Argus Research Initiates Equity Report Coverage on Better Choice Company, Inc. (OTCQX: BTTR)
NEW YORK, Jan. 26, 2021 (GLOBE NEWSWIRE) — Argus Research, an independent investment research firm, has launched Equity Report coverage on Better Choice Company, Inc. (OTCQX: BTTR).
Excerpts & Highlights from the Report as conveyed by Argus Analyst Steve Silver, follow:
Better Choice is a rapidly growing animal health and wellness company that sells premium alternatives to traditional pet food. We believe that Better Choice is well positioned to capitalize on the global trends of growing pet humanization, expanding consumer focus on health and wellness, and the recession-proof nature of consumer spending on pets. Better Choice has an experienced management team, with a multi-decade track record in the packaged goods space, including animal health. It also has strong e-commerce capabilities that allow pet owners to easily learn about and order its products.
Better Choice sells primarily through retail-partner channels, which include Amazon, Chewy, Petco, and PetSmart, as well as its own direct-to-consumer online web platform. According to market-research firm Packaged Facts, online purchases of pet food continue to take market share from brick-and-mortar retailers, expanding from 7% of U.S. pet product sales in 2015 to 22% in 2019. We expect Better Choice to take advantage of this trend by focusing on new product innovation to attract consumers who already purchase frequently online, rather than by investing resources to convert traditional brick-and-mortar consumers to online shopping.
The pet health and wellness industry is highly competitive, as more companies focus on enhancing product quality while also working to build brand awareness and customer loyalty. We view Better Choice as a leader in the fastest-growing segments of the industry, as evidenced by its strong online business. We also note that recurring subscription revenue accounts for about 50% of the company’s online sales.
Better Choice generates approximately 60% of revenue in the e-commerce and DTC channels, above the industry average of 25%-30%. These segments are also growing at 15%-20% annually. The company’s DTC strategy leverages one-on-one customer relationships and uses consumer behavior data to guide its marketing efforts and lower customer acquisition costs (relative to traditional marketing efforts such as product discounting). Better Choice also tailors its marketing to reach specific demographic groups, including women, millennials, and middle-class consumers in emerging economies. Management believes that these groups are more likely to become pet owners and purchase pet products through online shopping sites.
In our view, the acquisition of Halo and the sales expansion through the retail channel represent key, underappreciated areas of distinction for Better Choice. The retail channel has become the primary contributor of company sales and growth. Better Choice is now able to leverage the customer data and behavior information it gathers from its DTC efforts and apply these lessons to the retail offerings, most notably the pet specialty channel. In addition, Halo’s established sales channels position Better Choice to sell other current and future product lines more effectively through the retail channels. Lastly, Halo’s established commercial foothold in high growth markets, including China, should enable Better Choice to expand its product reach more broadly.
ANALYST COMMENTARY ̶ EARNINGS:
For the nine months ended September 30, 2020, Better Choice reported revenue of $33.3 million, up 187% from the same period in 2019, reflecting contributions from the TruDog and Halo acquisitions. In recent years, gross margin has consistently been in the 35%-40% range, which we believe underscores the favorable market dynamics for its premium products. Year-to-date, the company has reported an adjusted EBITDA loss of $1.1 million, excluding non-cash charges related to acquisitions and financing-related expenses.
About Better Choice Company, Inc. (OTCQX: BTTR) www.betterchoicecompany.com
Better Choice Company Inc. operates as an animal health and wellness company. It offers raw-diet dog food and treats, naturally formulated premium kibble and canned dog and cat food, oral care products, supplements, and grooming aids. The company provides its products for dogs, cats, and pet parents under the Halo and TruDog brand names. Better Choice Company Inc. sells its products through online retailers, pet specialty stores and its own direct-to-consumer website. It has operations in the United States, Canada, and Asia, and is headquartered in Tampa, Florida.
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Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research’s compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.