A $610 Million Exit

Issue #24

September 19th, 2023

Quick Hits:

🐶 30 Most Owned Dog Breeds in America

😂 The perfect account doesn’t exi…

🐕 How much does a dog walker make?

😂 The funniest video you’ll see all week

• Gourmet no more - Inflation is causing pet parents to move away from premium.

• Brazil - Is experiencing remarkable growth in the pet space, however high taxes remain a hurdle.

• GoDog Expands - The emerging premium pet care provider is targeting the southeast for franchise growth.

• Bird Food - TOP’s Parrot Food, is expanding its distribution partnership with Phillips Pet Food & Supplies.

• Mammaly - German pet supplement brand secured €14m co-led by Iris Ventures and Five Seasons Ventures.

In 2021, Zesty Paws sold for 610 million dollars, 6 years after it was launched. Let’s find out who was behind this supplement behemoth and how everything unfolded.

In high school, AJ Patel started a web-hosting company. He was making around $5k a day, employing mostly people from India. For a high school student that’s equivalent to being a billionaire.

When he was a senior in college, he figured out that he could buy Zynga chips, sell them on eBay, and pocket a nice profit, again supposedly making $3-5k a day. However, after a while, Facebook caught wind that this was happening and apparently did not like it very much. They started suing the people doing this, and AJ abruptly shut the business down.

When he finished college he decided to start a “real business” with the money he had saved up, he launched a few different businesses but nothing stuck. He also gave his brother money to open a liquor store.

Two years after he graduated from college he was, in his own words:

“Broke & depressed”

All that money that he had saved up was gone and all the businesses he had tried to launch went bust.

He decided to take an entry-level job at corporate America. He knew it would be short-lived as his personality wasn’t a good match for the corporate machine. He wasn’t a very good employee ( by his own account) but he stuck around for a couple of years just to make ends meet.

In 2013 he discovered Amazon FBA, he knew he had a knack for e-commerce and felt like this was something he could do really well. He borrowed $20,000 from his parents, and $20,000 in credit card debt and launched his first product, a natural skincare brand - Insta Natural. He carved out a niche by delivering natural and affordable skincare products for an affordable price, most of their products were under $25.

Within 3 months, the brand was bringing in $100k in revenue a month.

This early success was the confirmation AJ needed, he already knew this was going to be successful but he needed the numbers to make everyone else believe it as well. He knew he wanted to repeat this process and pursue multiple brands using the same strategy.

In 2014 he launched Zen Wise, a supplement brand, which again was doing extremely well. He was getting questions from customers about supplements for pets, so much so that he realized there was an actual need/demand for it and decided to pursue it.

He hired a brand agency, found a co-packer and a formulation lab, came up with a great tagline, and in 2015 he launched Zesty Paws. The plan was the same, first dominate e-commence (specifically Amazon)then go to retail. He figured out a formula that works.

In 2016, he made a bad hiring decision for Insta Natural. Within a short time, he saw a massive decline in sales. He thought once he hired this new CEO that he could just take his foot off the gas and let the CEO take the reins. That wasn’t the case, he decided to fire the CEO, and assume the position. To get back on track, he had to take outside capital. He sold a 60% stake in his new and emerging brand, Zenwise Health (Zesty Paws & Zen Wise) to Maxim Partners.

With this injection of new capital, he worked on massive distribution for Zesty Paws. This new partnership allowed them to reach deals with massive big-box retailers such as Target and Pet Smart. Additionally, they start selling through Chewy.

By 2018, AJ’s combined brands registered $55 million in revenue that year.

AJ’s Portfolio:

• Smooth Viking - Acquired

• Zen Wise - Acquired

• Zesty Paws - Acquired

• Insta Naturals - Acquired

• High Key - Currently running it.

Fast Forward to 2021 and Zesty Paws was reportedly doing around $15-20 million a month.

That same year, H&H Group acquired Zesty Paws for $610 Million Dollars, of which AJ owned 40% at the time.

This wasn’t H&H Group’s first foray into the pet space. In November 2020 they acquired Solid Gold Pet for $163 million as its first venture into the global pet nutrition space.

"The pet supplementation market has demonstrated great resilience and accelerated growth, and we believe Zesty Paws is well-positioned to make a strong contribution to the H&H Group offering," said Laetitia Garnier, chief executive officer of H&H Group. "Zesty Paws has established a strong brand and premium range of high-quality supplements for cats and dogs, with a pioneering spirit of innovation at its core. The combination of Zesty Paws' attributes and brand reputation in the US premium pet supplements market, and the growing demand for quality pet nutrition globally, makes this a very compelling opportunity for our Group."

Unlike most founders who make big exits, AJ has kept relatively low-key. He is not very active on social media, he doesn’t do a lot of press and/or interviews. He seems obsessed with finding categories with a need for innovation and a space to create “better for you” versions.

AJ’s philosophy: “Are you solving a problem for consumers or are you creating something unique in the marketplace that doesn’t exist”

If you can answer yes to one of these, you have a product that is worth pursuing. You can either create a category (Zesty Paws) or substantially improve a category (High Key) and think long-term.

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• Coffee & Coco - New sustainably sourced coffee wood and coconut rope chews are coming to independent US pet retailers.

• New Partnership - Scrumbles established a new partnership with Asda, a British supermarket chain.

• Snif Snax - Salmon-based treats receive the 2023 Natural Dog Treat Product of the Year award.

• Sharks as food - This Japanese dog food has some interesting ingredients.

• Fromm the window - Fromm Family Foods is expanding its nutritional offerings for cats and dogs.

• New Ring tag - Ring launches a new QR code-based tag for your dog.

• Thanks, Yoda - A police dog is accredited with helping catch a fugitive who escaped from a Pennsylvania prison.

• Ancestry launches dog DNA testing - Ancestry, the DNA company is now offering pet DNA.

• Are vegan cats healthier? - A new study suggests they might be.

• The UK is banning Pitbulls - In a move that will horrifically impact innocent dogs and their families, the UK government is pursuing the unthinkable. Singling out and banning one specific breed. Banning any breed based on a few isolated incidents that mostly involve bad owners is shortsighted and cruel.

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Finally, What do you call sleeping puppies?

Hush puppies.

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