Freshpet: Scott Morris

Freshpet co-founder Scott Morris helped transform pet food by sidestepping traditional kibble and cans, and making slice-and-serve meals that almost looked palatable enough for humans. When Scott and his partners launched the business in 2006, the concept of fresh pet food was so novel that retailers balked at installing special refrigerators for it. So Freshpet provided its own refrigerators, a logistical nightmare that nearly ground the business to a halt. More than 30,000 refrigerators later, Freshpet has a 96% share of the fresh pet food sector, with a customer base of 10 million dog and cat households. This episode was produced by Carla Esteves, with music by Ramtin Arablouei. Edited by Neva Grant, with research help from Alex Cheng. Our engineers were Gilly Moon and Maggie Luthar. You can follow HIBT on Twitter https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and email us at [email protected] mailto:[email protected]. This episode is brought to you in part by Canva, the easy-to-use online design platform for presentations, social posts, videos, websites, and more. Start designing today at Canva https://urldefense.com/v3/__https:/www.canva.com/for-teams/features/brand/?utm_medium=display&utm_source=audio&utm_campaign=us_en_all_free_bra_consideration_2023wwydth2_na&utm_term=Wondery&utm_content=Broad__;!! Iwwt! QqxHLNtUdpIIxw_krrv7MGmnfzwbBOrZD_G9svhEPDTxFavPcc1bbAOKSfMgNFRuyum5kSUDDOm6HzG0$ – the home for every brand. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan,

• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

  Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back

• 2:16Guy Raz?

  on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. If you travel often, you'll want to hear about this unprecedented offer. For the first time ever,

• 3:00Guy Raz?

  new Delta SkyMiles Reserve American Express Card members can earn two Delta Comfort Round Trip flights for travel within the 48 contiguous US states, Puerto Rico, or the US Virgin Islands. Plus, you can earn 50,000 bonus miles towards your next getaway. And who doesn't appreciate an elevated airport experience? Delta SkyMiles Reserve Card members get access to the Delta Sky Club, your pre-flight oasis to recharge, with 15 visits and four one-time guest passes each medallion year when flying Delta together. That's up to $950 in annual value. Value estimate based on $50 per visit rate to purchase additional visits

• 3:45Guy Raz?

  or bring a guest to the Delta Sky Club. Make every trip feel more rewarding with the car that upgrades your travel. Apply today at delta.com/cardsocial. Offer ends November 4, 2026. Minimum spending requirements and terms apply. Flights are fulfilled as flight certificates valid for Delta Comfort or Delta Maine to select domestic destinations. Book 21-plus days in advance. Up to $80 per person and taxes and fees apply. Other restrictions apply. When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering. I'm thinking about getting in, filling up, and getting on with my day. And it reminds me a little bit of the founders I talked to on this show, because the best

• 4:27Guy Raz?

  ones obsess over things their customers will never see. Tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile regular gas in port fuel-injected engines. Actual results may vary. Visit mobilefuels.com for details.

• 5:14Speaker 01

  It was kind of every day, it was you're playing whack-a-mole, where what was the challenge that was going to be today to figure out this business? And we started talking to other retailers. It was back to the, you want me to do what? And I don't care if you were successful there. I don't think that's going to work in my store. It was a really, really difficult time in that kind of 2008 period. And I remember one day, leaving work and getting in the car and openly sobbing in the car on the way home.

• 5:52Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:04Guy Raz?

  I'm Guy Raz, and on the show today, how Scott Morris figured out how to squeeze dog food into slice and serve rolls and grew Fresh Pet into the country's leading brand of fresh pet food.

• 6:26Guy Raz?

  You know that old cliche about if you want to make a friend in politics, get a dog? Well, let me throw out a new one. I actually made this one up. If you want to make a lot of money as an entrepreneur, sell to pet owners. In 2022, Americans spent $136 billion on their pets, and that was a 10% increase from 2021. Think about how massive that market is. And why do we spend so much on our animals? Because we love them. My cortisol levels plummet every time I snuggle my dog Kiki or our cats Millie and Morty. Anyway, about 20 years ago, an entrepreneur named Scott Morris started to notice a new pattern of behavior among pet owners. For one thing,

• 7:10Guy Raz?

  they were moving away from your standard kibble and canned food. Pet owners started buying things like organic, grain-free, meat-heavy dog foods. And for their cats, beautiful corrugated cardboard scratch cocoons. How do I know? Because I was one of these people. Anyway, seeing this trend, Scott realized that maybe, just maybe, you could make a premium pet food that wasn't only fresh, but also refrigerated and with an expiration date. You know, like, human food? So when Scott launched Freshpet in 2006 with a few partners who, like Scott, had worked in pet food before, he faced massive challenges. For starters, pet food aisles didn't have refrigerators.

• 7:55Guy Raz?

  There was dry food and there was canned food. So in order to get Freshpet off the ground, he had to not only make fresh pet food, he had to get into the refrigerator business. And many, many stores resisted the idea of installing coolers. It would take a lot of failure, including spoiled pet food and faulty refrigerators, to figure out how to make it all work. But today, Freshpet dominates the fresh pet food market. And though the company is not yet profitable, Freshpet is valued at around $3 billion. Scott Morris grew up in the 70s and early 80s in Long Island, and it was during high school that he began to lean into entrepreneurship. He started his first company with a friend.

• 8:39Guy Raz?

  It was a landscaping business. And after, he went on to study business at the University of North Carolina, where he was also a star track and field athlete. And at UNC, he started yet another side hustle with a guy he knew from his track team, a business that built loft beds for other students.

• 8:56Speaker 01

  We went to a lumberyard. We bought a ton of lumber. We took all of it initially, and we decided we were going to use the track team locker room. We were kind of somewhat out of season at the time, and we got back early in the summer, and we started cutting all the pieces. And we advertised at not only UNC, but also Duke and North Carolina State. We ended up building hundreds of lofts across the three schools. And we started hiring people. If I wasn't going to school or starting to train for track, I was building lofts.

• 9:30Guy Raz?

  What would you charge for a loft?

• 9:33Speaker 01

  I think it was $110 at the time.

• 9:36Guy Raz?

  Did that include the lumber?

• 9:37Speaker 01

  Yeah, yeah, it did. And it was several years ago, but I want to say it was right around $110. And then we had kind of bells and whistles that people could add, so it would go up a little bit from there. But it was, obviously, you want to keep things as cost-effective as possible.

• 9:51Guy Raz?

  Yeah. And that wasn't even your first business. I mean, I think you and a high school friend started like a landscaping business and then you kept it going in college, is that right?

• 10:02Speaker 01

  Yeah. We had had a couple of businesses together and they were successful enough where we made a pretty fair amount of money. We had actually sold them, we had employees.

• 10:12Guy Raz?

  How much you sell it for?

• 10:14Speaker 01

  We actually sold it for a little over $10,000.

• 10:17Guy Raz?

  Wow, that's pretty good.

• 10:18Speaker 01

  And again, it was a fair amount back then, but we had, it wasn't just landscaping. We were doing, I mean, we were doing yards every week, but we were building decks, we were building mailboxes, we were putting in brick patios and pavers. I remember one of the things that was silly, but it was a kind of a breakthrough for us was we kept putting flyers in mailboxes and we weren't getting any phone calls. And then we started putting prices on every one of the flyers that we put in mailboxes to advertise.

• 10:43Guy Raz?

  Hmm. You would basically put a price on it and people were like, wow, that's cheap.

• 10:47Speaker 01

  Yeah, they thought it was really reasonable and they also knew it was a couple of college kids or at the time somewhere between high school and college at different times that were doing this. And I think people wanted to support us and it kept growing and growing and we kept, we were buying equipment and I was very involved in fixing and taking care of the equipment and working with the employees and Roger was typically the one who's dealing a little bit more with the customers.

• 11:11Guy Raz?

  All right. So after you graduate college, you've got this business degree and I guess you decide to see what it's like to work for a corporation. So from what I understand, you do a bunch of interviews and I guess you wind up taking a job at Ralston Purina, which is a company that makes like cereal and pet food and things like that. And what were you hired to do?

• 11:34Speaker 01

  So I was kind of in a sales training role when I came into the company and the big joke from everyone else that was on the team was they had all taken the worst stores and the worst areas and through all the different other salespeople in the area and they had given that to me and that was my sales territory. So it looked kind of a, looked a little bit like a voting district sometimes and it seems to be kind of, you know, very circuitous and a little bit all over the place. That was my sales territory, it kind of stretched all over the place.

• 12:06Guy Raz?

  So how did you, and you had the South, or part of the South, that was your area?

• 12:10Speaker 01

  Yeah, it was kind of downtown Atlanta, all the way over to Alabama. So here I was, this Jewish guy from Long Island, driving around Atlanta and all the way into Alabama, and Piggly Wiggly's and all these different stores that I was, it was an incredible learning experience.

• 12:28Guy Raz?

  And you were focused on selling pet food?

• 12:31Speaker 01

  Pet food and cereal. So it was Czech cereal, there was a brand called Alma Delight, and then there were a lot of pet food brands. It was the Dog Chow, Puppy Chow, Hi-Pro, Purina One, Meow Mix, Cat Chow. And the initial job was literally to get in my car, and I had a little over 100 and something stores. We did a lot of shelf sets, where we were setting the shelves, literally at night.

• 13:00Guy Raz?

  You were literally putting product on the shelf and making sure that it was prominently displayed?

• 13:05Speaker 01

  Exactly. We would lay it out, and I mean, I remember one time, it was 3:00 AM in the morning, I'm setting a shelf, and I was actually working with a nose guard from Notre Dame, from another company. I think he was working with Carnation at the time. And we were kind of looking at each other going, what's going on here? Why, it's in the middle of the night, and we're setting a grocery store shelf. And we'd just both finished college, and we're like, didn't we go to college for this? But it was one of those situations where you did look around and suddenly go, like, wow, we are really starting at the bottom. That's really where so much of the hard work is in so many of these industries. And I think that sometimes that work is underappreciated.

• 13:48Guy Raz?

  So you would end up spending over a decade at Ralston Purina, and really getting into the marketing side of things. And you became sort of a marketing leader there. And I'm wondering, in sort of this, the 90s, right? Was, I mean, marketing presumably was television, coupons, right? Because people got, I mean, everybody looked at coupons in their Sunday papers, like, that was a thing. Is that what you did?

• 14:17Speaker 01

  You know, it was, I think that was traditionally how it was done. And there were me and another partner, this gentleman, Rick Speckerman. And what we started realizing was there were millions and millions and millions of dollars that were being spent in couponing and discounting that were really not very productive. They were drawing people in that would buy it once and then go back to whatever the next promotion was.

• 14:42Guy Raz?

  Right.

• 14:42Speaker 01

  It wasn't building affinity or loyalty to the, for the products. And I think that was an incredible, really, really salient learning. And we kept bringing that data forward. And him and I, I'd say we were the key catalyst in really changing the way we started moving away from discounting. And it was, at the time, it was $70 million in all kinds of discounting and couponing.

• 15:08Guy Raz?

  Yeah.

• 15:09Speaker 01

  That we were able to move out of those kind of inefficient activities into really, like, really fundamental brand building activities.

• 15:16Guy Raz?

  So after you, by the way, I mean, by the way, did you, I mean, you kind of fell into the world of pet food, but were you like a pet person? Did you have lots of pets? Was that part of your own life?

• 15:31Speaker 01

  Yeah, it was. I mean, I always had pets growing up. And then when I met my wife, you know, I met her when I was at Ralston Purina and she owned, she had four cats when we first started dating. And she had worked at a shelter and had an incredible heart. And she ended up taking some of these cats home that didn't have homes. And so I was always involved with pets and I loved them. And what I started realizing more and more is the value that they bring into people's lives. And I, and there was actually a lot of research that had been done that people with pets live longer and healthier lives. And there were three aspects on why they did. One of them was the emotional benefits of having a pet and having kind of a, you know,

• 16:15Speaker 01

  someone you're, you love in your life and caring and nurturing. People are caring and nurturing and you get to do some of that with a pet. It's part of it's because they make you more active. And then the third piece that is, people do not think about or realize is, believe it or not, it's actually the microbiome. It's actually the bacteria that, that pets bring into our lives. People with pets tend to have less allergies typically. But I knew that being involved in an industry that, that did that, that I could feel really good about being involved in it.

• 16:47Guy Raz?

  You would eventually leave Purina after it got acquired by Nestle in 2001. And I guess at that point, it becomes a different, somewhat different company, right? Oftentimes, when companies get acquired, they sort of become different. And I think there was like a cultural shift there that you weren't happy with, right?

• 17:07Speaker 01

  Yeah.

• 17:08Guy Raz?

  And so from what I understand, you wound up joining the leadership team at Meowmix, which had been part of Ralston Purina, but eventually it got spun off as a separate company, right?

• 17:22Speaker 01

  Yeah. So when I was at Meowmix the entire time, first of all, it completely awakened my entrepreneurial spirit because there was literally no company behind it. So we had to build a company almost from scratch. I mean, it was, it was a really wild experience because it was like, well, here's a brand. It's selling about $200 million a year and you have to figure out how to build a company. You have to figure out how to find the people around the company. You have to figure out how to make the product over time. You have to figure out every single aspect of it.

• 17:54Guy Raz?

  Yep.

• 17:55Speaker 01

  And when I walked in there, we were using our, we didn't even have desk phones. We didn't have business cards. So it was a few desks sitting around in a big office space. And it was like, well, we now have to go build a company and become an entrepreneur again.

• 18:10Guy Raz?

  Huh. All right. So in 2006, which was about four years after you joined Meowmix, it got, it got sold to Del Monte for a lot of money, I think like $700 million. And you, you left at that time and from what I gather, you walked out of that opportunity with, with quite a bit of cash, right? Because you, you were on the leadership team, so presumably you did okay out of that.

• 18:33Speaker 01

  I did really do well and it was a lot of money. And I think when I was, I was mentioning a bit ago that when I was at Purina, one of the things that happened was it was potentially all those changes when Nestle bought Purina, it was really kind of, I thought it could impede my ability to be successful. And what I started realizing was I didn't like not being empowered.

• 18:57Guy Raz?

  Yeah.

• 18:58Speaker 01

  I didn't like that someone else had made a decision that was going to affect my future and my, my safety and my ability to, you know, make a living for my family. And, and I looked at that and I said, wow, that's, I didn't like that feeling. And I had, you know, realized that along the way, I started kind of awakening, you know, on my own and started thinking about like, what was great food? And I remember somewhere along the way, someone said to me, you're selling McDonald's for cats. And I didn't, I didn't like that. I kind of knew what that meant even back

• 19:38Speaker 01

  at 2000. So I think it was, it was, it was a great brand and I think cats loved it and consumers loved it. But I just felt like it was time for me to really kind of continue to move forward.

• 19:52Guy Raz?

  Yeah. So you, you sort of, your time with, with Meow Mix comes to an end and you, you have some cash with you.

• 20:02Speaker 01

  Yeah.

• 20:02Guy Raz?

  And, and at that point, did you think, okay, now I'm, I'm, maybe now's the time for me to start my own thing?

• 20:11Speaker 01

  So you know how you have these times in your life that are incredibly, like you remember like it was yesterday and it's just crystal clear. And I remember there were a few of us sitting around talking about like maybe what we wanted to do next. And the CFO of Meow Mix came by and handed me an envelope and that envelope had a seven figure check inside of it. And it was, you know, maybe more money than I thought I might've ever had, quite honestly. And there was incredible excitement around getting the check, but I swear, I remember opening it up. And it was the emptiest moment maybe of my life. And I realized it wasn't about just the money. I mean, the money was about that empowerment, but it was about building something great.

• 20:56Speaker 01

  And I remember that so clearly. And I had become very awakened around nutrition and just thinking about what food is and a lot about the food supply. And that led me and two other gentlemen to start thinking about if we reinvented pet food, like if we were going to start literally with a completely clean sheet of paper from scratch, what would we make? What would that product be? And we started thinking it probably wouldn't be kibble because the conversation literally was, is kibble even food?

• 21:32Guy Raz?

  And when you say we, who was the we? Who were you talking to?

• 21:36Speaker 01

  Yeah, so it was, there were three of us. It was a gentleman named John Phelps and another gentleman named Cahill Walsh.

• 21:43Guy Raz?

  And they were also in the pet food business?

• 21:45Speaker 01

  They were in the pet food business. John worked with me at Meow Mix and then Cahill was not at Meow Mix, but John had worked with him in Australia, actually. And they had seen fresh pet food.

• 21:56Guy Raz?

  So they had seen fresh pet food in Australia that people were basically buying like in like a refrigerated section?

• 22:06Speaker 01

  Yeah, it was actually initially when it was launched, it was literally just ground raw meat and it was kind of all the leftovers. It was, it was done very, very differently in Australia. It had byproducts, it had preservatives, it had kind of like all the scraps. I mean, everything in there.

• 22:26Guy Raz?

  But the point is, is that people were buying, they weren't buying dry pet food there or wet pet food in a can. They were buying it in a refrigerated section, which I guess in 2006 did not really exist in the US.

• 22:37Speaker 01

  No, it didn't exist at all in the US. There was some raw food in the US, like what was originally done in Australia, but it was frozen. And so I think it was definitely, that's where like the initial inspiration came from, but we knew we had to do it completely differently here in the US. We knew we needed someone to kind of help kick this off and that could really start immediately. And that was this gentleman, Cahill.

• 23:03Guy Raz?

  Huh.

• 23:04Speaker 01

  Cahill worked with Nestle in Australia and Cahill started writing a business plan. So I think we all started working together to try and figure out, well, how do we make this food?

• 23:16Guy Raz?

  So he comes to the US and you guys decide you're going to explore this. And I have to assume, I mean, given that you, you know, you got a pretty nice payout of a few million bucks, you had money to finance it?

• 23:31Speaker 01

  Well, when we first, first started, we didn't have a whole lot of money because I didn't have that check yet.

• 23:37Guy Raz?

  Right.

• 23:38Speaker 01

  Yeah. So we did cobble together some money for sure. Cahill and John actually both took out some loans and I had a little bit, but we cobble together, it was like, I think it was $875,000 if I remember the number initially. And what we learned quickly was that sounds like a lot of money, but it's not at all. And when you start doing packaging and you start trying to figure out how to initially import product and then you're trying to sell it in and then you're paying for refrigerators and then you suddenly realize, I have to figure out how to make this product because what I'm getting just doesn't work. It's incredibly expensive to typically to start up, you know, some type of manufacturing operation.

• 24:23Guy Raz?

  All right. So you, you kind of start the process of, I guess, initially just exploring how you would do this. And I would imagine, this, you know, 2006, I'd imagine, you know, It's like making Jimmy Dean sausages or something, right? Like you're, I just think of that because it's like a round tube of meat. That you would go and you would find meat, grind it up and, and just, you know, put it in a tube. I mean, first of all, what was the, what was the first step you had to take? I mean, did you, you had to source meat, I guess initially, and find a place to make this?

• 24:59Speaker 01

  Yeah, no, you're exactly right. We, we literally, we did, the analogy I would give you is, we knew we wanted to make cookies, but we didn't have a recipe.

• 25:08Guy Raz?

  Right.

• 25:09Speaker 01

  We knew the product we wanted, but we didn't exactly know how to make it all. So yes, you had to find, you know, meat and other ingredients and you had to figure out like, well, how do you, how do you, what are the, what types of ingredients? What are the specifications of them? It has to meet certain nutritional requirements. How do you cook them?

• 25:25Guy Raz?

  Yeah.

• 25:26Speaker 01

  How do you actually cook it? How do you get it into the package? And we started figuring it out.

• 25:30Guy Raz?

  Yeah. I mean, you had experience in the industry. You knew that, you knew who bought canned food. You knew who bought dry food. But, but surely there was, it was risky to think about refrigerated food because, you know, it isn't as convenient.

• 25:47Speaker 01

  Oh, it's, it's not, it's not convenient at all. In fact, it's the exact opposite. And people love, although they were nutrition aware and although pets were part of their lives, they love convenience. And we felt like that was one of the biggest challenges for us bringing this to market was, hold on a second, I have to buy my pet food refrigerated, I got to keep it fresh and I have to keep it in the refrigerator and then I have to cut it up? And, and it's, it was one of these situations where I think a lot of people looked at it, both in the industry and the retailers. And it was so different, they couldn't get their head around it. And the thing I always recognized was if something was so different, it's either brilliant or completely stupid.

• 26:32Speaker 01

  And I think in 2006, the verdict was out for quite a while.

• 26:36Guy Raz?

  When we come back in just a moment, Scott starts rolling out the first Fresh Pet Products, only to find out, he's got to roll out new refrigerators too. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 26:55Guy Raz?

  Let's face it, we humans are smelly. All of us. And there are actually things we can do about it, like, for starters, using Lume whole-body deodorant. Lume Starter Pack is perfect for new customers. It comes with a solid stick deodorant, cream tube deodorant, two free products of your choice, like mini body wash and deodorant wipes, and free shipping. Lume is also excited to announce the launch of their men's line, Mando, with more masculine scents and packaging, but still outrageously effective. I actually have a stick of Mando Pro Sport right here in the studio with me. And it's actually amazing, because when I use my regular deodorant, I can start to, let's just say, I can smell myself after a few hours. But Mando's proprietary formula is incredible.

• 27:39Guy Raz?

  It keeps me from smelling sweaty all day. As a special offer for our listeners, new customers get $5 off a Lume or Mando Starter Pack with code BUILT at lumedeodorant.com or shopmando.com. That equates to over 40% off your Starter Pack when you visit lumedeodorant.com or shopmando.com and use code BUILT. The Pod Cover by 8Sleep will improve your sleep by automatically adjusting your bed's temperature based on your individual needs. The cover can be added to any bed, like a fitted sheet, and allows you and your partner to cool or warm your side of the bed as low as 55 degrees and up to 110 degrees. Now, I'm a terrible sleeper.

• 28:24Guy Raz?

  Over the years, I've tried a bunch of different things, including cognitive therapy. I can tell you, I've been sleeping on the Pod Cover by 8Sleep for a few months now, and it is a game changer. Seriously, it is absolutely incredible. It turns out, my body likes to sleep on a really cold mattress, and 8Sleep figured that out. The last few months of the year can be stressful, but I rest easy knowing that I'm sleeping on the most sophisticated sleep tech in the world. Invest in the rest you deserve with the 8Sleep Pod. Go to 8sleep.com/built and save $150 on the Pod Cover by 8Sleep. Go to 8sleep.com/built and save $150 on the Pod Cover by 8Sleep. 8Sleep currently ships within the USA, Canada, the UK, select countries in the EU, and Australia.

• 29:18Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2006, and Scott and his partners are working through a list of all the things they want their new dog food to do. And the list is pretty easy to put together. The hard thing is, how do you actually make the food?

• 29:35Speaker 01

  How to make it where it was nutritionally complete, it looked appealing to the consumer, it had a great shelf life, it lasted for a really long time, it was firm enough to cut, so it was a good experience again for the consumer. It smelled good. So we kept working, working it, working it, working it.

• 29:58Guy Raz?

  So you wanted it to be like a meatloaf, rather than like a sort of a refrigerated, like canned, wet canned food. You know, you just, like, you could, I guess, make that into a refrigerated product, and it would be sold in like a Tupperware container. But you wanted something that was more like a meatloaf that would be sliced?

• 30:17Speaker 01

  Yeah, we wanted it, and the initial inspiration was almost like deli meats.

• 30:22Guy Raz?

  And it wasn't going to be as solid as a bologna. It was still going to have like, it was still going to break apart once you put it in the bowl, like ground, wet food.

• 30:30Speaker 01

  No, actually, it was pretty firm. We wanted it where people didn't mind touching it.

• 30:37Guy Raz?

  Right, okay.

• 30:38Speaker 01

  Because, and if you think about, so there's two aspects to the product. One of them is, we wanted to use the freshest ingredients we possibly could. And the second thing was, we wanted to cook it as little as possible. Because we, John and I, were really focused on this idea of bioavailability. So the more you cook certain ingredients, the less bioavailability or nutrition that there actually is for the person or for the pet. And you needed refrigeration in order to keep it fresh.

• 31:08Guy Raz?

  What was your thesis at the time? I mean, you know, pet food, the pet food business, I think in 2006 in the US, it was like a $15 billion industry and it's grown a lot since then. So clearly it was growing and it's just exploded, right? Especially because people seem to be having more pets than kids now. But what was the, like, how, you know, why did you think that people would be interested in refrigerated pet food? You know, and people were buying canned food, people were buying dry food. How did you think you could convince people that, you know, this refrigerated food was going to be a better option?

• 31:48Speaker 01

  There were two major trends that we were watching. And one of them was that people were definitely starting to head down that path of like, I'm becoming more aware that I need to eat better food and less processed food.

• 32:01Guy Raz?

  Right. Not snack wells.

• 32:03Speaker 01

  Exactly, exactly. They needed to start eating a better diet for themselves. Now, whether they did that or not is another story.

• 32:09Guy Raz?

  Yeah.

• 32:10Speaker 01

  And then the second piece of it, we, just like you were mentioning, dogs were becoming an incredibly important part of our lives. And the, the simple analogy is, you know, maybe 50 years ago, they were mostly in the backyard and they went from the backyard to the doghouse, to the garage, to the laundry room.

• 32:27Guy Raz?

  To the end of my bed every night.

• 32:29Speaker 01

  Exactly. Yes, exactly.

• 32:31Guy Raz?

  On my feet.

• 32:32Speaker 01

  Absolutely. They have become our kids.

• 32:36Guy Raz?

  And you started to see that, you really started to see that come into focus around that time.

• 32:41Speaker 01

  Exactly. And it was referred to in the industry as the humanization of pets. So this idea of pets were becoming more like kids or humans. And the thing I kept asking everyone in the industry was, if everyone realizes that this idea around humanization of pets, why are we feeding them like, honestly, like farm animals? Because initially kibble came from animal feed in the 40s, 50s, 60s. That's really where that grew out of, the idea of having a kibble. So we should probably be feeding them differently.

• 33:13Guy Raz?

  But let me, let me ask you about, let's just go back to making it, right? You wanted to make something that was fresh.

• 33:22Guy Raz?

  Could be could be shelf-stable for 12 weeks, I think, three months.

• 33:26Speaker 01

  Mm-hmm.

• 33:27Guy Raz?

  And was sliceable. Those are all challenging things to do.

• 33:31Speaker 01

  Mm-hmm. Yeah. You know, it's interesting. We actually worked with a team of initially veterinary nutritionists, and we said, what's the perfect pet? What's your dream pet food? Tell us what it is. And they had some ideas. And then we continued to talk to different people that were involved in in processing different foods and cooking different foods on the human food side. And we started in the first partner I think we had with Freshpet was a group called the Hunsburgers. And it was in Quakertown, Pennsylvania.

• 34:03Guy Raz?

  This is a meat producer. They produce meat for humans, right?

• 34:05Speaker 01

  Exactly. They did. They did. They produce meat for humans and actually the pet food market.

• 34:11Guy Raz?

  Okay.

• 34:12Speaker 01

  And we actually convinced them to let us have 10,000 square feet of their manufacturing facility, kind of off on the side on in this other room. And that's literally where the trials to start making Freshpet started.

• 34:26Guy Raz?

  So it took you, do you remember how long it took you from the time you started to experiment with? And were you using beef, or using chicken, or turkey, or what?

• 34:36Speaker 01

  I think maybe it was just chicken and turkey in the very beginning, but soon after we used, we were using beef also. So we wanted to have a handful of different proteins because different people and dogs like different types of proteins. And I would say it was probably a year of of testing and trying and tinkering before we thought we had it. But it's a lot of times today, you'll hear people say it's the version one or V1. I would say that was V1. And we thought it was ready to go to market. And and the reality was, it probably was good, but it wasn't where it quite needed to be on kind of that version one.

• 35:14Guy Raz?

  You guys were doing this out of a manufacturing facility in Pennsylvania, and they were making the food for you. They were able to to make it for you?

• 35:22Speaker 01

  No, this it was it was our facility. It was so it was their building. And it was we rented right next to in this in this chicken processing facility where they made human meats.

• 35:34Guy Raz?

  Not human meat, human-grade meat, you should say.

• 35:38Speaker 01

  Yeah.

• 35:38Guy Raz?

  Not grinding up humans.

• 35:39Speaker 01

  No, no, no. Oh, my God.

• 35:44Speaker 01

  Yeah, we had space in that facility and we started bringing in equipment. And initially, it was just a simple mixer and then it was a giant steam oven. And then we had something that was, it's called a chub, a chub machine or a K-Pak machine where it basically puts the meat into the sleeve. And then initially, we were putting in these giant pallet sized totes with, of ice water to cool it down. Because part of pasteurization is the cooking part where you heat it up or the steam oven.

• 36:15Guy Raz?

  Yeah.

• 36:16Speaker 01

  And then part of it is where you have to bring the temperature down pretty quickly. So we were trying to follow kind of the USDA guidelines around how to actually do pasteurization on foods.

• 36:26Guy Raz?

  Yeah. And, and did you, by the way, I'm assuming you would, you, you had to bring these to actual real live dogs to test.

• 36:34Speaker 01

  Oh, yeah, yeah.

• 36:35Guy Raz?

  Yeah. Because dogs eat everything. I mean, they, I mean, they, they, they eat poop, right? I mean, like, they'll eat anything.

• 36:41Speaker 01

  Yeah.

• 36:42Guy Raz?

  So how did you know whether this was, you know, good?

• 36:48Speaker 01

  You know, there's a range of dogs. There are dogs that will eat almost anything. Then there's a very large group of dogs that will not eat, you know, almost nothing. And we wanted to test with all the dogs. And part of it was about taste, but, but we had to make sure the nutrition worked for the pets. And then when the consumer opens it up, they have to look at it and go, oh, my God, this, this looks good. It looks like food I could eat. And we would literally go out of our way to make sure it smelled good for the consumer. So the first tip is the dog loves it and eats all of it. And then the more people used it and the longer they used it, the more they saw literally a visible difference in their dog's health in some way.

• 37:29Guy Raz?

  Hmm. So once you had it down and you were ready to pitch, pitch it, I, because you guys were based in, or you living in, in New Jersey at the time?

• 37:40Speaker 01

  Yeah, I was still living in New Jersey and Calhoun had been back and forth a little bit. He originally started off in San Francisco and then he moved to New, we figured we all need to be together. So he was now living in New Jersey, too.

• 37:50Guy Raz?

  So you needed some retailers to put this in their coolers, right? And, and by the way, at this point, This was still, I mean, you guys were still financing this with some of the friends and family money and then the money that you guys pooled together?

• 38:04Speaker 01

  Yeah, at this point, it was still, there was, I would say, still that friends and family group, but at the time, we finally talked both PetSmart and Petco into doing a small test with us in the San Francisco Bay area.

• 38:18Guy Raz?

  And the Bay area presumably because that's where people are sort of more first adopters, like more experimental?

• 38:24Speaker 01

  Yes, and we just thought it was a, we both agreed, both the retailers and us, agreed that we thought it was, the consumers were fairly progressive around nutrition. Now, honestly, for us, the other thing is, we wanted to be able to test it in a place where we could have like one distribution network. It ended up being a van that we literally ended up hiring someone to drive a van to deliver to the stores, because that was one of the next challenges, was no one wanted to carry the product for us, none of the distributors.

• 38:54Guy Raz?

  Right, because they had to be refrigerated?

• 38:55Speaker 01

  Yeah.

• 38:56Guy Raz?

  Yeah, but how did you, I mean, at the time, 2006, did Fresh, did Petco and PetSmart have any refrigerators?

• 39:03Speaker 01

  No, no, they didn't have any refrigerators, and the original idea was, oh, well, we'll let the retailers buy the refrigerators.

• 39:09Guy Raz?

  Yeah.

• 39:10Speaker 01

  And they said, are you kidding? You want me to spend our money on your refrigerator?

• 39:16Guy Raz?

  So you had to buy them?

• 39:17Speaker 01

  Yeah, and that was us kind of starting to launch into owning all of our refrigerators, but it was, we not only ended up in the pet food business, but we ended up in the refrigerator business.

• 39:27Guy Raz?

  These were refrigerators, by the way, that were like open, like you see them in supermarkets, the open refrigerators, and they would just stock the fresh pet rolls, I guess?

• 39:36Speaker 01

  Yeah, we had, we had some open air, we had some closed air refrigerators, we had all different ones that we would use for the test, but we also had this idea of go big or go home, so we felt like we needed like a really big display, big merchandising for. Reach someone, you know, the consumers to actually look at it and realize what it was. And it said Fresh Pet on it? It said, yeah. Well, actually, we initially started the company under the name Professor Connors. We wanted to name it Dr. Connors, and then we couldn't name it Dr. Connors because we didn't, you needed a vet to be able to call it doctor. So then we called it Professor Connors. And then it was, I joke about it, as it was one of my moments of weakness where I agreed to call

• 40:19Speaker 01

  the company Professor Connors. And it was around for about a year as Professor Connors. Professor Connors Pet Food? Was it dog food initially only? Professor Connors Deli Fresh was the original, original name. And I know it's a little bit of like a tangent, but, but John, we kept talking about, we gotta change this name. And John didn't really want to change it. And he went away over, over on vacation. And the second he walked away, I turned to Colin and said, we have to change the name of this company. I said, we're gonna regret this forever. And we ended up changing it to Fresh Pet. And when he got back, I had changed the name in front of the, we had a small little house as our office. We changed the business cards and we completely changed the name and then started to moving, moving

• 41:03Speaker 01

  on the packaging. And when John came back, he actually literally drove by the office the first time because he, he, he didn't recognize the sign. He, he just drove past a little bit. And he came in and said, what, what do you guys, what'd you guys do? And I said, John, you're gonna thank me for this later. We could not be Professor Connors. We needed a name that really was understandable and quickly digestible by consumers and retailers. And 20 or 30 years from now, it may be Kleenex, or it may be Xerox, where it's the name of the category. But for now, this is the right decision for us to be making. And, and I think, within about a minute, he realized that it was the right decision for us and, and it was a good decision.

• 41:48Speaker 01

  And I mean, it's, today, the name of the category is literally, you'll see the sign in the, in the grocery aisle, Fresh Pet Food. Wow. Up on the sign. And it was super important to have a name that told the consumer what it was, fast. Right. So you were initially in, what, like 20 Bay Area stores or 15? I think it was 25, I think was the number, between Petco and PetSmart. And you had to buy all the refrigerators for these stores? Yes. And we didn't know what we were doing, buying refrigerators.

• 42:20Guy Raz?

  And that was, and how did you, I mean, you had enough money to finance that?

• 42:25Speaker 01

  We, I think for this period of time, we had enough money in the very beginning, but we quickly started realizing, wow, we, this manufacturing piece is taking a lot more money.

• 42:36Guy Raz?

  Yeah.

• 42:37Speaker 01

  And then we're now buying refrigerators. And then we also had this team of people that we had worked with in the past that we were like, wow, this is going to take off. And we're going to need this team of people and we don't want to lose them.

• 42:49Guy Raz?

  The team of people who were at Meow Mix with us. At Meow Mix, right. Yeah. I mean, so just presumably to recruit those people who, you know, they had certain salary expectations, they were experienced. I mean, this isn't a startup with like 25 year olds.

• 43:04Speaker 01

  No, no. It, you know, I always equated to, it's like when you're dealing, you're watching an incredible basketball team. All five of those guys know where the other one is and what they can do. And that's the people that we wanted on the team. We knew, we knew how they could play. We knew the positions they could play. We knew what they could get done. So now we had a ton of overhead. We, we had these people coming in. We started building manufacturing. We're now buying refrigerators and we were quickly, quickly, the business was not developing fast and we were quickly running out of cash. And it got very, very scary and very, very real, very fast.

• 43:44Guy Raz?

  So presumably there wasn't a whole lot of money left to market this. You had to just, you know, you've got these refrigerators. They are in the Bay Area, which is a place where people tend to be more, you know, experimental and willing to try new things. But how did you, how did you get customers in those stores to, to try that product?

• 44:04Speaker 01

  The biggest single thing that we did were, were just demonstrations or demos. And we'd stand literally in the store and we would show consumers what the product looked like and that it looked good, it smelled good. And the one thing that was working for us is as we gave people samples. They went home and they fed it to their dogs, obviously.

• 44:24Guy Raz?

  Yeah.

• 44:25Speaker 01

  And the dogs, they had a great experience. And then, once they started using it a few times is when they started seeing the performance of the product.

• 44:32Guy Raz?

  Did you ever do any like, any like stunts where like you took a bite out of it to say, hey, you know, it's safe for humans or good enough for us?

• 44:40Speaker 01

  We, we have, we definitely have done some of those things along the way. We've been willing to, you know, eat it and taste it. I actually had, um, we had a reporter tour a factory probably about five years ago. And I literally took a bite off the line and so did she. So yes, we, we did, we did everything. We, we had, we had people in those markets that we called these like kind of road warriors. And they would spend time literally driving around and visiting vet offices and going to dog parks, dog daycare, giving out samples. So it was, it was very much kind of like on the street, kind of ground level gorilla type marketing to try and get enough people to try the product.

• 45:21Guy Raz?

  And how did it do in those stores?

• 45:24Speaker 01

  I mean, it did probably okay. It was a little below expectations, but the, the complexity of the supply chain and making it in Pennsylvania and shipping it to the West Coast and then having the right product and inventory and then filling those fridges. And there was so much product in the fridges that it would have had to done extraordinarily well for it to sell fast enough to get through it before we ran into shelf life.

• 45:48Guy Raz?

  Right, because, because by the time you make it, the clock starts ticking and you're rushing it from Pennsylvania. That's probably five days already. So now, right, you get to the, so every day counts.

• 45:59Speaker 01

  Yeah. But what we didn't realize was 12 weeks sounded like a long time, but to start shipping it around the country, to make it and ship it around the country and then actually have it sold out of a refrigerator. There was a, a concept they were introduced very soon after and it was called Sell It or Smell It. And it was literally you would, if you didn't sell the food, you'd start smelling it because it was going bad. And, um, and, and that was, that was really like a, a, kind of a rude awakening. And we realized 12 weeks. Was not enough shelf life for this to work in the beginning and get it started. We needed a longer shelf life and we we were absolutely 100% committed to making sure that

• 46:43Speaker 01

  it was all natural. We were not putting any artificial preservatives in there.

• 46:46Guy Raz?

  Could you do that? Could you could were you able to? I mean, could you figure out how to do that? How to make it last longer?

• 46:52Speaker 01

  Yeah, I think we went from version one to version two of the product very quickly. And it was the only way we were going to be able to get any type of significant investment is if we solve that problem because.

• 47:04Guy Raz?

  You had to make it last for how long?

• 47:06Speaker 01

  We actually moved it from 12 to 16 and then eventually to like 18 and 20 weeks over time.

• 47:12Guy Raz?

  Wow.

• 47:12Speaker 01

  Yeah.

• 47:13Guy Raz?

  So so what explains why, in your view, it wasn't doing that well in those in those Bay Area? So this was more expensive? Was it the price point? Why?

• 47:22Speaker 01

  I think it was more expensive. I think that when people don't know about what something is, they're hesitant. People typically are not like fast adopters to change. And it's that I think that that piece of information applies to almost everything. But now you're feeding your kid and I want to make sure that this is a good food and a good product that is safe for my kind of quote unquote kid or pet.

• 47:48Guy Raz?

  Yeah. How much did it cost at that time in 2006, a roll?

• 47:52Speaker 01

  I think we were at 999 for initially like it was a I think we were targeting 999 for a six pound roll, which was pretty cost effective, quite honestly.

• 48:03Guy Raz?

  You could still make money off that as I mean, it was cost effective for the consumer, but you could still make a profit off that?

• 48:10Speaker 01

  We weren't making much and that was another problem that we had to like, we wanted to again, make it as affordable and as accessible. But we kind of sacrificed some margin upfront because we felt it was important to get the momentum going behind it. And getting it into consumers' hands. So we wanted to make it as cost effective as possible for consumers.

• 48:32Guy Raz?

  But of course, that that was still it was still challenging. I mean, and challenging for you, as you say, I mean, because you you you said that when you set out at the beginning, one of the one of the principles was we're not going to like from your time at at Ralston Purina.

• 48:44Speaker 01

  Yes.

• 48:44Guy Raz?

  We're not going to, you know.

• 48:45Speaker 01

  We're not going to use discounting. It damages the brand and it was a real key learning and it became one of those incredible principles that we put in place upfront.

• 48:56Guy Raz?

  So you had like multiple challenges. I mean, you had, you know, short shelf life, really high overhead costs because you had an expensive team and you were in the refrigeration business.

• 49:10Speaker 01

  Yes.

• 49:11Guy Raz?

  And that was, and by the way, if this wasn't going to work, it was going to fail, like basically Petco and PetSmart were going to be the proud owners of free refrigerators.

• 49:19Speaker 01

  Yes, unfortunately. So I mean, there were times where you start questioning, wow, is this a good idea and can we do it? And I think what's really important for me was, I think you can talk a little bit about that with the team because you want to be honest, but you can, I think you can never lose, you know, their confidence. Once the team starts losing confidence in what we're doing, then I think it can literally become a quick failure.

• 49:51Guy Raz?

  So really, I mean, there were so many, so many challenges you faced in terms of convincing retailers to carry this. The first and foremost was the refrigeration. I mean, if you want it to be in the pet food section of a big box retailer, you'd have to basically like open up that shelving space and put a refrigerator there in the middle of that section. And I have to assume that there was probably a lot of resistance to that idea initially.

• 50:21Speaker 01

  Absolutely. This, that came into the situation where we presented to retailers and even after we had made a little bit of progress with PetSmart and Petco and we started talking to other retailers, it was back to the, you want me to do what? And I don't care if you were successful there.

• 50:38Guy Raz?

  Yeah.

• 50:39Speaker 01

  I don't think that's going to work in my store.

• 50:40Guy Raz?

  Yeah.

• 50:41Speaker 01

  And it was so hard for them to understand that we wanted to put a refrigerator in the middle of their aisle. So there was a lot of, there were a lot of eye rolls. And at the same time, with all of these challenges, we literally had the economy starting to fall apart in 2007.

• 50:58Guy Raz?

  Yeah.

• 50:59Speaker 01

  At the end of 2007, it, you could just, you know how you can just feel when the economy's starting to change? So then retailers were like, you know, your dog food's still kind of expensive, your pet food's expensive. And although consumers may love it, how can, how can you expect people to pay for this?

• 51:15Guy Raz?

  When we come back in just a moment, how Scott gets into a battle with Walmart about refrigerators and takes a huge risk by not backing down. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 51:36Guy Raz?

  This episode is sponsored by AG1, the daily foundational nutrition supplement that supports whole body health. I literally drink it every day. And the reason, I wanted better gut health, immune system support, and I wanted to be able to replace a bunch of supplements that are already in AG1. I drink AG1 minutes after I wake up. It actually helps power my morning workout. Since I've been drinking AG1, I've noticed I have more sustained energy, better clarity, and even improved digestion. And it doesn't spike my blood sugar levels. And with just one scoop, preparing my drink takes a few seconds. AG1 is part of my daily routine and the payoff is enormous. Just one daily serving gives me the nutrition I

• 52:20Guy Raz?

  need with 75 high-quality vitamins, probiotics, and whole food sourced ingredients. If you're looking for a simpler, effective investment in your health, try AG1 and get five free AG1 travel packs and a free one-year supply of vitamin D with your first purchase. Go to drinkag1.com/built. Support this show by going to drinkag1.com/built. Check it out.

• 52:48Guy Raz?

  Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams, and businesses ship production-ready sites faster than ever while getting every detail right. Prompt, inspect, edit, and publish in one At a whole new pace. AI agents and humans work together.

• 53:30Guy Raz?

  The agents bring speed and scale and people bring taste, judgment and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on.

• 54:15Guy Raz?

  NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together and that shift is already underway. That's why NetSuite wants to put a new expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization and how to position your business to prosper from it.

• 55:00Guy Raz?

  If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Stripe is built for whatever comes next because the pace of change has never been faster than it is right now. New business models, new currencies and new expectations for speed, reliability and scale. Stripe builds financial infrastructure that helps businesses start, grow and operate globally. From payments and billing to fraud protection and cross-border payouts,

• 55:44Guy Raz?

  Stripe is built to support the new pace of commerce. They're trusted by the companies building at the frontier. From 86% of the Forbes AI 50 to global leaders like Salesforce and OpenAI. In fact, more than 1.6% of global GDP flows through Stripe, with Stripe's users processing a combined $1.9 trillion last year. So if you're already thinking about what's next for your business, see what's possible at stripe.com.

• 56:27Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2007 and Freshpet has a lot on its plate. The economy is in bad shape. Retailers don't want to install refrigerators. And even people in the pet food business think fresh pet food is a dumb idea.

• 56:45Speaker 01

  I remember one time I was I was literally in our booth at a kind of a pet show setting up where retailers would come and walk the floor of a trade show. And I had an island with a cutting board and we had a refrigerator and I had gotten these hay bales. And I hear this, "Ah, Morris, Turtle Morris, fresh pet food. Boy, oh, boy. I wish I had thought of that." And it was it was someone I had worked with at Purina that was now at a different company. And he was happy to see me, but he thought what we were doing was completely ridiculous and laughable. And I think that was a pretty tough moment.

• 57:30Guy Raz?

  When you, I mean, essentially, you had to, in the first, I think, probably in the first three years, I mean, you had to constantly imagine, look for money to finance, because you bought a manufacturing facility in 2007, right? I mean, that was a slightly larger one.

• 57:54Speaker 01

  Yeah, we kept expanding the one we were in in Quakertown, right?

• 57:58Guy Raz?

  Right. And that, I think, took $10 million. I mean,

• 58:01Speaker 01

  Right.

• 58:01Guy Raz?

  So I imagine that a big part of the job was just constantly looking for money to help

• 58:08Speaker 01

  Yes.

• 58:08Guy Raz?

  finance the group, because this is a cash-intensive business.

• 58:12Speaker 01

  Right. So one of the people that we'd worked with at Meow Mix that was almost immediately involved was a gentleman named Dick Kassar, and he knew this other gentleman, Charlie Norris. And he said, you know, I think Charlie may have some money. You should go talk to him. So Cahill and I flew out to California, and we met him in kind of one of the lounges at the airport in San Francisco. And Charlie flew up from LA to meet us. And we explained to him what we were doing. And he said, look, I believe in jockeys, not horses. He goes, and I believe you guys can make this work. And I want to think about it, but I may be able to pull some funding together for you. And that was the original angel funding network

• 58:57Speaker 01

  that we were able to pull together, was led by Charlie, who eventually became the chairman of the company. And he just retired after, I think it was 16 years with us a couple of months ago.

• 59:08Guy Raz?

  Yeah. I mean, you know, despite all of the, you know, all of the sort of challenges, and despite the economic challenges, right, 2008 into 2009, was there any indication at all that people were still willing to spend, it's like, you know, the lipstick principle, right?

• 59:32Speaker 01

  Yeah.

• 59:32Guy Raz?

  That you still buy lipstick to look nice. Cigarettes still sell. Were there indications that people are still willing to spend premium dollars for their pets, or not?

• 59:44Speaker 01

  I think that there was, there were definitely a core group of consumers that started showing us that where they were really willing to spend money on their pets. And we started making a little bit of progress, but it was like, it was moving inches and we had to go miles. And it was store at a time, store at a time, a little bit of progress, a little bit of progress, fix the product, raise a little bit of money, continue to make more improvements of the product. And it was just, it was kind of every day, it was, you're playing whack a mole. And I remember one day, leaving work and getting in the car and openly sobbing in the car on the way home.

• 1:00:24Speaker 01

  And I tried to never let anyone see that, you know, we were scared or we were losing confidence. But quite honestly, it was one of those things, go home, go for a run, wake up the next morning and get back to work and go figure it out.

• 1:00:41Guy Raz?

  In, in March of 2009, you guys got an investment from Tyson Foods, the biggest supplier of meat, I think, in the world or one of them for sure. Did that, I mean, I imagine that was a shot in the arm, but I also imagine that that was at the time, like, you know, really crucial, critical to stabilize the business.

• 1:01:02Speaker 01

  It was, it was absolutely critical. This was, I mean, not, we realized if we didn't get a significant investment from someone other than the angel group, that we weren't going to be around.

• 1:01:12Guy Raz?

  Yeah.

• 1:01:13Speaker 01

  So when we found Tyson, and we found the right person at Tyson, we found a gentleman who, he was basically running a group that was looking to create other business units out of Tyson's kind of main or core business units. And they made an investment in us. And as part of the criteria, they had a, basically a term in the agreement that means they could decide if they, we had had any other fundraising, what the terms were. And what happened was there was a change from one CEO that we originally shook hands with and it turned from one CEO to literally the day we signed the deal, it was another CEO that was kind of in place for a while. And then finally, about a year

• 1:01:56Speaker 01

  later, a third CEO. So kind of end of 2009 into 2010. And the last CEO that came in did not get along. And he said, let's get rid of all these other businesses. And they were basically like, well, what do we want to do with Freshpet? And he said, I don't care. Don't give them another penny. And because they had the ability to basically decide whether we could raise money or not, they were literally trying to bankrupt the company or trying to get us to give them the company.

• 1:02:25Guy Raz?

  Wow. I mean, this is classic case of a new CEO coming in and just being a jerk and, you know, and, you know, just discounting anything their predecessors did. And he was like, let's just give them nothing, you know, bleed them dry, and then we can acquire them for pennies on the dollar.

• 1:02:44Speaker 01

  Yep, exactly. And it was from, it went from, oh, my goodness, we're working with Tyson, and we saw a path forward for really delivering the potential that this company had, to within a year, literally being back into the worst crisis we'd ever had. And Charlie, on his own, the original angel investor and our chairman at that point, stepped up and gave the company like an extended significant loan for a period of time in order for us to get through that period.

• 1:03:17Guy Raz?

  Well, so essentially, you have this, got this challenge. But meantime, you were expanding. I mean, you did manage to get into some big stores like Kroger, even Walmart, some Safeways. How did you convince those stores, given the skepticism around refrigerated dog food, how did you convince them to let you put a refrigerator in the pet food aisle?

• 1:03:42Speaker 01

  It was never easy to sell in new refrigerators, because every single retailer said, even if you said, we were doing great at retailer A and B, they're like, that's not mine. That's not my store. I want to test it. So they would start off with one fridge, or maybe five, or if someone was really aggressive, 10 stores. And you'd have to prove it out in those 10 stores. And we just kept building the network slowly over time.

• 1:04:08Guy Raz?

  Meantime, you were still losing money and you were hamstrung. You couldn't raise more money. So, I mean, this is a long period of time, almost two years, where you're hamstrung in your ability to bring in more capital and you're trying to expand retail sales, which means that you've got to expand capacity and you've got to invest in manufacturing and even advertising. So you guys were just, I mean, you were probably losing a lot of money at the time.

• 1:04:36Speaker 01

  We were losing a lot of money and we were fortunate enough in 2010 to unwind the Tyson deal and we brought in a private equity firm called Mid-Ocean Partners. And they invested in the company and they helped fund it. And the next thing that started to happen was not only were we able to prove it out on a fridge by fridge or a store by store basis, but we started using kind of broad level marketing and we were able to get dramatic increases in sales and we were getting incredible returns on our advertising. And when they saw the potential of adding all these fridges, they recognized that all they needed to do was feed this machine and it would start to take off.

• 1:05:17Guy Raz?

  It seems like you went from, and I mean this with the greatest of respect, from crisis to crisis in trying to resolve all of your problems because you get out of this, or you're starting to get out of this problem with Tyson, and at the same time, you're starting to encounter refrigerator problems, right? Like, I just can't even imagine this because you had to service and maintain these refrigerators in addition to delivering the food to these refrigerators. And some of them were breaking down or like they'd be in stores where the stores weren't air-conditioned and they were like open refrigerators and the food was spoiling.

• 1:05:56Speaker 01

  Yeah. We had an opportunity with both Kroger. And with Target. And when we had kind of talked about the expansion with Target, we wanted to go with these open air refrigerators. And especially at night, the refrigeration or the air conditioning was turned off in the store and the stores would get hotter and their refrigerators just couldn't hold temp. So we ended up having to, over time, put doors on all the refrigerators and enclose them, which was absolutely fine, but it was a long, it took months in order to figure it out.

• 1:06:32Guy Raz?

  Tell me a little bit about the, I mean, so, so basically every year you were growing, right? Like 2012, you had reportedly $44 million in sales and then about a little less than 20 million losses. 2013, 63 million in sales and then about 22 million losses. But at that point, you had like 10,000 refrigerators in stores, you had visibility. People, and the ad campaigns, by the way, from, from what I understand, were like, kind of designed to mainstream refrigerated pet food. Like, like at this point, people were kind of spending money on doggy day spas and all kinds of things that were, you know,

• 1:07:17Guy Raz?

  no judgment, I love my dog, I put my dog in a, you know, they get, my dog gets groomed and all that stuff. But, but still, there was, there was kind of a feeling that some of this was over the top. But I guess you wanted to kind of position fresh pet as like, just a normal thing that you would do for your dog or cat.

• 1:07:33Speaker 01

  Yeah, well, I think what we did is, you know, you steal the quote from Wayne Gretzky, you always want to be where the puck is moving to. And I think what happened early on is we got there too early. And then all of a sudden, in kind of 2010 and 2011, when we started getting the entire model figured out. The puck was now coming to us and we wanted to be in all the retailers and as many stores as possible and as many consumers as possible. So we really started thinking about, well, how do we get retailers and consumers, when they're thinking about pet food, to think fresh first. Fresh is the center of the bowl, is the base of the meal.

• 1:08:10Guy Raz?

  By the way, when did you get into the cat food side of the business?

• 1:08:15Speaker 01

  So, early on, we, I'd say early on, like 2010, we had cat food. It's been a very small piece of the business for many, many years, but it's something that we see as a potential, like, long-term opportunity for the organization.

• 1:08:28Guy Raz?

  It is, by the way, I'm assuming, is the dog food category more, is it bigger than the cat?

• 1:08:37Speaker 01

  Much larger, yeah.

• 1:08:37Guy Raz?

  It's larger, right?

• 1:08:38Speaker 01

  Yes.

• 1:08:38Guy Raz?

  Dogs eat more.

• 1:08:39Speaker 01

  Yeah, they eat a lot more. Think about, like, the size of a cat and then the, even if you take the average size of a dog.

• 1:08:45Guy Raz?

  I know. I've got two cats and a dog.

• 1:08:47Speaker 01

  Yeah.

• 1:08:48Guy Raz?

  I've watched them eat, yeah.

• 1:08:49Speaker 01

  Yeah. I mean, the joke always was, we love the people with two golden retrievers versus one cat.

• 1:08:55Guy Raz?

  Why did you decide to, to take the company public in 2014? Why'd you decide that was the right time? Did you, did you need to raise capital?

• 1:09:04Speaker 01

  We, we knew that we needed additional capital for a significant expansion in our manufacturing and we felt like going public was really the right, the right path forward for the organization.

• 1:09:17Guy Raz?

  So, let's talk about it. I mean, you go public in 2014 and, and that means, all of a sudden, you've got, it's a, you've sort of become a, somewhat of a different company. I think, within a year of the IPO, the stock price declined by like, almost 70%, right? And so, that, all of a sudden, you had some shareholders who were like, You know, upset about that. I think there was a point where like Jim Cramer on CNBC called your stock the disaster of the day. And you must have been aware of all this going on.

• 1:09:54Speaker 01

  Yeah, I mean, you're always aware of it. And I think that there are a lot of people that have not believed in what this could be early on. And then, sure, like, you start going public and, and, boy, you, you're on a different type of stage. And we, we were making incredible progress. We had over 40% growth the year we went public.

• 1:10:14Guy Raz?

  Yeah.

• 1:10:15Speaker 01

  But operationally, we had, we had a misstep. And we weren't as profitable as we thought we were going to be. And our margins slipped a bit. And it caused, you know, an incredible change in the stock and a loss of confidence in the market. And, I mean, the thing that was terrific is the people that believed in us, that stayed with us after we were public, were able to kind of ride back the progress that we made and, and make many, many times, you know, their, their investment.

• 1:10:47Guy Raz?

  You know, now that obviously you are a public company, all of your data is public as well. And, you know, and so, you know, I was looking at your, your sales figures for 2019, which were very impressive, you know, 250, 250 million dollars in, in sales that year, and a very small loss. I mean, it's, you know, 1.4 million dollars. So, at that point, it seemed like you were probably on track to hit profitability. But, but at the same time, I guess, for you, the strategy then and still is to just expand, continue to grow even if you are posting losses.

• 1:11:27Speaker 01

  Yeah. And, and, you know, the question starts to become, what's acceptable in the marketplace? And the market on, like, how their acceptance and their comfort level with some type of loss has kind of ebbs and flows over time.

• 1:11:42Guy Raz?

  Yeah.

• 1:11:43Speaker 01

  And I think the, you know, especially the, moving through kind of the last several years, the appetite for companies that are like, losing money. And not having a clear path to profitability has really waned. So we have, we've definitely kind of modified some of our plans along the way. And now we had a couple of years where we were growing over 40%, you know, and we want to kind of trim back the growth just a little bit. We want to stay in that kind of 30 ish percent range. And that's going to allow us to basically grow and be able to fund our growth going forward. And that's really the plan that we've laid out to the public markets.

• 1:12:21Guy Raz?

  I'm curious about this kind of, I don't know what to call it. This dispute with Walmart that happened, I think, before the pandemic, which was, they apparently wanted to own, I mean, you had refrigerators in all these Walmarts. They count accounted then and maybe even still do now for 20% of your business. And they wanted to use your, your fresh pet refrigerators to sell other refrigerated pet food. And you guys were, you know, you were facing, you know, an 800 pound gorilla here. How did you prevent that from happening?

• 1:13:01Speaker 01

  It was a very, it was a series of very, very difficult and challenging discussions. And I think the initial discussion was, what we had internally was, we can't allow anyone to put anything in our refrigerators. Because if I have one problem, I've got 25 or today, over 30,000 problems.

• 1:13:20Guy Raz?

  Yeah.

• 1:13:21Speaker 01

  Out there across the market, the number of fridges that we have. So we went back to Walmart and we explained like the perspective and the point of view that we invested in this category from the very beginning. We spent all of our money. We invested hundreds of millions of dollars to figure this out and build it and buy these refrigerators. And those were our refrigerators and it was their stores. And if they didn't want our refrigerators in their stores, they could let us know that and we would move them out. But if they were okay with it, we would continue on the model that we had always kind of moved forward with, which was our products go in our refrigerator. And if they wanted to put other products in, someone else needed to buy their own refrigerator.

• 1:14:03Speaker 01

  And I think over time Walmart didn't like it, but they think they got comfortable with the concept that. You know, the analogy that's out there is the red cans go in the red fridge and the blue cans go in the blue fridge. And what I'm talking about is Coke and Pepsi.

• 1:14:19Guy Raz?

  Yeah.

• 1:14:20Speaker 01

  So we use precedent that was out there. We use the initial kind of agreement.

• 1:14:26Speaker 01

  And I think we also kind of laid out kind of a business plan forward with them that demonstrated that we can be an incredible growth engine for their entire category. And it's a scary conversation, but you had to, you had to have it and you had to be honest about it.

• 1:14:40Guy Raz?

  Because you guys were, I mean, you do direct to consumer sales, obviously, right?

• 1:14:45Speaker 01

  We very, very little, like really, it's not, it really hasn't been a part of our business.

• 1:14:50Guy Raz?

  And why, why not? Why didn't you, yeah?

• 1:14:54Speaker 01

  It's interesting. So, you know, when we made the commitment to retailers and we said, we're, we're working with you and we're putting our fridges in the store. The deal was we weren't going to go around the retailer and go direct to consumer. And we feel as though the opportunity to deliver fresh food is where people are going to buy their fresh food over time. And that's going to be, they're typically going to make a trip to a store to do that. So that fresh trip is owned by the brick and mortar guys. And those are our partners that we went in with in the beginning. So even when we have played with this idea of shipping food to consumers, we're actually working with our retailers to actually ship it through their stores.

• 1:15:35Guy Raz?

  Yeah.

• 1:15:35Speaker 01

  Or their distribution centers.

• 1:15:37Guy Raz?

  So, I mean, you started this company in 2006. We're talking now in 2023. It has been a very successful brand. And presumably, you know, part of the mandate is to get it to profitability in the next few years. You know, what, what do you, sort of where do you see yourself in, in five or 10 years?

• 1:16:03Speaker 01

  You know, I don't, I don't exactly know in five or 10 years, but I try and be super objective about that. I sit back at the end of every year and I think about the contributions that I've made and the work that I've done and how I feel like I'm still helping to guide and lead and create the company and lead to success. And the day I stop having impact and contributing significantly to the organization is the day that I need to walk away.

• 1:16:31Guy Raz?

  So when you think about, when you think about your own journey and where Fresh Pet is today, how much do you attribute it to luck and how much to how hard you worked?

• 1:16:40Speaker 01

  You know, it's interesting. Going all the way back to early on in athletics, I had one, a great coach, his name was Jeff Ward, another one was Charles Foster, and they both said to me, you know, if you take a step back and you look at the people that have created, you know, been great athletes, they said there's two parts to it. One of them is they believe they can do it. And the other one is they have the skills to pull it off. And I think the third one is being at the right place at the right time or some level of luck or fortune or whatever you think it is. So everyone's going to have luck pass by them. And it's a question of what you do with it and how you think about

• 1:17:24Speaker 01

  it and how you, how you take advantage of that luck.

• 1:17:27Guy Raz?

  That's Scott Morris, co-founder and president of Fresh Pet. By the way, Scott is very happy to tell you about his own pets. He has one dog, an Aussie doodle, and two cats, or three if you count his grown daughter's cat, which of course he does.

• 1:17:43Speaker 01

  There are unquestionable perks to being Piper, Milo, sorry, Milo, Ringo, Suzu, and Piper. There are definite perks. They definitely, they eat well. I think, yeah, they probably lucked out a little bit showing up at the Morris house.

• 1:17:59Guy Raz?

  Yeah, Michelin three-star cat and dog meals.

• 1:18:02Speaker 01

  That's right.

• 1:18:03Guy Raz?

  Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's totally free. This episode was produced by Carla Esteves and our music was composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Alex Chung. Our audio engineer was Gilly Moon. Our production staff also includes J.C. Howard, Casey Herman, Sam Paulson, Elaine Coats, John Isabella, Kerry Thompson, Ramel Wood, and Chris Messine. I'm Guy Raz, and you've been listening to How I Built This.