EPISODE 38: Where is innovation coming from in the pet food industry?

Rachel Sheppard, director of Ventures for Mars Petcare, explains how her company is fostering innovations in the pet food and pet care space and what trends she sees coming down the pipeline.

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Lindsay Beaton sits down with Rachel Sheppard, director of Ventures for Mars Petcare, to delve into how new innovations find their way into the pet space and what Sheppard thinks might be coming in the future.


The below transcript is from Episode 38 of the Trending: Pet Food podcast, where host Lindsay Beaton spoke with Rachel Sheppard, director of Ventures for Mars Petcare, about innovations in the pet food space, why her company is fostering an entrepreneurial environment for pet care startups and what trends she sees in the pipeline. You can find the episode at Trending: Pet Food Podcast, on SoundCloud or on your favorite podcast platform. This episode originally aired July 2023.

Lindsay Beaton – Editor, Petfood Industry magazine and Host, Trending: Pet Food podcast: Hello, and welcome to Trending: Pet Food, the industry podcast where we cover all the latest hot topics and trends in pet food. I’m your host and editor of Petfood Industry magazine, Lindsay Beaton, and I’m here today with Rachel Shepherd, director of Ventures for Mars Petcare. Hi, Rachel, and welcome!

Rachel Sheppard, director of Ventures for Mars Petcare: Hi, Lindsay, thank you so much for having me.

Beaton In case you’ve not met Rachel or heard of Leap Venture Studio, here’s what you need to know. Her career is a fun mix of veterinary meets entrepreneurship. She studied Animal Science & Management at the University of California-Davis where she was preveterinary medicine. She spent a total of three years working as a veterinary assistant before getting her MBA at Santa Clara University with a focus in entrepreneurship.

Her career has since been a mix of working at small- and medium-sized companies, but always finding herself drawn to innovative groups and growth stages. Prior to her role at Mars, she was the director of global marketing at a pre-seed accelerator program where she led growth strategies and cocreated the Female Founder Initiative to help more women launch companies around the world.

Today at Mars Petcare, she co-leads the Leap Venture Studio program. In addition to running the program, she also supports a portfolio of 40 companies and finds unique ways to provide value and create connection between Mars Petcare and the 1,200-plus startups in their global community.

The Leap Venture Studio program is a partnership between Mars Petcare (the largest pet care organization in the world), leading animal welfare organization Michelson Found Animals, and world-class services platform R/GA Ventures. It is the world’s first accelerator focused exclusively on investing in early-stage and seed-stage pet care companies to improve the quality of life for both pets and their owners.

Rachel’s leadership position within Leap, as well as her unique knowledge of emerging pet businesses and overall dedication to the pet landscape is why I brought her on today to answer this question: Where is innovation coming from in the pet food industry?  

I know that I just gave a little bit of a summary about what Leap Venture Studio is, but I want to dive more into its history and why it was created -- and why Mars wanted to be involved. Can you give me a little bit more background on Leap Venture?

Sheppard: For sure, Lindsay. Mars Petcare and Michelson Found Animals -- actually leaders from both organizations happen to have sat next to each other at a conference and both had this vision for supporting pet care startups in the future. Both organizations believed that a pet care specific accelerator with very targeted support for growing the network of early-stage entrepreneurs and working with innovative solutions to support pet parent challenges in the future was something that the industry really needed. They decided to partner together to help more pet care startups accelerate and grow and get follow on investment as well, and really try to foster an entrepreneurial environment for pet care startups.

Beaton: It's such an interesting thing for such a large company to get involved in. Obviously, Mars is incredibly well known in the industry, probably one of the cornerstones that is running the industry -- a lot of brands, a lot of history there. What, do you think, drew Mars into the idea of bringing essentially new blood into the industry, when they're such an established brand and really have a rich history there in the space?

Sheppard: I really think at the end of the day, it's about getting back to our mission, which is creating a better world for pets. A better world for pets -- there are a lot of ways that Mars works on that internally. There’s a lot of things that we have in our portfolio that can support creating a better world for pets.

There's also a lot of things that people can do that aren't necessarily in our wheelhouse or aren't necessarily our core competencies. It's great to have an opportunity to support startups who are looking more further down the road, maybe even we are or have a certain type of expertise that we don't have internally but are helping all of us reach this goal of creating a better world for pets. At the end of the day, we're all here to support them, so that's what is drawing Mars in and keeping us engaged in supporting pet care startups in the long run as well.

Beaton: I think it gives you a very close-up perspective of what could be happening in the space and where the innovation lies, because you're always in front of these new companies who are trying to do new things and differentiate themselves in an industry that, frankly, is super saturated. Sometimes it can feel like everybody has done everything and there's nothing new under the sun. What have been a couple of the big trends you've seen in the last few years from the startups in the pet space. What new things are they trying to do?

Sheppard: I love this question because this question is what makes this job so much fun. Your listeners will be very familiar on the nutrition side of things, right, which is that we're seeing a lot of trends in sustainability, alternative proteins, how do we make pet parenthood more sustainable long-term, and personalization.

Pet parents want to provide the right food for their pet. I have two dogs myself. I feed them two different foods, for example. There are always new ways for brands to support pet parents in personalization for their pets’ nutrition. Those are two big trends we've seen.

You've talked to one of our portfolio companies, Native Pet, who's working on the supplement side and helping pet parents support digestive health individually.

There are some more solutions that have popped up that are interesting that we've seen grow in the last few years, like solutions designed to support pet parenthood in general. I would say that falls under the services category of ways and opportunities to get your pets to get enough exercise during the day while you're working.

We invested in a company called Borrow My Doggie in the UK, which creates a pack, if you will, for your dog. Your dog has a group of people who are helping take care of it. You may have a neighbor who walks your pet regularly, or you may have a few neighbors who walk your pet or spend time with them regularly, in this case, your job specifically. It’s such a cool way to think about how community can support pet parenthood and how maybe it takes a village more so than we think that really can help pet parents continue to provide their pets with the best life possible and everything that they want, but also be able to go to work full time and meet all their other obligations as well.

We also invested in another company called Dog Drop, which is scaling across the U.S. and is providing doggy daycare opportunities for pet parents as well. Those different types of services can be very important. We’ve also seen an increase in training apps and other types of training solutions to help pets and pet parents better communicate, as well as help people adopt more pets and make those adoptions as successful as possible. A big part of, not just adoption success, but also pet mental health and physical health, is training – that mental stimulation and challenge. So, that’s a category we've seen grow.

Two that I get a little bit interested in based on my background in veterinary medicine are some veterinary-focused solutions. Some of those are matching consumer behavior with veterinary models. For example, Mixlab, which is providing delivery of compounding pharmacy medications to pet parents. There are some things that are supporting the veterinary staff and thinking about how we make veterinary medicine the best possible place to work so that we're not seeing high turnover or burnout from the industry. Solutions like Hound are working on things like that.

There's also a lot of growth in diagnostics. We just made two investments in Oncotect and MI:RNA Diagnostics, which are both looking at how do we catch disease much sooner in pets, whether that's cancer or cardiac disease? What are we missing right now that is going to allow us to help do more of that, not just in clinic but also at home? How can we help equip pet parents with those tools in the future as well?

Those are some things that we've seen grow to date. There are three things that I can think about that are like, “What do I look for in the future -- future programs and future investments?”

I think anything that surrounds pet health and a better understanding of pet's health and the nuances of that -- whether that's mental health or nutrition or physical health or senior health -- all those things are going to become much more important in the future. I think cats continue to be underserved in terms of solutions. For cats and cat health, that’s a category we're always looking toward.

Something I feel strongly about, and I also think about a lot, is affordability and accessibility of pet parenthood. For example, with accessibility, I think about things like language. I think about the number of pets who -- there's a high number of pets in United States who don't have veterinary care at all. Some of that is because of language barriers or some of that is financial barriers or physical barriers. How do we continue to find solutions to make that more and more and more accessible. That's something I think about a lot.

The second part about that is affordability, which is having a pet is such a joyful experience. My dogs are the center of my universe. At the end of the day, how do we make sure that no matter what, if the person is able to provide their pet with a loving home and the food and shelter and water they need and the basic veterinary care -- how do we make that accessible at a reasonable price point? So those are some things to think about for the future.

Beaton: A lot of that sounds so deeply collaborative, like a determination to break down silos between the veterinary profession and accessibility to that, between pet owners and vets, between pet owners and food or products, or just being able to own a pet. Do you think that comes along naturally with the rise of humanization in pets as people want to be more involved in their pets’ lives and we're trying to respond to that?

Sheppard: That's one of the tailwinds our industry is facing -- pet parents don't want to be an average pet parent; they want to be an excellent pet parent. In the information age, that's possible across the board of how we think about their health and nutrition and what you provide them in terms of training and physical activity and veterinary care.

The trend of humanization of pets does carry us forward and will influence the solutions we'll see. To your point about collaboration, that's really the underlying thread of why Leap exists. Back to the earlier part of our conversation, we know that we can't do this alone -- create a better world for pets -- we all need to be collectively working on that. Also, it gives a huge opportunity for the industry and the different stakeholders to think about where the solutions really meet. By that I mean, when we look at the pet care industry stakeholders, we have a lot of different people involved -- we have investors, we have veterinarians, we have the pet parents, we have the pets themselves. We also have researchers and universities. There's a lot of different entities that play into pet parenthood and ultimately influence pet health in general. How do we get all these solutions to collaborate so that we're constantly working towards creating more accessibility, creating a better pet health outcome and creating more longevity and quality of life for the pets that we care for as well?

Beaton: Leap Venture Studio was founded in 2018, and I'm wondering how things have changed since you started? Are you able to work with more startup companies? Have the natures of the startup companies changed? What were some of the first companies you worked with? And what were they doing compared to what you're seeing now?

Sheppard: To clarify -- one asterick -- I've been running the Leap Venture Studio program for the almost two years now and it's been around for five. There was a time before my time and it’s important to those earlier cohorts to rewind five years ago. I think we're looking at a lot of innovation in nutrition, and that continues to change and evolve over time. Some additional categories that have come into play have been a focus on the pet parents being more involved in their pet’s health. What we just talked about -- that humanization aspect is really driving a lot of things coming to market to begin with.

It's people from outside the pet care industry who experience their own pain points and come in as founders saying, “I'd love to solve this problem, because I have it for myself and for my own pet.” Secondarily to that, of course, is this focus on sustainability, which continues to be a very common thread. That’s ramping up over time.

I would say there's also two other obvious things changing how we're seeing innovation come to market. One is, of course, the pandemic and COVID pressures, which changed consumers’ behavior. At least from my perspective, we're still trying to figure out where that consumer behavior lands exactly.

Omnichannel has become a lot more pressing for a lot of startups very early on, because I think people just don't shop in the same way they used to. I don't know if we've said for sure that the trends are going one way or another. People want to have options, so we must meet consumers where they are. I think that drives a lot of change.

When we think about the veterinary industry, that also has changed things a lot. There was a lot of wait times that people went through during COVID that created an opportunity for new veterinary models, but also at the same time created an opportunity for us to say, “How can we equip this industry with as much technology as possible that keeps pet health outcomes at the highest possible opportunity?” Meaning, we keep pets as healthy as possible, but also how do we match consumer behavior that's rapidly changing and expectations and user experiences.

Of course, there's the macroeconomic issues, which are more acute and have been more pressing in the last 12 months. The biggest part to think about there is how does that affect startups in their ability to fundraise at the end of the day? That's a broader startup focus, but it is something that we're thinking about regularly that will affect how startups are able to scale. Also, are we in a position where we're willing to assume that follow-on capital will be there like it was a few years ago?

Those are some things that influence our investment decisions, not just the decisions associated with the solution that company is bringing to market if that makes sense.

Beaton: I think that's interesting because you're playing a little bit of a crystal ball game, figuring out whether to work with these companies and help bring them to the next stage of things. There's so much going on right now in the industry -- there really is a lot of change happening. What are those conversations like? Are some of them, “This is such an amazing idea, we really want to take a risk on these guys, even though we don't really know how it's going to play out?” What is the mix of trying to play it safe versus really wanting to back the innovation that will move the industry forward?

Sheppard: That's a lovely question. I don't want to speak for everyone on the Leap Venture Studios investment committee or on the leadership team, but I will talk about how I think about evaluating companies at these different stages.

For example, if we're looking at a company that is in a more of a crowded space, for example, in this segment of pet care. We're going to really need to see some differentiation. We may expect more on the traction side, we may expect better unit economics. We may expect them to come also with some sort of differentiator, right, whatever that is, it must be a little bit unique, a little bit different. Those pressures are higher than more solutions we've seen in that segment of pet care.

Then there's the segment of pet care where we look about -- what do we see that we haven't seen a lot of solutions yet? We see a lot of pitch decks, we see a lot of applications, this is new and different. In those cases, we may feel more comfortable making a bigger “bet” and making that investment a little bit sooner when your available data points say that the market is ready to take this on, and it's going to be successful in scale because we haven't seen as many solutions and the competitive landscape looks a little bit different.

I think we've done a good job of balancing all of that to date. We'll continue to try to do that in the future as well, which is, what are we seeing change from a consumer, macroeconomic and pet parent behavior standpoint? What do we think people aren't seeing as a solution that they may need? How do we match those two things to make investments now that will be growing and scaling four to five years from now? It is a little bit of a crystal ball game, but it is also one that we are honored to be part of. Founders invite us to be a part of their journey. We're super excited about that.

I think it's important also to consider team as well. Team is important because I know that most companies are not going to look the exact same a year or two years from now, because of all the things we've just said. There are so many things we can't see coming. There are so many different pressures, every few months, there's something new that's being thrown out in the world that's making it harder and harder to be a startup and or to scale your startup. We must trust that teams are going to make those adjustments regardless. A lot of times when we're looking at an investment, yes, we'd like the solution. Yes, we believe there's an opportunity there. But we're also saying we think this team can navigate the ups and downs that are in front of them and make it to the other side to grow and scale and be a unicorn.

Beaton: What are some of the successes you're particularly proud of? Have there been any companies that have come before you guys and you went, “Oh, yes, this is going to be fun.” Then you got to watch them go on to success. I expect it's very gratifying overall, but are there particular ones that you're very proud of having backed?

Sheppard: Yes, there's quite a few. We just made six new investments. We have 46 companies now total in our portfolio. We have an awesome growing portfolio all the time. I'm so excited to work with all the founding teams.

Something I'm super excited about is just recent news -- Smalls, a fresh food for cats company. They just raised $90 million and closed their Series B about a week ago at the time of this recording. I'm very excited for them and so excited to see them growing, because again, cat is such an underserved market and category. Cat parents aren't being spoken to as much, so to see somebody just be able to get such a high level of success out of that is really wonderful. It’s also serving more cat parents and cats, bringing them healthy food.

The other one that I'm particularly proud to have been a part of is Hound, which is a company I mentioned earlier. Hound is really rethinking how to create the best possible experience for people who work in veterinary medicine. Because I worked in veterinary medicine, and I've been in hospitals, I know what those ups and downs look like, and so do they, they have that experience. For them to build something that is truly a solution that's going to address what is challenging at its core and a create better culture and experience is going to hopefully draw more people into the industry. That’s really just amazing. The founding team at Hound is wonderful, and I'm excited to be part of their journey.

Beaton: Among all the successes and the companies you've backed, has there been anything that has surprised you that you didn't see coming or you didn't know there was a need for but once you learned about it, you were like, “This is exactly what we need. This is perfect.”

Sheppard: Yes. That category, I would say really falls under, I would call it “communication with our pets.” Some of that we've seen from the perspective of Whistle, which is in the Mars portfolio. Another company we invested in that's focused on the cat version of translating data into insights, which is called Maki, which is based out of the UK. I'm just really excited about this. The idea of how do we take insights and translate that into what it means for our pet’s health? How are they doing? What's different over time? We have this live data now. That's on the consumer side and at home.

Then there’s the veterinary side as well, which I'm super excited about. Bio monitoring and understanding pain. There are two companies that pop up for me there, which is PainTrace, and another company called Manity out of France. I'm excited about these things, because they're giving us more information on what we don’t know that's going on with an individual pet in the vet hospital, like how much pain are they in?

For example, most people in veterinary medicine can tell you if the pet is walking with pain. You can see a pet walk, and you can say that dog has neck pain. But we don't know how severe it is at that point. We may know how severe it is, but we don't know how they're perceiving that severity. How much pain are pets in and to what level? Also are the medications we're giving them improving that pain and to what level? So much of that is very exciting to understand and have these communication tools that are going to allow us to better understand our pets from a physical, mental and emotional well-being perspective.

Beaton: These kinds of tools … are they building off things that already exist in the human medicine space? Or are they brand new ideas that could also expand into the human medical space? Because I know pain is something that the human medical space is always trying to refine and figure out how to determine how much pain someone is in because we can communicate as humans, but it's still a very subjective idea. They can monitor heart rate and blood pressure and things like that, but I find the idea of being able to increase that level of communication between a living thing in pain and how we can alleviate that pain absolutely fascinating. Is there any cross application there? Or are any of the ideas coming from the human space and being expanded in the pet space?

Sheppard: Candidly, I don't know the answer to that, mostly because I just focused on veterinary medicine when I get excited about new things. But I do think there's opportunities well beyond what they're working on now. It's just a matter of how and when we use those solutions and bring them into our pet health workflow. From a veterinary perspective, how do these things help inform us? How do they grow over time? I have no doubt, we'll start to see some of these things in human medicine as well.

Ideally, they're the solutions that sort of scale out. I think that's ideal for both the founders, and of course, their investors. There's a huge opportunity just to better understand what's really going on. I was talking to somebody recently about this idea of fear of pain, which is another psychological level of what does that mean for people? Does that mean they feel pain more quickly? Does that mean fear causes pain? We’re just starting to really understand so many of these things in humans. To be able to understand that for pets who can communicate with us only to a certain extent, how game-changing could that be?

Beaton: That is fascinating. We have talked about communication. We've talked about nutrition. We've talked about innovation overall. It sounds like there is a lot going on. There are a lot of players who really want to make a difference in the pet care space and really want to continue to drive things forward. What do you think the current state of innovation in pet care means for the future of the pet industry overall? And for the pet food industry in particular?

Sheppard: One, I think a lot of the trends we're seeing means that we still have a ton of tailwinds. Things are continuing to grow. There's lots of data points that show that the pet industry is going to be $300 billion by 2023. There's a lot of different things that are showcasing how much this industry is going to grow.

We’re all in it to say, “Okay, how do we make the best possible outcome for pet health and pet care as we do that, as we continue to grow and scale?” Leap exists to try to make that happen, and any other organization that's also supporting startups and pet care startups is trying to make happen.

What does that mean for pet nutrition? The idea of individualization is not over. We're still very much in the beginning of that, because there are a lot of different layers to it, right? You have your main meal, but you also have the build-the-bowl strategy with toppers and supplements. Then you have functional treats and all types of other things. We've also seen solutions come out that are enhancing water that pets are ingesting as well.

As we think about all the different ways in which we provide our pets food, we start to see more diversification, because we understand how good it is for our own digestive system and how to have a healthy but diverse set of products that we consume. How much of that will translate to pet care? I think it's going to be really interesting.

Beaton: Thanks so much for speaking with me today, Rachel. The pet food industry has so many players, and the barrier to entry can be daunting, but it’s also these new companies coming in with new ideas that can continue to drive the industry forward. It’s great to get a feel for how that’s happening. Before we go, let’s do a little plug: where can people find more information about you and Leap Venture Studio?

Sheppard: To find more information about me, you can find me on LinkedIn. To find more information about Leap Venture Studio, you can go to leapventurestudio.com and check out more about our programs as well as our portfolio.

Beaton: Awesome! That’s it for this episode of Trending: Pet Food. You can find us on PetfoodIndustry.comSoundCloud or your favorite podcast platform. You can also follow us on Instagram, @trendingpetfoodpodcast. And if you want to chat or have any feedback, I'd love to hear from you. Feel free to drop me an email: [email protected]. Once again, I'm Lindsay Beaton, your host and editor of Petfood Industry magazine, and we'll talk to you next time. Thanks for tuning in!

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