Freshpet sales continue to boom
Fast-growing company accelerating output amid pandemic, racing to refill bare shelves
Specialty pet food maker Freshpet is growing ... fast. How fast? CEO Billy Cyr on Monday compared Freshpet to “an 11-year-old boy who wears size 15 sneakers.”
“He’s growing really fast, and everyone expects him to be big,” Cyr said. “But along with that explosive growth, there can be some awkwardness.”
Stumbling in those big ol’ shoes is something that happened to Freshpet at the end of 2020 as the manufacturer struggled to keep up with high demand and left many customers staring at empty, or nearly empty, fridges.
While Freshpet products can still be difficult to find — all these snowstorms aren’t helping — Cyr said the compa
ny’s production output is accelerating this year and is on its way to climbing out of the inventory hole it dug. It will take until midto late April to fully refill the deficit, though consumers will see improvements well before then, Cyr said.
Returning to his development analogy, he boiled it down to this: “Our challenge is to do everything we can to achieve our enormous growth potential while insulating ourselves from some of the bumps along the way.”
Even with absorbing the bumps of 2020, Freshpet on Monday reported net sales for the year of almost $319 million, up nearly 30% from 2019. The company expects to surpass net sales of $430 million in 2021, which would be a 35% jump.
All the growth has Freshpet ahead of its long-term forecast, in which it plotted a course to serve 8 million households and generate $1 billion in net sales by the end of 2025. The company updated those figures Monday: 11 million households and $1.25 billion.
In terms of its bottom line, Freshpet reported a fourth-quarter net loss of $3.3 million due to increased expenses related to the pandemic, plant startup costs and beef inflation. Analysts were expecting the company to report a profit.
The company’s stock has slid over the past week — as have many growth stocks — and shares closed at $145.37 Tuesday. That’s still up significantly from one year ago, however, when Freshpet was trading around $66 a share. Four years ago, the stock was in the $10-$11 range.
The Lehigh Valley has played a significant role in the Secaucus, New Jersey, company’s growth. Freshpet has 240,000 square feet of manufacturing space in Hanover Township, Northampton County: the 100,000-squarefoot facility at 176 N. Commerce Way that has been producing pet food since 2013 and a neighboring 140,000-square-foot expansion at 146 N. Commerce Way that opened in October.
The new facility, dubbed Freshpet Kitchens 2.0, is expected to produce at full capacity by the middle of this year. Freshpet has invested $104.5 million in the facility and expects that number to reach $115 million when fully completed.
Cyr said Freshpet has more than 500 employees in the Lehigh Valley and is still hiring.
Freshpet, which has long said its biggest limiter is its ability to add manufacturing capacity, also is well into the process of expanding its production beyond the Lehigh Valley, something that allows the company to shorten customer supply chains while also giving it diversification of fresh chicken supply.
For one, Freshpet in 2020 started operations with a partner for its Freshpet Kitchens South manufacturing plant. The company has not disclosed where that operation is located, but Cyr said that facility should be capable of supporting $100 million in net sales by the end of 2021. In addition, he said Freshpet has started conversations with that partner about adding another manufacturing building that would house additional production lines.
Freshpet also broke ground last year on its largest project yet: a manufacturing facility on 74 acres in Ennis, Texas.
Cyr said Freshpet is targeting an opening date for that facility’s first phase in the second quarter of 2022, one quarter earlier than initially projected.
All of the expansions — if Freshpet commits to a second phase at the Texas plant — would give the company a projected $1.96 billion in net sales production capacity by the end of 2025, according to a presentation that accompanied the company’s earnings release Monday. That mix would include $900 million from the Texas plant, $560 million from the Lehigh Valley facilities and $500 million from Freshpet Kitchens South.
“We think the long-term opportunity for Freshpet is well north of $2 billion,” Cyr said.
But it’ll also be about limiting the growing pains, such as the ongoing challenge of finding Freshpet products that co-founder Scott Morris has kept customers updated on via social media.
In his most recent letter, posted Saturday on Facebook, President and Chief Operating Officer Morris said many Freshpet employees are working 50-60 hours a week to meet demand. So far this year, he wrote, Freshpet has shipped more than 8 million packages of product, up more than 30% compared with a year earlier.
“Over the past 10 years, there have been times where we have had challenges on our business,” Morris said on the earnings call Monday. “Sometimes it’s been challenges on making rolls or challenges on making bags or packaging supplies or whatever it may be. And the one thing that we have seen is the consumers and this business have been unbelievably resilient.
“Do I wish we wouldn’t be having out-of-stocks? 100%. There is no way to tell you how much my heart bleeds every time I see a consumer frustrated.”