Adapted from a press release:
Pet food maker Better Choice Company’s gross sales reached US$19.8 million in the second quarter of fiscal year 2022. Net sales were US$16.5 million, up 50% over the same quarter last fiscal year. A 133% increase in brick-and-mortar pet food retail sales helped this growth, along with a 75% increase in sales outside the United States. For the first half of FY22, Better Choice’ gross sales reached US$39.5 Million, while net sales were US$33.5 million up 54% compared to the first half of FY21.
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Better Choice Company was created in 2020 with the merging of two brands: Premium pet food brand Halo and freeze-dried raw pet food brand TruDog.
“In spite of unprecedented supply chain disruptions felt across the consumer-packaged goods industry, during the second quarter of 2022 we were able to deliver sequential adjusted gross margin improvement of approximately 300 basis points and 50% growth in net sales relative to the second quarter of 2021, driven by growth of 75% in International sales and 133% in brick-and-mortar sales,” Scott Lerner, CEO of Better Choice, said in a press release. “The US$19.8 million of gross sales generated in this quarter represents an all-time high for Better Choice, surpassing the US$19.7 million generated in the first quarter of 2022. While our international business continues to grow rapidly, we are making great progress in pet specialty. We have already launched Halo Elevate in over 1,500 pet specialty stores including Petco, Pet Supplies Plus and key independent retailers, and have observed consistent week-over-week growth of POS sales, coupled with strong repeat customer purchase rates at key accounts.
“In addition to delivering record gross sales, we also realized meaningful sequential gross margin improvement, achieving a gross margin of 29% in Q2 2022 vs. 28% in Q1 2022,” he said. “Adjusting for one-time pet specialty launch expenses, we achieved an adjusted gross margin of 31% in Q2 2022. This improvement in Q2 2022 was driven by several key factors, including the shift of domestic kibble production to a new co-manufacturer, the consolidation of production runs across our portfolio and the implementation of domestic and international price increases. In the second half of 2022 we expect to realize continued gross margin improvements, driven primarily by the transition of our international dry kibble diets to a new co-manufacturer. This transition was completed in mid-June and resulted in an immediate 1,500 to 2,000 basis point improvement to gross margin. Prior to the transition, these diets represented approximately $10 million of net sales in the first half of 2022. We also have a lot of exciting new developments planned, including the continued distribution of Halo Elevate nationwide and the rebrand of Halo Holistic and Trudog. We believe our second quarter cash position is sufficient to support our plan to achieve profitability, particularly since we expect to benefit from positive changes to net working capital in the second half of 2022. While we are very excited by our sales growth in the first half of this year, we remain laser focused on driving continued margin improvements across our portfolio.”
Second Quarter 2022 and Subsequent Operational Updates
- Launched Halo Elevate® in 1,000+ Petco retail locations.
- Launched Halo Elevate® in 600+ Pet Supplies Plus retail locations.
- Launched global marketing campaign to coincide with pet specialty launch, generating more than 42 million impressions and 22 million video views in the first six weeks post-launch.
- Completed co-manufacturing transition of key international diets in mid-June, resulting in an immediate 1,500 to 2,000 basis point gross margin improvement for these diets. Prior to the transition, these diets represented approximately $10 million of net sales in the first half of 2022 (approximately 70% of total international net sales).
- Completed integration of TruDog Brand and launched Halo® branded freeze-dried raw meals, treats and toppers.
- Implemented Domestic and International price increases effective April 2022 to address inflationary pressures.
Better Choice refines pet brands, targets millennial owners
Better Choice Company (BTTR) entered the New York Stock Exchange in June 2021 while raising US$40 million in capital to support the growth plan for the company’s refreshed Halo brand. Being a publicly traded pet food company has been an asset, Lerner told Petfood Industry magazine, ensuring that everyone knows where the company’s at and where it’s headed.
“It’s a little bit more work because you’re engaging with the investor community,” Lerner said. “You’re always selling — they’re our customer as well, and you’re selling the brand. But it’s a great asset, because it makes you think about how to position the brand and the company in a very positive way, and be more overt. You can go on our website and see our press releases, see our investor presentations and get a sense of what we’re up to. But what’s cool about the pet space is because so many people own pets, they’re built-in consumers too. So even though we’re talking about the company to a Wall Street exec, they’re also buying our product because they have two Goldendoodles at home.
“I also believe it creates a level of discipline that is higher than would be required from a private perspective, because of SEC (U.S. Securities and Exchange Commission) guidelines and auditing and all the things you have to do,” he says. “So our team has to be better sourced and just better in general. It’s a huge motivator, because everybody in the company has options; it’s almost like a scorecard every day. But it’s a lot easier tool than ‘Trust me, we’re doing great,’ and it’s a great recruiting tool, as well.”
Having built his team and gotten everyone on board with the mission, Lerner says the company is very much building for the long term.
“We don’t have a short-term mentality, and that helps create a great culture, too, where people take on a business owner mindset and treat our business like it’s their own,” he says. “If you look at our investor materials, our marker is to be at least US$100 million in revenue by 2023, and that will come through the penetration in the pet specialty channel. It will be the launch of Halo Elevate Cat later [in 2022]. Then, it will be filling out the rest of the innovation pipeline and starting to push it with potentially new product lines that are out there in the market, and having a full suite of products the pet parent can feel good about feeding their pet.”
