about the pet food processing industry on our News page.