Freshpet at 2025 dbAccess Global Consumer Conference: Navigating Growth Challenges

On Tuesday, 03 June 2025, Freshpet Inc (NASDAQ:FRPT) participated in the 2025 dbAccess Global Consumer Conference. The company addressed a challenging start to the year, citing consumer uncertainty as a key factor impacting growth. Despite these hurdles, Freshpet remains optimistic about its long-term prospects, underpinned by the growing demand for premium pet nutrition.

Key Takeaways

• Freshpet’s growth has slowed to 13-14% due to consumer uncertainty, yet the company remains focused on its Most Valuable Pet Parents (MVPs) who contribute significantly to revenue.
• The company maintains its EBITDA guidance by controlling expenses and strategically investing in media, despite lower sales.
• Freshpet is expanding its distribution channels, including e-commerce, and plans to launch new manufacturing technology in Q4 to enhance efficiency.
• A new advertising campaign is set to launch in Q3, with a focus on targeted channels like streaming and social media.
• Freshpet is confident in becoming free cash flow positive by 2026, with plans to re-evaluate its long-term revenue target if growth does not accelerate.

Financial Results

• Freshpet has adjusted its net sales target to 15-18% growth.
• The company’s adjusted EBITDA guidance is now between $190 million and $210 million.
• Q2 growth is anticipated to remain in the 13-14% range, with gross margins expected to improve in the latter half of the year.
• Freshpet continues to aim for a 48% gross margin and a 22% EBITDA margin in the long term.
• Installed capacity exceeds $1.5 billion, and the company expects to be free cash flow positive in 2026.

Operational Updates

• Freshpet is concentrating on its MVPs, who account for 70% of revenue with an average annual buy rate of $500.
• A new technology for bagged product manufacturing will be introduced in Q4, enhancing product quality and flexibility.
• Distribution efforts are expanding, with a focus on omni-channel strategies and leveraging existing retail locations for e-commerce.
• Freshpet is testing a partnership with Sam’s Club and has reduced SKU assortment to boost operational efficiency.
• The Ennis plant is projected to be the most profitable facility.

Future Outlook

• Freshpet anticipates steady growth in Q3, with acceleration expected in Q4 due to new campaigns and customer activation initiatives.
• The company plans to carefully manage capital expenditures to increase free cash flow.
• Freshpet will review its long-term revenue target of $1.8 billion in the coming quarters if growth does not accelerate.
• The company expects to surpass canned dog food sales this year.

Q&A Highlights

• Freshpet attributes the breakdown between advertising and sales to consumer uncertainty and plans to shift media spend to more targeted channels.
• The DTC initiative is focused on subscriptions and customized offerings as a brand-building effort.
• SKU assortment is actively managed to balance innovation with operational efficiency.

For a detailed understanding of Freshpet’s strategic direction, refer to the full transcript below.

Full transcript - 2025 dbAccess Global Consumer Conference:

Unidentified speaker, Moderator: Okay. Thank you. Welcome back, everybody, and welcome to our next session. I’m I’m thrilled to welcome back Freshpet to the stage, leader in fresh pet food in The United States, consistently growing double digits and tracking to over 1,000,000,000 in fiscal twenty five revenue. With us today are Billy Cyr, chief executive officer, newly appointed newly appointed chief chief operating officer, Mickey Beatty, and chief financial officer, Todd Comfer.

Thanks to all three of you for joining us. Glad to be here. Alright. We’re gonna use the entire session for q and a. And, Billy, I’m gonna start with you.

I don’t I don’t not we’re just talking about it, not unique to Freshpet, but the year started out on a more challenging foot than you’d originally anticipated, though I think a lot of companies had originally anticipated. I guess two questions. You know, how do you assess the state of play today? Mhmm. You know, are things stable?

Are they improving? Are they still further deteriorating? And as anything number two, as anything that you’ve seen recently altered your your views on long term tailwinds behind fresh pet Yeah.

Billy Cyr, CEO, Freshpet: Let me start with the second part, which is our view of the long term tailwinds has not changed. We still think consumers wanna get dogs. They wanna feed themselves better, and they want to feed their pets better as a result. So the long term tailwinds are still there. The category has a history of having moments along the way where consumers might take a pause in the decision to get a dog or to replace a dog that’s passed away or to move up in their dog food.

But over the long term, through many different cycles, the category has continued to go up and north and, to up and to the right, fairly consistently. And we we still think that’s the case, and all the data we have today says that that hasn’t changed. If you ask people why they aren’t getting a dog, why not doing something now, it’s I need to move into a bigger house, and I you know, or a house with a yard, and I’m just not ready to do that, or houses are too expensive or interest rates are too high. If I’m ready, can I get a dog? Well, I need to get out of my apartment, but I can’t get out of my apartment because my landlord won’t be having dog.

All those kinds of economic things are holding people back, but history has shown over and over again that this is just pent up demand, that at the moment when those things break, the consumer does what they’ve always wanted to do, which is get a dog, and then they treat that dog like it’s one of their children. So we see that. Now, where are we in the more near term? Where we are in the more near term is, you’re right, the first quarter was very, very uneven. We don’t describe it as economic problem as much as it’s uncertainty, because the uncertainty is the consumer is just not sure they’re going to have a job.

They’re not sure what things are going to cost. And as a result of that, they don’t make those decisions that you would normally lean into, the things that keep the economy moving. Get an appliance, get a dog, get a car, buy a bigger house or whatnot. And so we saw we saw that act that happen in the first quarter. As we’ve gotten into the second quarter, we’ve kinda seen our our growth rate as everybody sees in the Nielsen’s every Monday.

The growth rate had slowed. Right now, you know, quarter to date, the Nielsen’s are showing, in our version of the Nielsen’s, which is as much all encompassing as we can get, it’s about 13%, you know, quarter to date. And our our business has a small amount that’s in the unmeasured, which might be a half a point to a point on top of that. But that’s about what we’re seeing in the quarter to date. And it’s but at this point, it’s steady.

It’s not that the growth rate is slowing. The growth rate is very steady at this point. And we feel like that sets us up very well for the back half of the year where we have a a series of initiatives, and Nikki can give you more detail on what those initiatives are, a series of initiatives that we think will get us back on our front foot again.

Unidentified speaker, Moderator: Okay. Nikki, you wanna jump in on those initiatives? Wanna you wanna hold those for later?

Billy Cyr, CEO, Freshpet: Take it away.

Nikki Beatty, COO, Freshpet: Great. Thanks, Billy. So I I think that we we’ve got a lot of runway still for growth. That’s probably where I would start at Freshpet. Today, that we’ve got 14,000,000 households that are buying into our brand.

Unidentified speaker, Moderator: Mhmm.

Nikki Beatty, COO, Freshpet: We’re still growing with every demographic and all income groups, which I think is terrific news, but we have seen that slowdown coming through. So what we’ve started to have a look at, especially over the last six months, is really deepening our insights into who is the consumer target that we believe we can really start to go after. So we’ve gone very deep in understanding their attitudes, to the brand. We’ve really looked to where they’re getting their media, where they’re most likely to sort of learn a bit about us, and then where they’re shopping. And we’ve gone deep into these areas and then really started to think about how do we need to adjust our plan for the year to go to go after them.

And we talked I think Billy and Scott certainly talked to Cagney about MVPs, which is these most valuable pet parents. And this is the group that we’ve decided we’re really gonna go after. So certainly super serve them in everything that we do. And you might be asking, well, how many of this group is is out there? Because there’s definitely been questions about our TAM, our total addressable market.

Well, to date, we have 2,000,000 of these MVPs, and we believe there are over 7,000,000 MVPs for us to go after. And they these are the ones that have raised a high degree of interest in purchasing our brand in the future. Might not be tomorrow, but it’s definitely the time that we can grow into. So some of the initiatives we’re looking at really are involved media. So have we got the right creative to serve these MVPs?

It’s around media targeting. What do we need to do differently with where we are investing at media in the year to go? And then it’s also super serving them in terms of the distribution points. What are some of those distribution opportunities that we can really tackle? So everything strategically that we’re looking to do in the year to go is about super serving them, and I can touch on any of those areas that I like to

Unidentified speaker, Moderator: Awesome. That’s a I for many people, that might have been introductions of Nikki. So, Nikki, why don’t we take us kind of step backwards and just give us a little bit more context about what brought you to Freshpet and and what maybe has most surprised you or most excited you since you’ve, you know, taken taken taken on the role?

Nikki Beatty, COO, Freshpet: Great. So I joined in September. I think it was Billy last year. And I’ve worked in the pet industry for about five years before then. And Freshpet was a company that came onto my radar a few years ago, and that was just this terrific terror of growth really coming through and a disruptive way, I think, of, going to market, and really doing business.

So what I really liked about Freshpet and I still do really like about Freshpet was the pioneering nature of the brand. So as someone who does believe in in trying to do their best with my own healthy food choices and what I put or try to put in front of my kids each each day, I really do believe in the fresh proposition, that we offer out there. And that’s not just because it’s the healthiest, but you see the enjoyment that every dog and even my two cats get from eating fresh pet food. So strong believer in the brand. I met Scott a few years ago.

I really believed in the the purpose, the mission of the company, and felt that this was a really good cultural fit for me. And coming in at this time feels really exciting time because it’s a great opportunity to scale the business. Already a billion in revenue, but I do believe terrific headroom still for very significant growth. So with my background a little bit more in established consumer goods, I just felt I could bring some skills and experience that would really help scale the business.

Unidentified speaker, Moderator: Good. Yeah.

Billy Cyr, CEO, Freshpet: I I would just add to that. You know, as we talked for the last couple years, we really wanted to build bench strength for our for our company, and we got behind in talent. This was a huge opportunity for us to get an a plus player who understood the space but also brought the skills of a much larger enterprise into a very much of an entrepreneurial organization. And so it’s part of our growing up phase, is bringing Nikki in to play that role. And it’s been it’s been a good thing to have her on our team.

Unidentified speaker, Moderator: Good. Yeah. Billy, the the if you just kind of pan out within the within within pet food is competitive space, within within fresh pet pet food, it’s becoming increasingly competitive. What do you think sets Freshpet apart the most? And to what extent do you believe that the the diff the points of difference you have today are are structural and sustainable?

Billy Cyr, CEO, Freshpet: Yeah. I mean, obviously, it has to start with a product that is demonstrably different from anything else that people can get, and that drives a level of preference and satisfaction that can’t be delivered by the competitive alternatives. And we’ve built an entire business system that is designed to deliver that experience in an incredibly, strong and competitive and efficient way. So it goes everything from the products that we create, the technology to create them, the know how how to make a fresh product that can go through a refrigerated supply chain to a retail outlet, deliver that exceptional quality at the re- at retail and in the consumer’s fridge and in the- in the dog’s bowl, but do that consistently over time. And that means we have to have manufacturing expertise.

There’s manufacturing scale that’s critically important. Manufacturing scale in fresh delivers the opportunity to have much broader variety and much fresher product for the consumer. Distribution scale. And that’s not just the, you know, the cost or the system of delivering it from manufacturing to the retail outlet. It’s also owning those fridges in the store and the expertise to know how to place the fridges, service the fridges, get the optimal assortment in the fridges.

All that is critically important, and those are the advantages we’ve built over a long period of time. The next horizon of that is manufacturing technology. We’ve been working on finding new ways to make an exceptional product incredibly efficiently for the last five years. We think we’ve got some breakthroughs in that area, and we’ll be demonstrating that in the fourth quarter of this year. But it’ll be just another one of the legs in this stool that supports a very durable consumer franchise.

Preferred product, you know, preferred retail presentation and control of that presentation, the manufacturing expertise, the manufacturing scale, all that adds up to a very durable business.

Unidentified speaker, Moderator: Okay. I’m I’m sorry if I missed it. The fourth quarter the illusion of fourth

Billy Cyr, CEO, Freshpet: quarter of we are we’ve been talking about we’ve developed a new technology that we’re very excited about. We’ve we’ve run it at a pilot plant level and bench level for a long time. We now are building a production scale line of a new technology to make our bagged products in a way that is more, economically advantageous to us. In other words, higher throughputs, higher yields, much better consistent quality, and also some product flexibility. So it’ll give us the opportunity to produce a wider array of products than we produce today.

That technology will start up in the fourth quarter, and we’d be shipping off that line sometime in November, December. And it’s we’re very excited by it.

Unidentified speaker, Moderator: Okay. Great. Todd, you know, I guess, maybe you can kind of chime in here on on the steps the company has taken year to date, the pivots that have been made from a financial perspective to adjust to the lower lower volume expectations and yet fund some of the the proactive course corrections that that Nikki and and Billy had kinda alluded to earlier.

Todd Comfer, CFO, Freshpet: Yeah. So, obviously, after the first quarter, slower start than anticipated as we brought the the net sales target down to 15 to 18% and adjusted EBITDA EBITDA guidance from a hundred and 90,000,000 to $210,000,000. We feel very comfortable despite the the lower sales. We, you know, we can we can hit that EBITDA target. We are looking at every expense very closely, making sure that we’re very tight, especially from a g and a perspective.

We’re trying to manage the plant cost as tight as possible without doing anything that long term disadvantages us. We’re making a modest increased investment in media. The returns are still very positive, not as positive as they were probably a year ago, but they’re still generating a nice return. Nick and I meet on it literally every week and discuss it. If those returns aren’t as robust as we’d like them to be, we’ll we’ll we’ll pull back a little bit.

We’ll we’ll be smart about it. But we still will get some nice leverage, especially in the g and a piece of our business throughout the year.

Unidentified speaker, Moderator: Okay. Nikki, is the the you talked about sort of the the emphasis on MVPs and the relative sustainability and the opportunity around MVPs. Is that the focus and, you know, is that where the dollars are going? And or, you know, how do you how do you make sure that the kind of the the the more casual, not yet committed fresh pack consumer doesn’t you don’t miss that opportunity. So what’s the what’s the balance of focus in this tougher environment?

Are you leaning just further into MVPs, or what are you doing with the more casual consumer?

Nikki Beatty, COO, Freshpet: Yeah. That’s a great question. And I think strategically, we’ve really weighed up that balance between total households and then the mix of growth in households and growth in buy rates. And maybe the first thing I’d say is is an MVP for us has an average annual buy rate spend of around $500.

Unidentified speaker, Moderator: Mhmm.

Nikki Beatty, COO, Freshpet: Our average household in the Freshpet franchise is a hundred and $10. So there’s a really big difference between those two elements. So, obviously, the more MVPs we get into the brand, and currently, 70% of our revenue is driven from these MVPs, is really gonna be able to deliver significant revenue and also profit growth. Also, the other characteristic of an MVP is once you’ve got them in, their retention rates are obviously very high as well. So you might end up paying slightly more to bring them into the franchise, but you’ve got a much higher lifetime value that’s coming through from those consumers too.

So the key question is, by super serving our MVPs, do we still believe we can continue to get light or occasional households into the brand, which is still part of that TAM for the long term? And our answer is yes. We believe we can do. They’re not mutually exclusive, but what we will be doing, is making sure that our creative, creative we will be testing for MVPs, but we will also be testing against the general population of households too. But we’ve gotta make sure that our creative works very, very well for those MVPs.

And part of that is that insights that I was talking a little bit about about what makes an MVP different. And it really is that healthy lifestyle, that healthy attitude to food, and they’re looking for more reasons to believe that not just fresh is good, but that fresh gives you the healthiest and the best proposition for your dog. So you will start to see us as a brand move a little bit more into that territory. And then maybe as a typical household, you might be used to seeing our advertising, certainly heavy in sports, certainly sort of heavy in cable TV. You might start to see us now moving a bit more into streaming, and you might see us showing up a bit more in social and in other digital marketing platforms as well.

Unidentified speaker, Moderator: Okay.

Nikki Beatty, COO, Freshpet: So it’s just a better mix really of marketing spend that we’ll be putting through in the year to go.

Unidentified speaker, Moderator: Okay. I I want I wanna come back to marketing in a in a bit. But but I I was actually what was going in my mind was was distribution because I think, you know, increased distribution has been you know, it’s kinda synonymous with with Freshpet, but it’s not just more, but I would argue that there’s opportunities for better quality. Right. So how do you think about the the march towards more distribution in in this environment, particularly in twenty in twenty five?

Are there ways to to to accelerate that push to kinda counter some of the demand headwinds?

Billy Cyr, CEO, Freshpet: Yeah. Let me frame it, and Nikki give you some some specifics on it. Obviously, as a brand that is not broad, full distribution, we have extensive distribution today, but we’re not everywhere that people buy pet food today. There’s always gonna be some white space opportunity, and that’s what we’ve been filling on a very consistent, steady basis over time. What’s happening more episodically and is frankly becoming much more strategic for our customers is those really big bets that a customer will make that they want to either get into this category for the first time, as Costco did over the last couple of years, as we have a test underway at Sam’s right now and, you know, see how that goes.

But also, the big bets they make to say, I’m going to make fresh the centerpiece of my category because this is where I can win in pet food relative to the online players. And when that happens, those are big decisions. They happen more episodically. They happen at a higher level at the retailer. But when they happen, they become a big thing, and they just don’t come in on a steady basis.

But we’ve been working on those for many years. We’ve had some of those happen. We have some of those in the future. Nikki can give you a little bit more Sure. View on that.

Nikki Beatty, COO, Freshpet: Yeah. One of my learnings is we get terrific engagement, with retailers right now. We are the driver of growth. There’s not many brands that are growing within pet right now. And despite the slowdown, we are still head and shoulders the growth driver for the overall category.

I think that the the challenge for us is when you’re going in looking for space, you’re looking for an extra forefoot. You’re not going in with one product, two products, switching things around on a shelf. You need an extra forefoot to put that chiller in. And the kind of initiatives that Billy’s talking about could well be looking at spaces outside of the pet category, or it might be incremental space, whether it’s end caps or other display space that we would be looking to take over. So those kind of conversations take us a little bit of time, but what I’m really pleased about is the level of engagement we’re getting on the long term vision of the role that Fresh can play.

And certainly in a grocery store, in a mass store sells a lot of fresh fruit, vegetables. We play that key anchor role for the category, and then we are haloing with the fresh credentials that they’re building within human food as well. So we think we’ve got a really unique opportunity to play in that space. And then the other part I’d highlight with distribution is it’s not just retail distribution that’s an opportunity for us. It’s also selling to the omni shopper through ecommerce.

Todd Comfer, CFO, Freshpet: Mhmm.

Nikki Beatty, COO, Freshpet: So we’re really looking to take advantage, of that 28,000 distribution points we’ve got. They’re like micro fulfillment centers spread across The US. We’re really looking to take advantage of all those distribution points and really try and drive a much higher rate of click and collect and really try and make sure that we are servicing that online shopper through those distribution points in a different way. And that’s an area that I think is untapped for us at Freshpet. You saw in q one, we grew our ecommerce sales by over 40%, And I think that that is still for us a really big opportunity, and you need more chillers, more distribution to be able to service the capacity for online as well.

So when we’re talking to retailers at the moment, we’re really talking about the omni shopper, not just that in store shopper coming in.

Unidentified speaker, Moderator: Do do you think the conversation with retailers is I mean, in some ways, it’s more difficult because the the the category is slower. They’re kind the retailers are generally in survival mode in a lot of different respects. So thinking bigger and strategically is harder. On the other hand, the need is greater.

Nikki Beatty, COO, Freshpet: Mhmm.

Unidentified speaker, Moderator: So is that is that a is that an impediment to these conversations, or is that an opportunity, an enabler?

Nikki Beatty, COO, Freshpet: Nothing happens as fast as we’d like. Yeah. I think that’s the piece as an entrepreneurial company is you’re looking for decisions. We can move typically quicker than a retailer can move in the current environment. So I think it really does depend on the retailer.

Certain retailers think about the long game and are really prepared to work with you, looking at really where your estimates, your forecasts are, and building capacity for the long term. Others are a little bit more opportunistic. And it’s our job really to flex, I think, into those different spaces as we go and make sure that we’re an attractive partner for long term growth. And I think what’s different versus a few years ago is they’re looking for us to shape what that category vision looks like versus coming in and selling just under the Freshpet banner.

Billy Cyr, CEO, Freshpet: Yeah. And I would I would add to that that the best decisions are made when somebody’s making it not in reaction to the current environment, but it is part of their long term strategic plan that they wanna attract the person who is a, you know, pet household. They might be buying their pet food somewhere else. They want to get them to come in the store. They want them to shop all the departments of that store, and they view us as a strategic part of that plan to build out their retail presence.

If that’s the, if that’s what the retailer’s looking at, that’s the way they’re thinking, that’s gonna be a really good long term decision for us and for them. K.

Unidentified speaker, Moderator: Okay. We’ll come now advertising. Mhmm. Told you we’d come back to advertising. Okay.

I have a question for you for each of you on advertising. Sure. Let me get them all out there, then we can decide how you wanna parse that. But so the first one is, you know, for you, Billy. You know, in the past, we’ve talked a lot about the tight correlation between A and P and future future sales

Billy Cyr, CEO, Freshpet: Yeah.

Unidentified speaker, Moderator: For Freshpet. That correlation seemed to have at least temporarily broken down the first part of this year.

Billy Cyr, CEO, Freshpet: Wobbled a little

Unidentified speaker, Moderator: bit. Wobbled. Yeah. Better word. Mhmm.

So sort of what’s your root cause diagnosis as to why? Right? How how do you think about it going forward? Todd, maybe for you as we like, how does that relate to your, thinking around ROI of future spend? And and then, Nikki, talk about kind of where kind of where we’re targeting future spend.

But let’s start with root cause diagnosis.

Billy Cyr, CEO, Freshpet: Yeah. And the root cause is that you have to- when you put advertising on the air and expect to get some response from the consumer, the consumer has to be ready to make some form of a change. They have to have a need that’s expressed by their pet or by themselves, or they have to be getting a pet. There has to be some need that’s expressed. And if there’s a reduced amount of that need in the market, you are going to get less of a return for the advertising.

And we’re seeing that. We saw that, and we measure it very ruthlessly. We measure our CAC on a monthly, quarterly, annual basis to see where we are, and we clearly have seen the CAC go up. It’s still an investment grade, but we’ve seen the CAC go up. If it wasn’t if if we couldn’t look at the economic data, meaning the response by income group or the response by age or any of those things and not see a pattern there, we’d worry about it.

But the reality is we’re seeing what you would see as a very classic example of consumers under stress. The lowest income consumers and the middle income consumers are hit hardest. The higher income consumers are hit the least. It’s very common pattern, so it doesn’t give us pause. Basically tells us you’re in an environment where you should expect less effectiveness, but we will, all things will return.

Okay.

Todd Comfer, CFO, Freshpet: Yeah. Look, we’re in a good position. We’re very fortunate that the operationally, we’re performing very well. The plants, all three of our facilities are doing a really nice job right now. Ennis has really turned the corner for us in the last couple of months.

It last year was our least profitable facility. It will likely end the year, our most profitable facility as from a margin perspective, as the as the business scales up. That gives us some financial flexibility to invest a little bit more money in media if the returns are there. And again, we’re looking at it constantly. We’ve given a little bit more in our latest outlook, a nominal amount to continue to drive the business because we’re here for the long term.

Again, if we’re sitting here two or three months from now and the returns are not where we want to be, we’ll pull back a little bit because it’s just it’s just not smart to invest. But, fortunately, we’re way ahead, you the last couple of years from a margin perspective. The plants are running really well, and that gives us some confidence to invest.

Unidentified speaker, Moderator: Okay. Mickey, maybe just more more color on, you know, the marketing that you are putting into market today, how it’s maybe Nuance a little bit different than the past and, you know, any any green shoots you’re seeing from it.

Nikki Beatty, COO, Freshpet: I I would say that we are actually running and there is huge amounts of love for our campaign. We get every week, we get consumers writing in, calling, telling us how much they love they love our campaign. But when you take a step back, we’ve actually been running the same platform campaign now for the last two years. And if you think about our growth curve, I would say we’re in what is sort of the early majority stage of our development as a brand. And it’s now time for us to tell a slightly different story.

So where we’re at, I think, overall is we are getting, very, very strong sort of awareness and responsiveness, but slightly less impact now, certainly without MVPs than we have had historically. And I think that really does link to some of the places where we’re choosing to invest our media. So we’ve been pretty heavy on linear at the moment, which drives very high awareness, but we’ve not been very targeted, and we still have a huge headroom to grow into with streaming. So that will become a bigger amount of our spend. And then what social and lower funnel activity allows you to do is it allows you to tell slightly different creatives and different parts of the Freshpet story that may appeal to different users on the brand.

So we know that there are some small dog households, for example, that really wanna see creative showing up with small dogs and why Freshpet really benefits small dogs, senior dogs, another really big opportunity space, etcetera, for us. So by being sort of more targeted and more focused in our advertising, we believe we can actually tell more layers of that story. So that’s some of the learnings that we’ve got really in the year to date, that there’s a little bit less effectiveness coming through in linear TV. There’s more effectiveness coming through in some of the other tactics.

Unidentified speaker, Moderator: Does the organization have the capability to be more focused, or is that a learning curve at the same time it is a, you know, a learning itself?

Nikki Beatty, COO, Freshpet: I think we we are learning together. I think that that would probably be the best way to describe it. We’ve got some terrific agency partners, and I’m really impressed with the level of data we’re able to get from our media agency partners. As Todd says, every week, we’re sitting here. We get the ROI back from our advertising.

We’re able to make adjustments really within the plan accordingly, which I think is absolutely terrific. But if I had to say where do we need to build capabilities over the coming years, it will be a bit more in that performance marketing part of the business, especially as we start to put some more significant spend into digital. Mhmm. And as we grow, for example, our ecommerce business, that will also require some different marketing skills and capabilities that fall under that arena.

Unidentified speaker, Moderator: Okay. Todd, I guess as as you as you kinda grapple with the demand volatility and think through the different investment spending options, I guess, just maybe level set us level set for us a bit on on how you’re thinking about year to go performance financially for the for the company. I mean, just it gets this base case expectations in terms of cadence of results from here, you know, within the guidance range you’ve already Yeah.

Todd Comfer, CFO, Freshpet: Mean, we don’t we don’t typically give quarterly numbers, but let let me give you some things to think about. So Billy mentioned we’re kinda tracking all in in from a growth perspective in that 13 to 14% range. Mhmm. That’s that’s probably where we’re gonna be plus or minus for q two. We’re not anticipating any significant change probably into q three, probably somewhere in that arena.

We do feel we will accelerate the business as we end the year. We have a new campaign that we’re really excited about it. We think we’ll coming in q three, which we think will have a positive impact. We’re starting to lap some easier comps as we get into the second half of the year, and Nikki and her team are doing an amazing job from a customer activation perspective, and we think some of these things will hit in the back part of the year as well and accelerate growth as as we end So, you know, not exactly where we wanted to be, obviously, as we started the year, but we feel like we’re gonna end in a good place.

We will invest a fair amount in media in q two. If you remember, if you look at last year, we had very nominal media growth in q two, so we’re lapping that. So we’ll have a significant impact this quarter. Gross margins will probably be similar to what they were in q one, and they should accelerate a bit in the second half as well.

Unidentified speaker, Moderator: Okay. And at the I mean, at the same time, we’re we’re kinda thinking through the uncertainties in ’25. You know, you’ve remained committed to the the financial targets that you’d set out beyond beyond ’25, looking out to, you know, ’26, ’20 ’7

Billy Cyr, CEO, Freshpet: Yeah.

Unidentified speaker, Moderator: Objectives. I guess, what preserves sort of confidence in your ability to attain those goals? Sure. Why are those still the right goals? Yeah.

So I I

Todd Comfer, CFO, Freshpet: break down in two pieces. The margin the margin piece that we laid out, the 48% gross margin and 22% EBITDA, we feel great about. Again, like as I mentioned earlier, the plants are operating very well. We have levers in the p and l. And even if the business, you know, doesn’t is below what we kinda set out from a net sales target, we have levers in the p and l and upside to to hit those that 48 and the 22.

The wildcard is obviously the net sales. So if you know, we’re not gonna change the target way out of the gate, right out of the gate that we set at the February, we wanna see how this is this a blip and we’re gonna reaccelerate, or is this if it or is it gonna extend for, you know, a longer period of time? If we’re sitting here a couple quarters from now and it has not accelerated, we’ll obviously have to address the the 1,800,000,000.0, but still there even if that 1,800,000,000.0 has to come down at some point, we still have a tremendous the TAM’s enormous, We still have a ton of upside in this business. And, the margins and the cash flow, we feel great about.

Unidentified speaker, Moderator: Yeah. And we talk about the margins and the levers that you have to kind of preserve those margins and and and cash flow. You know, you talked about kind of pushing CapEx out into the right. There’s probably some a toggle between how much is just sort of, you know, new build out at Enos versus Yep. Versus, you know, kinda retrofitting existing capacity.

Just talk us through the the the puts and takes there and just the, a, the the kind of little little more description about what those lever levers are, and then just, you know, your confidence level that you’ll be able to kind of identify the need and pull them, you know, in time.

Todd Comfer, CFO, Freshpet: Sure. So good news is we are sitting on installed capacity of more than $1,500,000,000 today. That doesn’t mean they’re fully staffed, that doesn’t mean those lines are operating at the at the highest level that they eventually will be at, but fully staffed, operating at a high level, we have more than $1,500,000,000 of capacity installed today. So that gives us some financial flexibility to decide when to add more and how much to add over the next, you know, several quarters. Mhmm.

We literally meet on this every month. We go through a deep dive on what we think the demand is. We do a deep dive of what capacity is coming online, the timing of the projects, whether we’re retrofitting a line, whether, you know, new new technology, when that’s coming in place. So we could do a deep dive every month to assess how much how much capital we need to spend, and do we have the ability to move things out and increase free cash flow or not. So because of that, I’m very confident under, you know, any reasonable scenario of top line growth

Billy Cyr, CEO, Freshpet: Mhmm.

Todd Comfer, CFO, Freshpet: That we will be free cash flow positive in in ’26. And, look, I think, you know, we have a good system in place. Like I said earlier, the plants are operating very, very well. The slowdown has had a, you know, a nice side effect of us getting the legs underneath us and being being able to test a number of things and getting Ennis online. So I feel very good about where we are.

Yep.

Unidentified speaker, Moderator: Okay. Great. I wanna hit a couple topics in the time we have left. The the first one, I know it’s relatively small, but the DTC initiative that you’ve talked about, you talked more about it at at at CAGNY, and then you confirmed the the expansion of it on the last earnings call in terms of the the the Freshpet custom meals business. I guess just talk a little bit more about what you’re doing there, why now is the time to kind of push in that direction, how it’s differentiated, how it supports the the base retail business, and just sort of how it fits into the long term story.

Billy Cyr, CEO, Freshpet: Nikki and I will tag team this one as I mean, just we’ve first of all, we wanna be where wherever the consumer wants to shop for a product like ours, a fresh pet food product. And so we’ve got a great retail presence. As Nikki described, we’re building out the e commerce platform quite nicely. And by that, we describe it as, you know, Instacart, you know, the curbside pickup, walmart.com, whatever this retailer systems are. We use our fridges as the remote vehicles.

But there’s a reasonable number of consumers who are buying fresh or, in most cases, frozen pet food, via DTC. And so we wanna make sure that consumers who preferred to buy that way had an alternative. So we did a lot of experimentation and came up with a model that today, it’s very small. It’s not a big part of our business. But for those consumers who want to buy that way, it’s a viable alternative.

And so that gives us a fairly full suite of alternatives for people’s ability to buy our product. Do you wanna describe a little bit more about how we do that?

Nikki Beatty, COO, Freshpet: Yeah. I think that’s great, Billy. I think the one thing I’d say is we’ve talked a lot about the TAM and the MVP numbers today. D to c has a little bit of a role in helping us to move into that TAM, but the vast majority of the TAM and the MVP opportunity we’ve got is not dependent at all on on d to c. So I wanna make that very clear because I think there’s definitely been a little bit questions around that as well.

So when we take a little bit of a look at d two c, why do I think it’s valuable? Well, it drives subscriptions. So I go back to that buy rate again, on that MVP at $500. Now we’re very nascent with our d to c business, but we’re very encouraged by the last couple of months that we’ve seen that the retention rates are really in a very good spot. And then the average buy rate that it delivers, if we keep those cohorts engaged, we could be delivering over a thousand dollars, of of pet food out there to those loyal households.

So do we see this as a big household play? I think in transparency, we don’t see this as a big household play, but we do think it plays a valuable part in building the brand. And there is definitely a subset of consumers out there that are only looking for that home delivery, and they’re looking for something that’s really customized, that really fits around their specific dog needs. So I think for us, it’s important that we have a play in there, but it’s not a play that in any way detracts from what the core business is, which is very much our our retail model and the ecommerce that we believe we can deliver through the fridge network.

Unidentified speaker, Moderator: Does the, you know, the fact that you’re, selling at retail price points, you know, make kinda self fund the business from the start and make it economically accretive even though it’s small, or is there a level of scale that you need to achieve to make it viable?

Billy Cyr, CEO, Freshpet: You need scale. And there there’s a fairly there’s a there’s a marketing investment that has to be made to attract the consumers.

Unidentified speaker, Moderator: Okay. So small, but it needs to be a little bit bigger.

Billy Cyr, CEO, Freshpet: Yeah. Got

Unidentified speaker, Moderator: it. Todd, you know, the other topic I wanna talk about in our closing minutes here just is around SKU assortment. Yeah. It’s right. Because right now, it’s it’s from to my mind, it’s it’s a relatively simple assortment, which has benefits, but there seems to be also opportunities to, you know, to unlock growth if you can customize formulations, pack sizes, pack formats, etcetera.

You know? So how how much opportunities how much how important is that to unlocking the opportunity set from a revenue perspective long term? And then on the flip side, you know, how much complexity is too complex, and how do you balance that?

Todd Comfer, CFO, Freshpet: Yeah. We’ve actually reduced the number of SKUs in the last couple of years, which has actually helped our our, you know, operating nicely. Look, there’s no perfect answer to this question. I would say we tend to like innovations, a nice piece of our growth. It’s not the main driver.

It adds a couple points of growth every year. So there’s probably, you know, three or four SKUs that we add on an annual basis. What we tend to do is we bring three or four in, we tend to, you know, cut off three or four that are not performing. So in a perfect world, I’d like to keep it pretty stable to where it is today. That helps the plants get a lot more efficient because what we do is very hard, and giving you know, doubling the number of SKUs would just add complexity and runtime and and, you know, impair our ability to grow margins over time.

But the the reality is we need to have innovation. We need to, you know, broaden the appeal to to more and more consumers, but we’ll do it in a manageable way.

Unidentified speaker, Moderator: Okay. If you’re trending if you end up trending below the 1.8 trajectory and you’re you’re pulling the levers to toggle away from new capacity build outs, you know, so you’re you know, there’s less CapEx investment. Does that limit your ability to diversify? No. Or is that those are

Todd Comfer, CFO, Freshpet: independent? No. Independent.

Unidentified speaker, Moderator: K. Very good. Alright. We’ve got a couple minutes left. So I guess, you know, I’m a take you beyond your 27 objectives and force you to look out to twenty thirty.

Billy, if you were to look back, you know, what what do you wanna be able to say were the company’s biggest accomplishments over the next five years?

Billy Cyr, CEO, Freshpet: I’ll start very close to home and personal. I have a six year old Samoyed who has been fed fresh pet her entire life. She’ll be 11 then. She’s in our investor presentation. She’s the big white fluffy dog you’ve seen in our investor presentations.

She’ll have been fed her entire life, and I’m hopeful that at that point, she’s healthy, vital, and like a puppy. So that’s a very personal part of it. I think that you have to start with, we are a very mission driven company. And if we’re in the business of changing the way people feed their pets and doing that for the better, I’d love us to be looking in 02/1930, looking back and seeing how we have changed this category. We have a chart out there that shows how fresh pet food will pass the canned dog food in the grocery channel.

It’s passing it this year as we speak. And that’s part of that trend. Mean, canned dog food’s the oldest form of commercial dog food. We’ll surpass that. You know, we’ll be heading towards, surpassing dry dog food at some point further out in the future.

But if we change this category for the better and have done all the work to build the infrastructure to support it, created the products that meet the consumers’ needs, have done an incredible job of building a brand equity, and have made it attractive for all the stakeholders who are involved, our shareholders, our employees, the pet parents who buy the product, the pets themselves, that would be a really big thing. Because it’s not often in your career you get a chance to participate in a category changing opportunity like this. What attracted Nikki, it’s what attracted me to this business, is the opportunity to change an industry and change it for the better. And so that would be, I mean, if you’re in 2030 looking back and you look and say, if somebody says to me, I can’t believe we ever fed our dogs dry dog food, I’d feel like we won.

Unidentified speaker, Moderator: Great. On that note, we’ll wrap it up. Billy, Nikki, Todd, thank you very much. Thank you all for joining.

Billy Cyr, CEO, Freshpet: Great. Thank you.

Unidentified speaker, Moderator: Appreciate it. Thank you

Todd Comfer, CFO, Freshpet: very much.

Nikki Beatty, COO, Freshpet: Bye. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.