Rapid growth in the UK’s premium pet food sector
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Last November, we reported that a young startup marketing home-made, ultra-premium pet food had been valued at £25m, by an unannounced set of investors. This niche market has seen several other startups achieve impressive levels of sales growth over the past five years, suggesting an increasing level of demand from British consumers for premium pet food. As people become more aware of the links between their diet and health, it seems they are extending this logic to their other non-human dependents as well.
The most successful startup in this sector has been Lily’s Kitchen. Following an unspecified capital injection from private equity firm Catterton in 2015, the company has seen its turnover grow from £15m to £26m between the 2016 – 2018 accounting periods. Whilst Lily’s Kitchen is yet to achieve profitability, they’ve featured on several prominent high-growth lists since incorporating in 2008. These include Virgin’s Fast Track 100, and the FT’s 2018 Future UK 100.
Butternut Box has raised a considerable amount of venture capital (£14m), though this has yet to translate into sales above £10m (the threshold at which private companies must publicly disclose turnover). Their most prominent backer is Passion Capital, who have backed other leading startups such as Monzo, GoCardless and Nested.
*Disclaimer: Butternut Box shares significant shareholders with Beauhurst.
Tails.com, also offering an array of premium pet food products, was recently acquired by the pet food arm of Nestlé. Considering they only incorporated in 2013, that represents a remarkably quick startup-to-exit arc. In 2017 they had already generated £13m in turnover. Their founders include the ex-Head of Supply Chain Operations at Innocent, and the founder of Lovefilm, which was one of the UK’s first e-commerce success stories from the dot-com era of internet business (i.e. late 90s early 00s). It was acquired by Amazon in 2011, with its web-player infrastructure becoming the basis for Amazon Prime. Such an impressive management team helps to explain this startup’s rapid growth and exit.
These startups are building on a foundation built by earlier “healthy pet food” SMEs. Examples include Symply, which started up in 2008, and whose grain-free (and expensive) products achieved a turnover of £25m with an operating profit of £27m in 2018, and Butcher’s, a similar company who underwent an MBO in 2007, and rapidly grew its turnover from £72m in 2010, to £92m in 2015, picking up several high-growth awards along the way.
What stands these startups’ products apart from conventional pet food? Whilst each startup is slightly different, each one has more or less created pet food with a very high meat content, either freshly prepared or completely raw. Generally overly processed components have been removed. This incorporates key tenants from the ongoing healthy food craze – unprocessed and “natural” ingredients. Generally, each company is aiming to create “human-grade” pet food. Indeed their products resemble human meals much more so than the conventional pet food most of us are used to (dried, processed pellets of ambiguous origin).
For comparison, just 4% of Tesco’s cheapest pet food is the animal advertised on the packaging. A further 40% is attributed to vague “animal derivatives”. In the luxury pet food niche there is clearly money to be made – it will be interesting to see just how much, and whether other VCs get involved.
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