(Bloomberg) -- High-end pet-food maker Honest Kitchen said it secured a $150 million minority investment from Monarch Alternative Capital LP.
The terms of the deal weren't disclosed. The producer of cat and dog foods, treats, and health supplements, which it labels “human-grade,” now has a valuation around $500 million, according to a person familiar with the transaction. Honest Kitchen's existing equity investors include Alliance Consumer Growth and White Road Investments.
The company will use the new funding to boost marketing and expand production at the Topeka, Kansas, facility it built last year. As part of the deal, Patrick Fallon, managing principal at Monarch Alternative Capital, will join Honest Kitchen's board.
“We're going to be able to fuel marketing efforts to reach a whole new demographic of pet parents,” Chief Executive Officer Michael Greenwell said. This represents a pivot from the past few years, he said, when the company focused more on building out its supply chain.
The U.S. market for pet food and treats had an estimated value of $44.1 billion in 2021, according to the American Pet Products Association. Last year, in addition to opening the 100,000-square-foot manufacturing facility, Honest Kitchen also became a public benefit corporation and increased sales by approximately 40%, Greenwell said. Public benefit corporations, or PBCs, are for-profit entities whose mission also includes some kind of public good.
Founded by Lucy Postins in 2002 in San Diego, Honest Kitchen was an early entrant into high-end pet products, capitalizing on the ever-increasing amount of money owners spend on their furry family members. The company sources ingredients like free-range chicken and Marine Stewardship Council certified fish.
“Human-grade,” according to the Association of American Feed Control Officials, means that the food is edible for people and it's manufactured, packaged and stored according to federal laws for food meant for human consumption. The market for such pet food is getting more competitive, with companies including Ollie, the Farmer's Dog, and Sundays, now making the “human grade” claim.
After a surge in pet product demand early in the pandemic, the industry saw “modest but steady growth” in 2021, according to a report from Mintel.
Honest Kitchen, which charges a premium compared with other pet foods, raised prices by 10%, on average, in 2022 from the previous year. Prices across the industry were up by 6.8% on Jan. 1, 2022, from a year earlier, according to NielsenIQ.
The company says consumers are willing to pay more. “Our customer is typically educated and aware of the direct link between food and health,” Postins said. “Everyone knows good food costs more than bad food.”
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