Freshpet Strategies For Great Growth Potential

SECAUCUS, NJ – Freshpet, Inc. To build resilience in 2022, after a year of fluctuating supply chain, capacity and input costs.

Sharing fourth-quarter and full-year fiscal 2021 results, Freshpet CEO Billy Sayer said the company has “learned some hard and valuable lessons over the past two years,” including dealing with the COVID-19 pandemic and employment. Shortages, inflation and supply chain disruptions.

“Our operations have fluctuated multiple times along the way, and we are fully aware of the impact this has on many of our stakeholders, most notably our customers and consumers,” added Sir. “We’ve learned that in order to achieve the long-term sustainable growth that Freshpet can achieve, we need to do a better job of preparing for and isolating ourselves from these issues.”

For fourth-quarter results, the Fresh Pet Food Company reported a net loss of $9.3 million, an increase of 181.8% from $3.3 million in the fourth quarter of fiscal 2020. Net sales totaled $115.9 million, up 37.1% from 84.5 US$1 million in the fourth quarter of 2020. Fiscal Year 2020. Adjusted EBITDA was $9.7 million, down 24.8% from the fourth quarter of fiscal 2020.

For the full year 2021, Freshpet reported a net loss of $29.7 million, up 828.1% from $3.2 million in 2020. Net sales totaled $425.5 million, up 33.5% from $318.8 million in 2020, adjusted EBIT Depreciation and amortization are $43 million, down 8.3% from 2020.

The company kicked off these results in its preliminary fourth-quarter and full-year report in January.

“We finally have the capacity to support Freshpet’s key growth potential – while also improving the reliability of our operations,” Cyr stated. We plan to use this ability wisely – budgeting conservatively to ensure the reliability of our operations in an uncertain environment but also planning aggressively to maximize our growth potential. We believe our 2022 plan strikes the right balance – keeping us on track to achieve our 2025 goals and enabling us to forever change the way people feed their pets.”

Freshpet attributed the higher net loss to increased sales, general and administrative (SG&A) expenses, which amounted to $48.9 million in the fourth quarter, up 45% from the fourth quarter of 2020, and accounted for approximately 42.2% of the company’s net sales during the quarter. . For the full year, SG&A expenses were $186.8 million, up 38.5% from 2020. The increase in SG&A expenses was attributable to increased freight and other logistics costs, increased operating costs, stock-based compensation, and increased media expenses.

Gross profit increased for the fourth quarter, to $41.2 million and 35.6% of net sales. Adjusted gross profit was $48.4 million, or 41.7% of net sales, compared to $38.7 million or 45.8% of net sales in the fourth quarter of 2020. The company attributed the decline in gross profit as a percentage of net sales to increased production. Costs at its Kitchens South location, employee pay raise plan, capacity investments, and ingredient inflation.

These costs also impacted Freshpet’s gross profit for the full year in 2021, which was $162.1 million, or 38.1% of net sales, up from $132.9 million, or 41.7% of net sales in 2020. The adjusted gross profit for the full year was $189.5 million or 44.5% of net sales compared to $154.1 million or 48.3% of net sales in 2020.

The company is working to re-fill a gap in commercial inventory that occurred in 2020 and lasted until early 2021. To avoid this in the future, the company is working to increase its capacity, produce excess demand, and reduce its manufacturing capacity as per its guidance for 2022 forecast.

“It took a long time to refill that hole,” said Sir. To do so, we had to delay our growth and increase our production to a level much higher than demand. For perspective, in February, we generated an annual run rate of nearly $600 million in net sales. While our depreciation run was about $490 million in net sales.”

Freshpet also expects to provide additional online capacity in 2022, specifically at Kitchens South and its upcoming facility in Ennis, Texas. However, the start-up of the Ennis facility has been delayed, and supply chain disruptions and labor shortages are expected to remain obstacles for the company and others in the pet food processing industry.

“We are relying heavily on the completion of our facility in Ennis, Texas and a successful start-up, which is now delayed to early Q3 due to a shortage of building materials,” said Sir. “…Up and down the supply chain we are seeing disruptions caused by everything from labor shortages to port blockages to material shortages to mandate protests, closures and now bird flu. The reliability of supply and transportation can no longer be assumed, something we used to take for granted. And many shortages are unpredictable.”

Cyr also shared that the company will launch several new product lines in 2022, including additional capacity for Fresh From The Kitchen rolls and products.

Freshpet announced two price increases in November 2021 and late February 2022 to adjust for inflated raw material costs the company had previously absorbed. Heather Pomerantz, Freshpet’s chief financial officer, warned that volatile costs could lead to a third increase in the prices of Freshpet’s products in the future.

“We’ve taken the biggest price increase ever, and we’re budgeting for a reasonable level of price sensitivity,” Sayer said. “However, if we had a lower price sensitivity than we set out, we would not want to put ourselves in a position where we cannot reliably supply our customers and consumers.

With these price increases, Freshpet remains optimistic that household penetration and purchase rate will continue to rise, especially as it plans a “more loaded” advertising plan for 2022, which will account for about 12% of net sales.

“We’re monitoring the effect of higher prices on our household penetration and purchase rate,” Sir said. “We think we will have a short-term setback in household penetration when the higher price first appears on the shelf, but it quickly turns positive because we have a full distribution, a heavier media plan and increased fridge placements. The buying rate is likely to benefit from higher prices, even if Few consumers chose to use less Freshpet and made our long-term goal more achievable.”

Freshpet’s entire portfolio household penetration increased 6% in 2021 compared to 2020, bringing the total number of households to 4.18 million. From 2018 to 2020, the company saw household penetration growth at a double-digit year-over-year, and attributed the smaller increase from 2020 to 2021 to “massive inventory outages and delays in marketing.” However, the company stated that it is still on track to reach its goal of being in 11 million households by 2025.

Freshpet Breakthrough Trends for Families 2018-2021

Freshpet’s distribution expansion will continue into 2022, when it expects to add 1,300 new stores and upgrade or add a second refrigerator to 1,775 existing stores. This should increase the total number of the company’s stores to 24,931 by the end of the year. The company increased its total number of stores to 23,631 locations in 2021, up from 22,716 stores at the end of 2020.

Freshpet’s e-commerce sales grew 73% in 2021 compared to 2020, which is about 6.4% of the company’s total sales. These e-commerce gains were driven by click-and-collect services offered by mass merchandise and large pet retailers, also buoyed by last-mile delivery services and new online delivery platforms. The majority of Freshpet’s sales (87%) still come from traditional purchases.

The company is also supporting increased media investments in international markets, including the UK and Canada, and its first foray into the French pet food market.

“We have tested about a dozen grocery stores in France for most of the past year, and we are ready to move on to the next step there, expanding to more stores and starting a media investment in several markets,” said Sir. .

Also in 2022, Cyr sparked the launch of “a variety of new products”, many of which will be launched in the second half of the year.

Freshpet expects more than $575 million in net sales for the full year 2022, which is an approximate increase of 35% over the full year of 2021. Adjusted EBITDA is expected to exceed $55 million, which will increase by Roughly 28% from 2021, with Freshpet expected to keep $13 million to $17 million in “unabsorbed expenses,” including capacity maintenance and expansion.

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