New Product business development plan - from concept to early growth projections

1. organic rascals
NYU – STERN
Introducing & Managing
New Product
Pet Industry

2. organic rascalsInitial Concept
Nutrient-balanced meals designed by you with natural
and organic ingredients fitting your pets’ age and lifestyle.
Your pets’ personalized meals are packaged at peak
freshness in resealable pouches, delivered to your
location of choice.

3. organic rascals
The shift towards smaller pets (dogs and cats) is led
by changing lifestyles and demographic patterns:
➢ urbanization is forcing people into smaller spaces
where large pets are not practical
➢ longer working/commuting hours where high
maintenance pets are not feasible
➢ young singles are looking for a small, easy to care
for pet for companionship
Leading to:
➢ pet owners who are happy to spend heavily on
ensuring they have the best possible quality of life
➢ Overall humanization: pet owners talk to their pets,
treat them like children, confide secrets in them, set
up social networking profiles for them, and share
photos, videos, and trust them more than they trust
their partners
70% consider pets
as beloved
members of the
family and as
”kids”
27% pets are well
cared for but still
animals
Trend #1: Pet Humanization

4. organic rascals
Treats are a major growth area, and
one that is open to high levels of
humanization - taps into trends towards
indulgence, which are particularly
prominent among the humanizing pet
owner
More pet owners are trading up to
premium pet foods and products
The trend is expected to continue
Foods is marketed with the human appeal of enticing
sounding recipes and echo trends in human food of
organic, sustainable ingredients
Industry Trend: Pet Humanization

5. organic rascals
Pet Humanization Psychographics

6. organic rascals
Pet humanization
is not a passing
fad and is here to
stay!
Industry Trend: Pet Humanization

7. organic rascals
Trend#2 – Going Natural and Organic
$1.7B
market
Labels such as “natural,” “organic” and “grain-free” increasingly command larger portions of shelf space, and
buzzwords like “superfoods”, “high protein”, or “freshly made” have migrated from human food into pet food
Pet Humanization
Human Natural and Organic Food
and Beverage

8. organic rascals
Natural and Organic Psychographics
What are their human food trends that can migrate to pet food?
If target
Millennials
and GenY
If target
Boomers
and WWII
Gen

9. organic rascals
Pet Food Market Overview
Pet Food$12 Billion
(14% CAGR in next 5 years)
Wet food
$2.2B (18% of total)
Dry food
$7.1B (59% of total)
Treats
$2.8B (23% of total)
Overall picture for the dog food market is positive, with sales expected to grow by 14% between 2014
and 2019, increase driven by growth in premium moist/wet food
All organic ($970M, 8% of total)
Some Organic & Natural ($727M, 6% of total)
Non Organic & Some Natural ($10.4B, 86% of
total)

10. organic rascals
Pet Food Market Growth
Mintel estimates sales of pet food will reach $20.8 billion in 2014, with
12% growth between 2008 and 2014. Year-over-year growth has been
consistent and is expected to remain so, increasing the pet food market
to $23.3 billion by 2019

11. organic rascals
Pet Food Market Annual Spending
Spending on pets in the US in 2014 will be around US$60 billion by the end of 2014 (APPA)
Spending increased by 5% between 2012 and 2013, despite the pet population increasing by only
0.4%. This indicates a strong increase in spending per pet.
Most of this spend was on food.

12. organic rascals
Industry Cycle: Natural and Organic
• While organic food is growing in the human world, it still does not approach mass-market size
• The organic pet food market is also may be just the beginning as all pet food aspects lag somewhat behind
their human trend counterparts
Organic &
Natural Human
Food Industry
Organic &
Natural Pet
Food Industry

13. organic rascals
Pet Food Natural and Organic - Demographics
Although “All Natural” claim is valid for many customers Organic pet food buyers tend to be
mostly younger Millennials, and wealthier Gen Y

14. organic rascals
Going Natural and Organic Customer Needs
Millennials: “How important are the following factors when choosing which pet food?”
What Can We Satisfy?
Develop via flavor offerings
Home delivery + FreshDirect
Keep up with online reviews & post relevant product information
Make vitamins a part of the ingredients
Organic & Natural Ingredients Claim
Package design and shape

15. organic rascals
Pet Food Channel Overview
“OTHER” will be our
channel of distribution:
A. limits competitive
response
B. more control over
price/margins
C. more control over
quality

16. organic rascals
Pet Food Channels of Distribution
Current Offer:
A. Convenience
Emerging Purchasing Locations: Drug stores showed significant growth of 15% during 2012-
2014, though they only have a 1.2% share of the market. Drug stores currently offer neither the one-
stop shopping opportunity of a supermarket, nor the selection of other retailers such as mass
merchandisers and specialty pet stores, but can be an attractive option for city dwellers looking for
convenience
B. Pet parents seeking the best food are discovering organic through smaller brands set up close to
human organic food shopping locations
Competitor in South, 1st to market organic pet food market - Kriser’s, owned by Brad Kriser, is a rapidly
growing upscale pet food chain; launched in 2013. Kriser’s revenue was forecasted to grow 40% as of
April 17, 2013, per Bloomberg’s BusinessWeek. “the Whole Foods of pets” and tries to set up shop by
Whole Foods stores as they serve similar customers.

17. organic rascals
Pet Food Seasonality
Google Trend shows little to no seasonality on “pet food”, slightly higher demand from May-
September month
Google Trend shows a slight decline in search from October - March on “organic” and
“natural”, and slightly higher demand from April-September = Warm time trend. Otherwise
seasonality does not play a large role in product sales
2007 pet food recalls
due to the
contamination

18. organic rascals
Competitor Value Proposition

19. organic rascals
Competitor Value Proposition

20. organic rascals
Competitor Value Proposition

21. organic rascals
Competitor Value Proposition

22. organic rascals
Competitive Product Analysis
Product
Natural &
Organic?
Customization? Packaging
Channels of
Distribution
Price
Organic
Rascals
Yes Yes Fresh Home Delivery
Fresh Direct
$$$
Freshpet Yes No Fresh Specialty Boutique $$$
Orijen Yes No Shelf Stable Specialty
Boutique/Online
$$$
Merrick Yes No Shelf Stable Specialty
Boutique/Online
$$
Blue
Buffalo
Yes No Shelf Stable Mass $$
Nature’s
Recipe
Yes No Shelf Stable Mass $
Wellness Yes No Shelf Stable Mass $

23. organic rascalsPet Food Market Structure

24. organic rascalsCompetitors
Organic Rascals faces multiple national brands in
ingredient sourcing transparency and premium positioning

25. organic rascalsFresh & Natural Advantages
Freshpet Inc. is the only national brand competitor to
Organic Rascals in the Fresh & Natural Organic segment

26. organic rascalsSustainable Advantages
Organic Rascals has the competitive advantage over national
brands in customization and convenience

27. organic rascalsInitial Concept Boards

28. organic rascalsBASES Results Summary
• 49% respondents own dogs and 38% own cats
• Ingredient Identification (Natural, Organic) is the most important
element in deciding brand selection set, followed by Easy to Find
• 55% respondents learn online about pet food brands, followed by
Veterinarian Recommendation at 53%
• Source of Ingredient is the number one reason for change pet food
brand
• Nutrition Balanced is the most valuable product claim
• Pet kid’s Taste Preferences determines 60% pet parents’ SKU purchasing
within a brand, followed by Pet Kid’s Age
• Highlight Product Claims is the most important package function,
followed by Resealable and Easy Storage

29. organic rascalsRevised Concept Board

30. organic rascalsBrand Positioning Statement
To pet owners who take to heart their pet kids’ food
quality, Organic Rascals is the nutrition balanced
organic pet food that is customized by you and home
delivered at the peak of freshness which is good because
it ensures your pets get the essential nutrients they need
and the taste they like just like you want for your family.

31. organic rascalsTarget Purchaser Segmentation
- 25 to 65 years old
- High-income
- Urban dwellers
- “Pet Parents” - care for their dog and cat’s
diet just as much as they do for their own
- Current premium pet food users

32. organic rascalsIdeal Customer – meet Doug
● 35 year-old male
● Partner at Goldman Sachs - works
60+ hours/week
● $500M+ annual income
● Lives in Tribeca
● Organic food enthusiast
● Married, social and no kids
● Has 1 dog - Bowser
● Bower goes to D Pets Hotels
everyday while Doug is at work

33. organic rascalsIdeal Customer – meet Kat
● 55 year-young female
● Lives in Upper East Side
● Retired and Empty Nester
● Has a lifelong kitty child -
Whiskers
● Kat is extreme health conscious
for herself and Whiskers
● Only eats natural and organic
food

34. organic rascals
BASES Consumer Insights
Natural &
Organic
Ingredient
s
Veterinarian
Recommendation
ConvenienceFriends
Recommendation
Nutrient
balanced
Resealable
Packaging
Key factors that influence our target consumers’ purchasing behavior
High Quality
Protein
Country of
Origin

35. organic rascalsPackaging
• Resealable Clear packages
• Color Coded Flavors
• Customized Serving Size
• Stackable Storage
8 oz. 16 oz.

36. organic rascalsBASES Sales Forecast
First Year: No. Households in NYC have pets= 33% x 3,063,393= 1.02 Million
http://www.businessinsider.com/cat-and-dog-ownership-maps-2014-7
http://www.nycedc.com/blog-entry/new-york-city-s-pet-population
http://quickfacts.census.gov/qfd/states/36000.html

37. organic rascalsSource of Volume
(1)Freshpet Inc., NJ: 2013 Revenue $63 million
(2)National natural pet food brands

38. organic rascals
Secondary Source of Volume:
Substitute
• 1 oz = $0.38 (highest in the market is $0.36)
• 1 pound retail price = $6.09 (highest in the market is $5.76), which will include a base with
nutrition and vitamins (50%), and 2 base meats ingredients (25% each)
Organic Rascals is 20% cheaper and 50% healthier
and tastier than home prepared combo
+ additional 25 min freed to play!
*prices are based on Whole
Foods price per Ibs.
Substitute for

39. organic rascals
*The information is based on in part on data reported by IRI through its Market Advantage service
for the 52 weeks ending January 26, 2014
*https://www.justrightpetfood.com
For Added Value Comparison across brands:
1. Stat with Market Average MSRP = $4.35
2. Add more ingredients
3. Add organic / natural
4. Add Home delivery
5. Add Humanitarian donations that come with purchase
Price (MSRP): As Added Value
Organic Rascals
MSRP $6.09 is right
on price perception
target

40. organic rascals
Added-Value Calculation
*The information is based on in part on data reported by IRI through its Market Advantage service
for the 52 weeks ending January 26, 2014
*https://www.justrightpetfood.com
Method:
1. Start with Market Avg. MSRP
2. Across 4 market segments add value
3. Each “value” assign a weight based
on importance % from survey
4. Sum up values added by each
segment and add them to the Market
Avg. MSRP to get to perceived value
5. Compare Perceived Price to Actual
Price

41. organic rascals
Channel Risk due to high MSRP:
• Observation: Online msrp is too high (we are highest in the market i.e. $6.09 us vs. $5.76
premium market average), observed limited very limited
Action: Can lower msrp up to be close to cost $2.91 (but quality perception will suffer)
• Observation: Daycare and Organic Ave msrp is too high
Action: can sell to 3rd party channels at lower cost, hence lower msrp = up to $5.00 (below
premium price), will be perceived less premium, but still above market average
At $5.00 MSRP, Organic Rascals margin drops from 43.8% to 32.3% in Y5
*The information is based on in part on data reported by IRI through its Market Advantage service
for the 52 weeks ending January 26, 2014
*https://www.justrightpetfood.com
Price (MSRP): Price/Margin trade
off Analysis

42. organic rascals
Finished Goods Average Cost
Calculation
*Financial industry data provided by MicroBilt
Corporation, www.microbilt.com/firstresearch
A. Average retail for premium dog food = $5.76 sold via premium retailer
B. Market average for “small premium pet retailer” gm = 38.4%;
C. Market average for “small premium pet manufacturer” gm = 19.7%
A. Average cost/ldp for “small premium pet manufacturer” = ($5.76 * 1) / 2.02 =
$2.85
B. Organic Rascals avg. cost/ldp = premium average market cost $2.85 + 1% of
the retail price that will be given to charity ($6.09*1% = $0.06) = $2.91

43. organic rascals
Domestic Market
“Pet Food Retail Sales & Organic”
Pet Food Retail Sales $ (in 2014) Organic Food Use (in 2013)

44. organic rascals
Domestic Market
“Rental & Leasing Top Cities”
ALL RESULTS SUM UP TO:
#1 NEW YORK –
Test Market and Expansion
market Year 1 -5
#2 LOS ANGELES –
secondary market to enter Year
3-5

45. organic rascals
Channel of Sales: Online with
Home delivery Option
Gross Margin on this
channel = 52.2%
Primary channel of
distribution will be online,
where our human customer
can, not only customize the
pet food, but also blog, post
and share their experiences -
from which we will learn what
our customers value the most
and pivot on those attributes

46. organic rascals
Domestic Market Test Variables:
• Too High? Test
with short term
promotions online
and in-store
• What yields more
purchase? Test
online as “call to
action” banner
• popular variations
to offer vs. never
used. Why? Ask
for customer
feedback
• What channel mix
yields more sales
and gross
margins?
Home
delivery vs.
Store
Purchase
Food
Customized
Options
Price
Organic vs.
Natural

47. organic rascals
Channel of Sales: NYC Test Market
and Premium Locations Y2-Y5
# Of Locations in NYC:
Organic Avenue = 10
D Pet Hotel (NYC) = 1
Biscuits&Bath = 9
NYC Dog Spa = 1
D is for Doggy = 1
TOTAL = 22
Gross Margin
= 20.4%
Gross Margin
= 22.4%
Gross Margin
= 20.4%
Gross Margin
= 20.4%
These locations do not primarily sell food but provide premium service, little
competition is expected. Will capture 50% of Channel Volume

48. organic rascals
Sales Channel:
Y1-Y3 Sales Estimates (New York)
Year 1: Sales will come from
A. “Online Sale and Home Delivery” model
B. Omni-Channel partnership with Organic Avenue Retail
Year 2: Sales will come from
A. “Online Sale and Home Delivery” model
B. Partnership with Organic Avenue Retail
C. Enter high end DPetHotel, B&B premium daycare, D is for Doggy premium
daycare, NYC Dog Spa premium pet spa and doggycare
Year 3-5: Grow and harvest sales from existing NYC locations
See financials on next slide

49. organic rascals
Organic Rascals Units Sales in
Partner Channels (Year 1-NYC)
Year 1 Partnership : A) on shelf retail sale and B) as order online and pick up in store omni-channel concept
Year 2 Partnerships: premium spa/daycare locations where premium food will be in high demand, but not
in competition with other on shelf stable pet food suppliers

50. organic rascals
Organic Rascals GM% Expectations
*Financial industry data provided by MicroBilt
Corporation, www.microbilt.com/firstresearch

51. organic rascals
5 Year Sales Calculations (NYC)

52. organic rascals
Channel of Sales:
Y3-Y5 Sales Estimates (LA)
Online:
Sales Share = 73%
Expected GM = 52.2%
Spas/Daycare:
Sales Share = 20%
Expected GM = 20.4%
Organic Stores:
Sales Share = 7%
Expected GM = 22.4%
As Los Angeles is the second best city in all attributes to New
York, we expect sales / location penetration and expansion to
follow NYC trend from Y1-Y3

53. organic rascals
Retail Sales Projections Y1-Y5
Calculations

54. organic rascals
Retail Sales Projections Y1-Y5
Online:
Sales Share = 73%
Expected GM = 52.2%
Spas/Daycare:
Sales Share = 20%
Expected GM = 20.4%
Organic Avenue:
Sales Share = 6%
Expected GM = 22.4%

55. organic rascals
Financials Projections Y1-Y5

56. organic rascals
Financials: Income Statement

57. organic rascals
Financials: Balance Sheet
*Calculations of Assets and Liabilities are assumed to
follow Industry Average for Pet Food Manufacturer in
USA (size: small company)
* Highlighted on the left are Financial Ratios used in
the Balance Sheet, also based on Industry Average

58. organic rascals
Financials: Cash Flow
Based on projected sales, Income and Balance Sheet, we expect to have
positive cash flow in the end of each year. Major asset investment is
currently projected only in Year 1.

59. organic rascals
New Product Line Expansions:
Year 1 - Year 5
Organic
Wet Pet
Food
Dog Food
Organic
Ingredients
Taste
Customizati
on
optimizatio
n
Online
Information
on Pet
Food
Trends
Become
Top Online
Source on
Pet Food
Add Senior
Dogs / Vet Diet
formulas
Consulting on
inventory stocks:
to local retail
stores companies
Pet Treats
Market

60. organic rascals
Brand Equity Expansions:
Year 5 forward

61. organic rascals
Marketing

62. organic rascals
Customized Fresh Wholesome Meals Delivered to Your Pet Kids

63. organic rascals
organic
rascals.com
Customized Fresh Wholesome Meals Delivered to Your Pet Kids

64. organic rascals
Let Consumers Speak for
Themselves Videos
http://youtu.be/FOlFTW8xOcw
Post videos shared by
people on how much their
pets enjoy Organic Rascals
- let the product bark and
meow for itself
Growl Translation:
“ Nobody gonna lay a
finger on my Organic
Rascals! “

65. organic rascals

66. organic rascals

67. organic rascalsWhat can go right & wrong
Grows too fast!
Market Risk - no market acceptance and insufficient
demand for Organic Rascals
Competitive Risk - new competition entry to the market
i.e. JustRight petfood by Purina just launched similar
market concept product of online customizable food
Operational Risk - Supply chain and manufacturing
capacity issues, ingredient issues
Global Warming/Economic issues

68. organic rascalsThank You!