Industry: Consumer / Pet
Area: Pricing Strategy and Revenue Growth Management

In collaboration with EBITDA Catalyst, Revology's strategic partner for driving value creation for mid-market Private Equity.

SITUATION

Client Background
The Client, a Private Equity owned ultra-premium fresh pet food provider, had been growing primarily through DTC.

Beside premium food in a variety of sizes and protein types, the Client offered an innovative line of "Vet-assisted" RX pet food options, that combined premium fresh human-grade quality, with prescription medicine for a variety of common conditions

Inflation & Competition
Both commodities & labor costs were up significantly, resulting in untenable declines in margins and profitability. The competition appeared to offer highly competitive prices, primarily under a SUBSCRIPTION model. This appeared to limit potential for price increases, resulting in Client's apparent "no win" situation.

One-size-fits-all Pricing

The Client's pricing didn't segment to capture the highly differentiated value created in the RX food offering. The Client also didn't sufficiently reflect in their pricing the differentials between a high-convenience, low commitment, high choice model vs. a higher volume / fewer SKUs / high commitment strategy both it and key competitors offered.

ACTION

Revology reset to an offering design that positioned Client to fully harvest value, including segmented price-setting actions in the inflationary environment.

Quantitative and Stakeholder Deep Dive
We conducted a comprehensive analysis of the client’s transactional data and detailed interviews with key stakeholders, including the operating team of the PE owner.

Uncovered Key Insights to Debunk Misjudgment of Competition's Pricing
We found, for example, that competition used completely different (much lower) recommended daily Kcal feeding portions for like-for-like pets, well below VIN guidance in some cases. This resulted in what seemed like lower prices to "meet every budget", but would in the end require subscription customers to order more often, a deceptive practice. More importantly, Client seeking to compete in their "order whenever you like" approach with Competitors' subscription pricing was strategically misguided.

OBSTACLES

Insufficiently Developed Segmentation

The lack of separation in pricing approach between completely different value propositions resulted in Client trying to be "best of all worlds to all people", leaving both growth and profit unrealized.

Misunderstanding of Competition's Pricing Points, Value Claims & Strategy
Partly due to opacity / confusion factors in pricing for pet food, and recommended daily portion nutrition values, Client had failed to analyze key value claims and "why" Competition's prices appeared so low.

Lack of Vehicles For Executing Tiered or Differentiated Pricing

Absent a multi-channel approach and a recurring-revenue model, Client played with a hand tied behind their back: "Pricing on our website is all there is, and it is what it is."

RESULTS

Key Insights Powered A Confident Pricing Strategy and Price Actions

Revenue & Margin Growth:

• Revenue & Margin both increased by double digits % within 12 months, with GM% up 11%

• RX product line pricing was finally priced based on its unique value proposition

• Larger size packs pricing was right-sized to value proposition closing gaps
  
  Competitive Positioning:

• The Client understood competitive pricing in a new light, freed from a captive / ceiling mindset anxious about competition's low pricing.

• Client modified its price-pack to include lower KCal feeding guidelines to close gaps