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on May 16, 2007

Success and More

S&M NuTec joins the ranks as a top contender in the pet industry

Few products in the marketplace today have enjoyed the kind of phenomenal growth that Greenies® has. Starting as a homemade treat, Greenies has gone from the basement (quite literally) to top of the sales charts in a relatively short period. The manufacturing company, S&M NuTec, LLC, is now one of the top 10 companies worldwide in terms of retail sales in 2004 (US$310 million). In fact, the company has grown 92,000% since 1999 and Greenies has overtaken Milk Bone as the largest US dog treat brand by value sales.

The story

Dr. Joseph Roetheli and Judy Roetheli co-founded S&M NuTec in 1996. The company was named for the couple's sons Steffan and Michael. By no coincidence, the company mascots are two Greater Swiss Mountain dogs named Serge and Max. Headquartered in North Kansas City, Missouri, USA, the company directly employs 95 people and provides jobs for 450-500 more in the local area.

Joe, an ag economist, managed R&D and commercialization programs for the US Department of Agriculture for 18 years. When asked to relocate his family to the Washington, DC area, Joe opted to stay in Kansas City, Missouri, USA and resign his USDA position. This gave him the opportunity to spend time further developing a product he formulated to improve the breath of the Roetheli family dog, Ivan. With the consultation of a board-certified nutritionist, Dr. Lon Lewis, and a human dentist from the University of Missouri School of Dentistry, the product has evolved into the top-selling pet treat on the US market today.

From humble beginnings, Greenies (so named because of their green coloring) have sold exceedingly well. It took some work; however, as the young, family-run company had to demonstrate sales of over US$1 million (in one month) before it could secure bank financing. Now, with simple growth of 70% per quarter, S&M NuTec strives to deal with its major growing pains.

The company

At the company headquarters, you can see evidence of a bustling, employee-friendly workplace. Worker cubicles and walkways are marked with descriptive street signs displaying canine and feline names. Dogs are seen walking the hallways with their human companions, and the walls are covered with numerous awards and photographs of the good works employees have accomplished.

Joe is quick to point out that the quality of the people who work at S&M NuTec is number one. He runs a "fun firm" with a unique culture where family and community interaction are highly encouraged. The company donates an impressive amount (over US$400,000 in 2004) to local and national charities and dog clubs, as well as contributes time and effort with Heart to Heart International and the local Community Blood Center. In fact, over half of S&M NuTec's employees are active in volunteer programs outside of work, contributing approximately 4,000 hours per year.

The company has earned over 40 awards, honors and forms of recognition since the beginning of 2002 ranging from national, regional and local honors, including recognition for merchandising strategies in the pet industry. For instance, S&M NuTec was honored by the National District Export Council with its 2004 Small Business Exporter of the Year Award. Also, Petco named S&M NuTec as its Vendor of the Year for 2004 and again in 2005, for supplies.

The American Business Association awarded S&M NuTec with the award for Best Company in America with less than 100 employees in June 2005. The Kansas City Chamber of Commerce awarded S&M NuTec its Mr. K award as the Outstanding Small Business in 2005.

Judy noted that she believes strongly that "one of the keys to success for S&M NuTec has been the company's ability to attract great people who are passionate about pets and passionate about their work, plus persistent in execution towards goals, and prepared to think creatively and work hard to achieve success as a team."

There are 95 people employed by the company directly. S&M NuTec is responsible for providing another 450-500 jobs in the local area through outsourced manufacturing, warehousing, packaging and shipping locations within one hour of Kansas City in Eastern Kansas and Western Missouri.

Co-founders Joe (CEO) and Judy (president) are joined on the management team by Brad Allen, COO; Russell Fries, (CSO-chief strategic officer); and Don Coleman, CFO. The mission of the company is "to provide innovative, practical, top-quality pet products that meet market needs; provide functional attributes; and provide value for the welfare of pets and pet owners." It does this by offering innovative products, which are supported by creative merchandising efforts. According to Brad, a former sales and marketing executive for Pepsi Co. with 20 years of experience, "we do a lot of things right."

As Joe noted, "we don't have the fear of knowing what won't work." Coming from outside the industry has allowed him to look at new ideas with an open mind and not be influenced by doubt. He knows that his company has been "very, very fortunate" and shows a real enthusiasm for the work. He did note that there have been challenges in managing such strong growth and that securing financing to keep up with that growth has been a big hurdle. Another hurdle has been protecting the company's intellectual property.

Joe and Brad are obviously proud of the products S&M NuTec manufactures. They explained that they are still working on every product in their line to continue to improve them. With new products being added all the time, and sales growing by leaps and bounds, the future is bright for S&M NuTec in the pet industry. Brad is quick to point out that it's "a great industry to be in." By listening to consumers and supplying their needs, the company plans to grow even further. The current demand for functional pet treats and the prominent positioning the company now holds in pet superstore chains have been key factors in their rapid expansion.

The products

Initially, S&M NuTec limited sales of its Greenies treats to local pet stores and grocery outlets. In 1999, the company expanded to national distribution. In 2002, Greenies began to be carried in larger national pet superstore chains (i.e., Petco and PetSmart). S&M NuTec now distributes its products to all 50 states and exports to over 50 countries worldwide. The company's packaging is printed in at least 12 languages. Joe noted that sales of Greenies have topped 650 million units to datea number that if placed end-to-end would circle the globe one and two-thirds times.

The product line began with the original Greenies dog treat, an entirely edible injection-molded product with the distinctive green coloring that gave it the name. The original Greenies is manufactured in six sizes for dogs (Jumbo, Large, Regular, Petite, Teenie and Lil' Bits).

Greenies was the first dog treat to receive the Veterinary Oral Health Council® (VOHC) Seal of Acceptance for both plaque and tartar removal. Independent studies have shown that feeding one Greenies per day resulted in:

A second product in the S&M NuTec line-up is Feline Greenies, released in the summer of 2005. The feline treat is available in four flavorsOcean Fish, Salmon, Chicken and Liver. Independent testing of the effects of Feline Greenies on tartar and plaque accumulation found:

Spin-offs from the original Greenies line include the Smart Chew, a non-edible chew toy for dogs available in four sizes: Jumbo, Large, Regular and Petite. A new complete and balanced baked dog snack named the Smart Biscuit has Greenies Lil' Bits baked into the green- or gold-colored treat to help freshen breath. It is available in three sizes (Small, Medium and Large) and two flavors (Double Green Chunk and Fresh Chip). This product was scheduled for release in February 2006.

Other products sold by S&M NuTec include:

More information on S&M NuTec's complete line of products is available on their website at www.nutecforpets.com.

Production snapshot

Within a short drive of company headquarters, one of S&M NuTec's facilities busily produces, packages, stores and ships products around the globe. In this 300,000-square-foot facility, over 1,400 truckloads per year are distributed and hundreds of area workers are provided with jobs. The facility is impressive in its efficiency and capacity. As the production process is (of course) highly proprietary, the details cannot be revealed, but a quick tour provided highlights.

In the injection molding area, Greenies begin as a drum filled with a resin compound that is brought to the facility to be molded, cooled and then tumbled to remove any excess edges or fines. As Joe demonstrated, the ingredients that go into Greenies are human grade prior to production and are completely edible by dogs, cats and humans alike.

After cooling, the Greenies are packaged in one of several ways. Some of them are individually wrapped on Doboy Linium 301 horizontal wrappers in individual pieces. These pieces are boxed and shrinkwrapped in a Lantech Shrink Tunnel and palleted for shipping. Others proceed to a Sandi Acre machine where the Greenies are packaged in resealable bags and then boxed and palleted for shipment. S&M NuTec's operation, including local outsource manufacturing, encompasses more than 800,000 square feet. All but one location is within an hour's drive of the company's headquarters.

Into the future

S&M NuTec has grown from a simple breath-freshening concept into a major force in the global pet treat industry. An entrepreneurial spirit and pure dedication have propelled S&M NuTec to the top seller of pet treats after just 7 years of sales. Joe and Judy Roetheli's simple plan to freshen their dog's breath has turned into a business success that neither one first envisioned. The future is bright for S&M NuTec with a growing product line, a focus on customer service, a growing work force and a skyrocketing bottom line.

Recent developments

S&M NuTech has been under intense media scrutiny in recent weeks. In response to consumer complaints and a single lawsuit filed against the company for incidents involving pets with intestinal and esophageal obstructions, the maker of Greenies said it plans to make some changes to its packaging. Joe Roetheli said the company plans to make the instructions more prominent on the packaging telling pet owners to carefully monitor their pets when feeding Greenies and make sure they feed their animal the right size treat. The company warns owners that dogs who gulp their food, or otherwise do not adequately chew Greenies, could have trouble digesting the treat, as could animals which eat Greenies that are too big or too small for their body size. Reportedly, the US Food and Drug Administration has received dozens of complaints about Greenies and is in the process of an informal inquiry, with which Roetheli said his company is cooperating.

In the wake of the press attention, some retailers have removed Greenies from their shelves. Roetheli stated that he didn't believe that sales of the treats had been affected too adversely, even with the negative publicity. In a recent press conference, Roetheli emphasized the incidence rate was incredibly low based on the number of treats sold. "The worst-case scenario statistics we have seen have one incident reported for every 8.1 million Greenies sold," he said. He also noted that the biggest misconception to come out of the press was that the Greenies packaging stated that the treat was 100% digestible. The packaging actually states that the treat is 100% edible. Roetheli commented that he would consider removing that statement from the label to prevent consumer confusion.

He added that too little focus has been given to the ability of Greenies to help keep dogs' teeth clean, saying complications from gum and tooth decay take three to five years off a dog's life.

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