The Nutrition Capital Network (NCN) Database tracked 19 pet product acquisitions in 2018 having natural, organic, or other healthy attributes, up from nine in 2017. While 2019 looks likely to lag 2018 based on the number of acquisitions reported in the first half of the year, financings are keeping up a brisker pace. Premium and natural food trends continued to be themes in 2019, as did online opportunities and CBD-added products.
Fundamentals for growth in pet products generally remain solid as spending continues to rise. According to the American Pet Products Assn., in 2018 $72.56 billion was spent on pets in the U.S., to which food contributed $30.32 billion. For 2019, it estimated that $75.38 billion would be spent on pets in the U.S., including $31.68 billion for food. Online purchasing remains a strong trend. Investors have poured more than $100 million into direct-to-consumer pet food companies since the start of 2018, according to a Cascadia Capital report entitled “Pet Industry Overview – Spring 2019.” The Farmer’s Dog raised $49.1 million in three financing rounds, making the brand the top funded.
Financings in the pet food category of the nutrition and health & wellness industry in H1 2019 included the following:
- MidOcean Partners exited its remaining investment in former NCN Presenting Company Freshpet Inc., a manufacturer of fresh food for dogs and cats distributed in branded refrigeration units. MidOcean initially invested in 2010 after identifying Freshpet as a category changer. Freshpet reported fourth quarter 2018 net sales of $51.6 million, up 30% over the prior year period.
- Farmer’s Dog raised an $8 million Series A led by Shasta Ventures. The direct-to-consumer platform uses proprietary algorithms to create customized fresh meals. The company has raised $49.1 million in three financing rounds, making the brand the top funded.
- Wild Earth Inc., a pet food biotech startup developing no-meat kibble made from renewably sourced fungi, closed a Series A investment of $11 million led by repeat investor VegInvest. The company also received $550,000 on the ABC hit Shark Tank for 10% of the company.
Financings in the pet supplement category included the following:
- Dane Creek Capital Corp. acquired RawPaw Natural Foods of Canada, a distributor and marketer of pet supplements complementing a raw pet food diet.
- Balance Point Capital, a maker of supplements for humans (and their dogs) announced an investment in SmartyPants, Inc., a portfolio company of North Castle Partners.
- Manna Pro Products, a manufacturer of pet care and nutritional products, is acquiring Hero Pet Brands, a provider of pet nutrition, grooming and cleanup products, the latest in a series of acquisitions by Manna Pro in the healthy pet nutrition segment.
- Hemp company Elixinol acquired a 25% stake in Altmeds LLC, maker of Pet Releaf hemp-derived CBD products.
Acquisitions announced in the pet segment of the nutrition and health & wellness industry in H1 2019 included the following:
- Global flavor and fragrances company Symrise AG acquired three Missouri pet-food-ingredient businesses from Darrco LLC for approximately $900 million in debt and equity. The move was described as a “strategic acquisition of an all-natural nutrition business with annual sales of $220 million.”
- Chrysalis Acquisition Partners Inc. acquired a majority equity ownership interest in Phoenix Imports Inc., a distributor of premium, natural, single-ingredient meat and bone dog treats.
- Red Collar Pet Foods acquired Hampshire Pet Products, a co-manufacturer of corporate brand pet treats, in addition to natural and organic products. Red Collar is owned by Arbor Investments, which acquired the private label pet food manufacturing business of Mars Petcare in December 2018 and re-named it Red Collar.
- Hyper Pet LLC announced a merger with OurPet’s Company, a provider of pet toys and feeders, in a deal valued at roughly $20 million. Hyper Pet has acquired several pet brands since 2016, including Aussie Naturals, Outback Jack, Wild Eats and pet toy supplier R2P Pet.
Pace of Transaction Activity in the Nutrition and Health & Wellness Industry Gains Marginally in 2018
M&As are down 5% in 2018 but financings are up 9% as rate of growth in the number of deals slows from blistering pace of the past four years.
NCN Transaction Database tracks 942 total deals in 2018
After four years of dramatic growth that averaged almost 40% annually, the Nutrition and Health & Wellness Industry saw only a 3% increase in transaction activity in 2018 compared to 2017, with the number of mergers and acquisitions (M&As) down 5% and financings up 9% compared to 2017, according to Nutrition Capital Network (NCN) and the NCN Transaction Database.
Pet Transaction Highlights in 2018
Pet Food, Supplements and Branded Food & Beverage Lead the Top M&A List
Petfood placed two deals on NCN’s top 10 list of M&As in the nutrition and health & wellness industry in 2018, with General Mills’ acquisition of Blue Buffalo Pet Products for $8 billion at No. 2, and Ainsworth Pet Nutrition (Rachael Ray Nutrish), acquired by The J.M. Smucker company, for $1.9 billion at No. 6. The acquisition of Pinnacle Foods by ConAgra Foods ranked as the largest in the industry in 2018 at $10.9 billion.
Natural & Premium Petfood and Pet Service Platforms
In 2017, the NCN Transaction Database showed a substantial uptick in deals in natural & organic pet food, subscription pet food delivery, and at-home veterinary and online care services. That trend continued in 2018, with a consistent stream of large and small pet related transactions, two of which ranked in the top largest M&As:
- General Mills’ acquisition of Blue Buffalo Pet Products for about $8 billion, and
- The J.M. Smucker Company’s purchase of Ainsworth Pet Nutrition LLC and its star brand, Rachael Ray Nutrish, for approximately $1.9 billion.
Natural pet food remains a driving force in the U.S. pet food market thanks to “mass premiumization,” according to a report by Packaged Facts that concludes: “For the first time in years, as of early 2018, mass channels appear poised to surpass pet specialty in pet-food sales growth.” A June 2018 editorial in Petfood Industry online noted that 31 M&A pet food deals had taken place already in 2018, and that the familiar model of one pet food manufacturer or marketer buying another is evolving as food conglomerates purchase large or iconic pet food brands, and new, smaller companies buy up equally small brands.
Ownership changes also occurred in the ingredients and distribution side of the business, notably Cargill’s purchase of Pro-Pet (private label and co-manufacturer); Kemin Industries’ acquisition ofdistributor Agri-Marketing Corp.;the acquisition of Lortscher Animal Nutrition by C.J. Foods, a custom manufacturer of premium pet food; and Tyson Foods’acquisition of the poultry rendering and blending assets of American Proteins Inc.,expanding Tyson’s presence in the animal feed ingredient business.
Notablepet segment transactions in branded products and services in 2018 included:
- Dane Creek Capital Corp. added to its raw portfolio by acquiring Pets4Life, Spring Meadows Natural Pet Food,and Naturawls Pet Products, in addition to leading a $4 million seed round in PetPlate, a direct-to-consumer meal subscription service.
- Barkstrong LLC acquired Great Life Pet Food, Wild Calling! Pet Foods, and Pioneer Naturals dog food.
- Manna Pro Products LLC purchased Vetscience LLC and its Fruitables brand of premium natural dog treats.
- NomNomNow raised $13 million for custom dogfood with participation from Bullish, CircleUp, e.ventures, Tandem Capital and Greycroft.
- Nulo Pet Food, a premium pet food brand, raised $5.5 million in February according to an SEC filing, and Main Post Partners announced an undisclosed strategic growth investment in June.
- Sport Endurance Inc. announced a letter of intent to acquire TruDog, a family-owned brand of nutritional food, supplements, and pet care products for dogs, cats, and horses with a goal of exploring the potential for CBD usage among pets.
- BrightPet Nutrition Group boosted its healthy portfolio with Phoebe Products LLC, a manufacturer of baked and freeze-dried pet treats.
- Charlee Bear Products, owner of Charlee Bear Dog Treats, acquired Hound & Gatos canned pet food designed around the Paleolithic diet.
- H.I.G. Capital closed the sale of Pro-Pet LLC to Cargill Inc.
- Inflexion Private Equity invested in British pet supplement company Lintbells, its third investment in the animal care arena. Inflexion said the UK market for pet supplements is worth approximately £100 million and growing at 7% per annum.
- CleverPet, the leader in pet engagement technology, closed an investment with strategic investor Pet Wellness Partners to bring total capital raised to well over $2 million.
- Wag!, an on-demand mobile dog-walking and dog care service startup, announced a $300 million commitment from SoftBank Vision Fund.
- Rover.com, a network of pet sitters and dog walkers, announced an investment of $125 million led by T. Rowe Price Associates.
- Nestlé Purina PetCare purchased a majority stake in Tails.com in the UK, a direct-to-consumer, customized dog nutrition business.
- In Australia, Mad Paws, an online marketplace for pet services, announced a $5 million series A funding led by Qantas.
- BabelBark completed a $4.5 million Series A funding to expand globally. Launched in 2016, BabelBark connects pets with pet care businesses such as veterinary practices,
NATURAL PETFOOD DEALS
Internet-based providers of custom and fresh pet food have kibble in the crosshairs. NomNomNow raised $13 million for custom dogfood with participation from Bullish, CircleUp, e.ventures, Tandem Capital, and Greycroft. Founded in 2015, NomNomNow says it is the only made-to-order fresh pet food company having its own U.S.-based dedicated facility.
PetPlate, a direct-to-consumer subscription service that delivers fresh-cooked pet meals, closed a $4 million seed round led by Dane Creek Capital. Other investors include Amity Supply, SWAT Equity, The Yard Ventures, Castor Ventures, and BrandProject. PetPlate sells human-grade meals for dogs in pre-portioned containers. “Demand for a healthy alternative to kibble will grow exponentially in the next few years,” predicted Mark Warren, chairman & CEO of Dane Creek.
Nestlé Purina PetCare purchased a majority stake in Tails.com, a direct-to-consumer, customized dog nutrition business, from Draper Esprit. Tails.com was launched in summer 2014 in the UK and creates custom kibble based on a proprietary algorithm that defines a dog’s nutritional profile. These custom pet food transactions follow premium pet food megadeals earlier in the year (General Mills’ acquisition of Blue Buffalo and J.M. Smucker’s of Ainsworth (Nutrish).