Meal Kits Go to the Dogs With Petco’s Customizable Freshpet Subscriptions

Petco announced upbeat fourth-quarter 2022 results on an earnings call Wednesday (March 22), led by its deep investments in pet healthcare and continuing strength in consumables.

Petco CEO Ron Coughlin told investors and analysts that the chain of 1,500 locations achieved its 17th consecutive quarter of comp store growth — 5% in the quarter — driven in large part by the pandemic pet adoption trend focused primarily around millennial and Gen Z consumers and their use of Vetco veterinary services, which have become a tentpole for the brand.

“In veterinary services, we are now at scale, with a veterinary presence in 90% of our pet care centers,” Coughlin said, adding that “Petco’s hospitals and clinics saw nearly 1.9 million pets in 2022, positioning us as one of the leading providers of veterinary services in the United States.”

Giving additional detail on that, Coughlin noted that Petco added over 1,100 veterinarians to its ecosystem in 2022 “representing a 40% increase compared to a year ago. We also added 50 new full-service pet hospitals” in 2022, for a current total of 247 hospitals across the country, which he dubbed “a significant milestone, having come from just 10 at the beginning of 2018, and cementing our position today in the top 10 from a hospital unit standpoint.”

The focus on vet services is paying dividends across the business, as Coughlin said vet customers demonstrate a 2.3 times higher lifetime value than non-vet customers.

New Membership Model Drives Higher LTV

Coughlin said sales of discretionary supplies in companion animal categories declined year over year, though the retailer recorded double-digit growth in consumables including its owned brand, WholeHeartedxe, and saw “continued year-over-year growth in both revenue and customers in Fresh Frozen and double-digit growth in Rx making progress in this $12 billion addressable market.”

Additionally, Coughlin said, “Our digital channels continue to gain momentum. App and website sales delivered double-digit growth both in the quarter and for the full year,” and that in 2022 Petco “hit a milestone surpassing $1 billion in recurring customer revenue, driven by repeat delivery, Vital Care and insurance, securing revenues that are both predictable and retentive.”

Now with a total active customer base hovering over 25 million, he noted that in January, Petco simplified its subscription structure, unifying all memberships under its Vital Care program. All paid Vital Care members were transitioned to Vital Care Premier, members of which have a 3.6 times higher lifetime value than non-members, he said.

See also: Petco Brings Together Products and Services in Single Membership Program

Rolling Out Freshpet Custom Meals

As he touched on the strength of consumables versus discretionary spend, Coughlin also noted that on March 22 the company announced a new partnership with the Freshpet natural pet food brand to launch a customized meal subscription plan.

According to a separate press release, Freshpet Custom Meals will be available exclusively on Petco.com and start at $3 per day, customized for individual pets based on ‘pet parent’ completing an online questionnaire about their pet.

Read: Petco Ecosystem Expands as Pet Parents Seek Human-Grade Pet Care

“This exclusive, customized home-delivered product is a breakthrough in the way pet parents can provide their pets with the very best nutrition,” Petco Chief Merchandising Officer Amy College said in the press release. “We’re thrilled to partner with Freshpet, the leader in fresh pet food, to bring Freshpet Custom Meals to life through our differentiated, seamless omnichannel ecosystem, as part of our ongoing commitment to pets’ high-quality nutrition and complete health and wellness.”

Launched initially in 15 states including California, Texas, Florida and New York, Freshpet Custom Meals will be available nationally via petco.com later this year.