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Statistics suggest in the pet food industry, if a company gets a customer to buy three bags of food in three months, the loyalty rate — the likelihood they’ll stick with the brand — is about 80%, says Better Choice Co. CEO Scott Lerner.
“It’s pretty rare for people to switch,” Lerner says. “That’s an opportunity. If you gain a consumer, you can keep them a long time. The challenge is to get people when they need to switch.” Pet owners, he says, typically consider changing their pet’s food at a few inflection points, such as when they get a new dog, have dietary issues or other medical issues. “Other than that," he says, "it’s tough."
But Tampa-based Better Choice Co. is up to the challenge.
The premium pet food company’s brands include Halo Pet Food and TruDog, and the company was formed when the brands joined about two years ago. Better Choice sets itself apart in the fast-growing pet space by focusing on premium products, made by six to eight manufacturers nationwide. “We use high-quality ingredients,” Lerner says. “The price point is on the high end. That’s really where we play.”
Better Choice sells its products through several sales channels, including online, in stores and internationally. The publicly traded company, which recently raised $4.1 million in a stock sale, now aims to grow across those channels, says Lerner, 47. The firm, traded over the counter, did a little more than $50 million in revenue in 2020 — with bold targets for the future. “Our goal is to be over $100 million by 2023,” he says. “We essentially break even now. Going forward, we’ll start to generate profit.”
The company also has an ambitious goal: to become the most innovative premium pet food company in the world. To do it, communicating well to potential customers and getting store clerks to recommend the company’s products, among other factors, will be crucial.
Meeting innovation and profitable goals, at a base level, will require more products. Better Choice Co. vice president of marketing Ryan Wilson says the firm has that side covered. “We’re making products that are going to be game-changing in the category," he says. "We are launching hundreds of new items in the next three years.”
With the recent stock sale and other moves, officials also contend the company is well positioned for growth. “We’re financially strong,” says Better Choice Co. CFO Sharla Cook. “We are investing a fair amount in 2021 into all of this innovation. The good news is the market is extremely excited about this company. We have never had any trouble raising capital when it’s needed. People are excited about the company, brands and leadership team. When we grow the top line, we’ll be profitable on the bottom line and be self-sustaining.”
Donald Young, executive vice president of sales at Better Choice Co., agrees. And Young knows what he’s talking about. He has more than 29 years of experience in sales at pet food brands, including The Nutro Co. and Merrick Pet Care Inc. At Merrick, Young grew the company to the No. 3 natural player in the pet specialty retail channel. During that time, it more than quadrupled its sales, surpassing $500 million, prior to it being sold to Nestle Purina Co. Today, Young thinks Better Choice has an even greater chance to create similar success.
Online Opportunities
Better Choice has about 45 employees, with about 30 working out of the company’s Tampa headquarters. Tampa is home base for employees in operations, customer service, accounting and finance. Lerner is based in Chicago, and there are employees in other cities as well, from Nashville to Cincinnati to New York. “Whenever I get my vaccine, I will be coming down to Tampa a lot,” Lerner says.
Since employees are not all together, one of the company’s biggest challenges is a common one during the pandemic: keeping everyone connected. “We do a lot of Zoom calls,” Lerner says. “We mandate to our team members that you do video calls, not phone calls.” The company has hosted Zoom meet-and-greets, coffee hours, happy hours and team-building events. “It takes a ton of effort to create the connectivity,” he says.
Before joining Better Choice in January, Lerner worked in the food and beverage industry. After serving in the U.S. Marines, he earned an MBA and worked for ConAgra Foods, Kimberly-Clark and PepsiCo. He then started his own beverage company, Solixir, which he's since sold to another beverage company. “I always wanted to get into the pet food industry,” he says. “I’m a huge dog lover. My wife jokes that I like dogs better than people.”
Lerner is particularly excited about the bright days ahead for the pet food world. “It’s a category that’s growing very quickly and is recession-proof and also operates, a large portion of it, online,” he says.
In ecommerce, Better Choice sells its products through big platforms such as Amazon and Chewy, and Lerner expects sales from those platforms to continue to grow over time. It also sells TruDog products directly to consumers through its own website.
The company’s online and offline approach to sales creates benefits for both sides. “It’s an advantage for us,” Lerner says. “We can take learnings from the online environment to the offline environment. People who come online are feasting on information to understand what it is they’re buying and what it is they’re giving their pet. It helps us understand what are the key triggers motivating them to purchase. We can take that to communication in the store environment so that drives purchases.”
Relationships and recommendations
While some companies are deemphasizing ties to brick-and-mortar retail, in-store sales is one of Better Choice’s focus areas for the future.
The company’s products are in about 3,000 locations now, including some Petco and independent pet food stores, and it wants to grow that availability. Its products are being tested in some Target stores now, for instance. “Where we’re focusing a lot of our effort for 2022 is into the pet specialty channel — reinvigorating with Petco and other players,” Lerner says.
To be successful in those stores, pet food companies rely heavily on employee recommendations. “The pet industry is driven through recommendation through store clerks,” Lerner says. “If you’re strong in that channel, we believe it will also help the other channels of business. It drives awareness across the board.” That means if Better Choice grows in-store sales, ecommerce could grow, too.
But how does a company get a store clerk to recommend its products? Having a clear value proposition is key, along with packaging that offers important information and the brand’s story. “If a customer asks a question, the person in the store can refer back to that bag,” Lerner says.
For Better Choice’s brands, the story is about performance, using a variety of metrics, from less itching or shedding to coat transformation and better stomach health. To back that up, it offers a money-back guarantee.
The company also encourages recommendations from store employees by putting on programs at the store level to educate employees. That process includes explaining products and providing samples so employees can try items with their own pets. It also involves marketing and point-of-sale materials that promote the brands. “It’s a real grassroots approach,” Lerner says. “Really with relationships at the store level, it does take quite a bit of time. It’s not a small expense.”
Wilson, the head of marketing, says the company keeps a key question in mind when putting marketing collateral together: “What are the materials that will help educate our retail associates so they are comfortable recommending our products?”
At the customer level, meanwhile, Young breaks pet food buyers into three categories. A third have done research and know what’s best for their pet. Another third have heard some information and know there’s something better for their pet, but they’re counting on the store to make a recommendation. The final third just got a pet and don’t have an education yet about products. Better Choice’s job is to seize every opportunity to tell each group about its products.
Around the World
Beyond domestic sales and ecommerce, international buyers also have been a key segment for Better Choice.
One reason? Consumers in Asia are spending more on their pets, Lerner says. “They want American brands because they stand for trust,” Lerner says. “We have been growing quickly in Asia and China specifically.” Some pet food safety issues with manufacturers in China are behind the trust issue, he says. Another factor is the sheer size of the population in China, he says, along with increased discretionary income in China, Japan and Singapore.
Better Choice sought out business in the region, partnering with a third-party distributor to bring its products to Asia. “We ship out full containers via ship, and obviously it takes a little bit of time to get overseas, but because of the size of the business, it doesn’t really hurt us from a logistics standpoint,” Lerner says. “If we were a smaller company, it would be more difficult. Certainly they’re paying more for these goods coming into the country. It goes to show you the consumer there is looking for super high-quality consumer products that originate outside their country.”
When considering possibilities of new overseas targets, the company looks at statistics related to pet parents, retailers and distribution.
“We’re concentrating our efforts on Asia and growing out that market, but there are other opportunities,” Lerner says. “We will expand into Australia and some other countries in Asia because we’ve established a foothold there. That’s the exciting thing about pet: everyone around the world has a dog, and they all have to eat. The nutrition requirements don’t change. A golden retriever in California needs the same nutrition as a golden retriever in China. It’s just a different way of talking to the consumer.”
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