After more than a decade working in the pet industry, in 2012 Kevin Fick became CEO of Worldwise, a California-based manufacturer of eco-friendly pet products. Under Fick’s leadership and with backing from Mistral Equity Partners, Worldwise has capitalized on the thriving pet sector, growing organically and through acquisitions with an eye toward international expansion.
Fick spoke with MMG about the size of the pet industry, the opportunity for private equity investment and Worldwise’s growth strategy. Below is an edited and condensed version of the conversation.
MMG: How large is the pet industry, and which demographic is driving its growth?
Kevin Fick: Depending on whose figures you look at, the industry is in the mid $65 billion-plus range, and about half of that is food and the other half is supplies and hard goods. The baby boomers have been the biggest demographic driving the trend lines, but now with millennials, we’re seeing earlier pet adoptions. They have a different set of characteristics that drive their purchasing behavior. And 90 percent-plus of purchases coming off the shelf or the Internet for the pet are driven by the “mom”—the female of the household.
MMG: How does Worldwise differ from other pet companies?
KF: The thing that I’ve always admired about Worldwise is that the company was founded on the premise that you ought to be able to make eco-sustainable products that perform as well or better than the alternatives. I know a lot of companies—especially in the last five years—that jumped on the “we’re eco and we’re green” trend, but this company’s been doing that for 20-plus years, and that’s been represented in its products.
MMG: What are some of Worldwise’s more innovative offerings?
KF: Tens of millions of empty plastic water bottles end up in landfills—we were the first to figure out that you can take those, clean and shred them into a fine fiber, and use that to stuff the inside of pet beds. Instead of filling landfills with water bottles, they’re going into pet beds.
We did a similar thing with corrugate. Take cats, for example: If you don’t provide a surface for them, they’re going to find something to scratch, so we figured out a way to take recycled corrugate and turn it into products that solve a great problem for cat owners. The No. 1 reason cats end up in a shelter is they’re destroying the pet parents’ furniture. We’re doing something great for the environment and something great for the pets and ultimately keeping a harmonious relationship in the home.
MMG: Why are private equity investors attracted to the pet space?
KF: An interesting statistic is that 90 percent-plus of pet manufacturers or brands do less than $5 million in annual revenue. It presents a great opportunity to roll up a highly fragmented industry, but it also presents a challenge because a company that size isn’t really a platform.
When you look at it, there’s roughly a handful of meaningful companies that I would say are over $50 million in revenue that you could even call a platform in the hard-goods side of the business. Currently we would rank right around that No. 6 position in terms of size of hard-goods suppliers.
So that’s the attraction for Mistral Private Equity, which bought Worldwise in 2011. You probably saw that we recently refinanced the company to be able to position us to do more acquisitions. That gives us the bandwidth and the flexibility to be able to be opportunistic on the acquisition front.
MMG: What is Worldwise’s strategy for growth?
KF: We’ve got a view that we want to be at the top end of the curve when it comes to organic growth in our chosen channels and categories. We also have a strategy under the build-it-or-buy it analysis where, if it’s something that we think we’ve got the core competency to build out into another category adjacency, we’ll do it internally. But if it’s something where we just don’t have those inherent skill sets within the company, we’ve got an active pipeline of acquisition targets we’re looking at that can provide some nice top-line and bottom-line acquisitive growth.
This past year we acquired the Quaker Pet Group, which is a great example because they were almost 100 percent dog toys and travel. Worldwise had dabbled in both of those categories, but we just did not and had not established a significant beachhead. And with not only the products and the listings they already had, but with the team that came with it from product development and sales, we really jumpstarted where we were. Now we can hit on a lot of categories and, for a number of our customers, we’re a one-stop solution.
In addition to acquisitions, the other thing that we’re really focused on is international expansion. We’ve already had a nice expansion into the Canadian market, the e-commerce sector, and now international expansion is kind of a wide-open green-field opportunity for us.
MMG: Which countries are most similar to the U.S. in terms of their domestic pet markets?
KF: The two that jump to mind are the UK and the rest of the EU. Then in addition to that is Japan, and you’re seeing the numbers go crazy there as well. There’s a lot of opportunity out there and the key to being able to do it is not only having the right brands and products and so on, but also the back-end infrastructure from an operations and logistics perspective. We’ve spent the last 18 months really focusing on getting that element right, because it doesn’t do you any good to try to expand into another country if you can’t get the product there in cost-effective, timely manner. //