Feed properly: as people from Mars make products for animals

Co-founder of MiniMe Gennady Dikalov

A warm September day, the annual exhibition of goods for Pets in Sokolniki. At the stand of the company “minimi Pets” lively. A former top Manager of PepsiCo Sergei Curly takes one of the boxes marked “Food for people”, opens and tries dog food beef roll with rice. The audience is happy, but Curly clearly anticipates such a reaction. In the eyes of visitors with small breaks will eat a pound of dog treats. “Visitors is so impressive that some began to try food with him,” laughs one of the founders of the company-manufacturer of food for cats and dogs under the brand MiniMe Dmitry Shirshov.

Curly, Shirshov and their partner Gennady Dikalov made such a suggestion: Pets should eat as people and not dry food or canned food, as do the international market leaders Mars and Nestle.

In January 2015, the entrepreneurs brought to the Russian market a new product a complete diet for Pets with fresh meat, groats, vegetables. According to SPARK, in 2015, the proceeds of LLC “minimi Pets” amounted to 4.7 million rubles., and losses of 5.2 million rubles. At the end of 2016, the partners expect to make a turnover of 30 million rubles. But the plus entrepreneurs are planning to come only in 2018. They have relied on expansion of geography of sales has more than 200 stores in Moscow, Moscow suburbs and St.-Petersburg.

“The key competitive advantage MiniMe the composition of the product, which is very similar to human food,” says Maria Nizamutdinova, PR Director Ozon.ru.

Photo: Oleg Yakovlev for RBC, assistant Nadezhda Gribova

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Photo: Oleg Yakovlev for RBC, assistant Nadezhda Gribova

The market of forages for Pets

For the population of domestic animals Russia ranks fifth in the world, estimated by Euromonitor International. Russians contain 16 million dogs and 22 million cats. The size of the animal feed market in monetary terms, Russia ninth in the world. In 2015, 86% of the market of forages for cats and 71% for dogs was occupied by Mars and Nestle, private labels type MiniMe controlled not more than 6% of the Russian market. In addition to the “minimi Pets” feed in Russia produce local companies, “Clinica” and “Rarity”. According to Euromonitor International, sales of pet food in 2015 in Russia amounted to 117.9 billion roubles, the forecast for 2016 129,1 billion.

Free swimming

In 2012, Dmitry Shirshov retired from PepsiCo as Vice President of marketing. He went for an interview at Mars, but decided that the corporate world became uninteresting to him: “I decided not to go to Mars, but to try on one of the markets where they operate.”

Shirshov claims that the idea for their business came to him in a dream: “One day I woke up in the morning and thought, why is Russia no fresh food for Pets? Until 5 am I have studied the world practice on this issue”. Shirshov found that the section for “healthy” foods for animals have been working in supermarkets of Australia and the United States, and the volume of the U.S. market exceeds $150 million In Russia in this segment don’t work on either Mars or Nestle.

Shirshov told him about my idea, Gennady Dikalov who worked in the company “Dymov”. “I was so proper that I went and bought a dog of the cane Corso breed,” says Dikalov.

Thinking of the idea took several years. In 2015, Dikalov quit, the partners began searching for an investor. Negotiations with venture capital funds at an impasse. Have friends who could potentially be investors in the eyes was a surprise. “How? You were both Vice-presidents, what other dog food, why do you need it?” recalls Shirshov their reaction.

<p>co-founder of MiniMe Dmitry Shirshov</p>

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Photo: Oleg Yakovlev for RBC, assistant Nadezhda Gribova

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Co-founder of MiniMe Dmitry Shirshov

In the end decided to develop on their own savings, to the benefit of the two raised $1 million Rented an office in the North-West of Moscow (91 thousand) and began to experiment with food. The development of food for dogs took Valentina Drozdova, who had experience in R&D Department of Mars.

In formulations based on MiniMe fresh meat, offal and various functional additives, for example to strengthen the muscular system and joints of animals. Any preservation, salt and spices, only pasteurization and roasting. On the freshness and naturalness, and it was decided to make a bet.

Around 1.52 million rubles. went only on the development of formulations and technologies. Test batch produced at a meat processing plant in Germany, and was testing the food on dogs of friends and acquaintances. For example, one of the tasters was the dog Gennady Dikalov, 55-pound guard.

To take food from abroad was expensive and long, and when partners tried to find a manufacturing partner in Russia, the problems started. For example, to accommodate the production at one of St. Petersburg meat processing plants required a veterinary certificate. However, the veterinary Inspectorate of the long with his results. “It cost us three months of downtime,” says Shirshov.

Eventually managed to negotiate with small suburban slaughterhouse “Ramfud,” and the suburban vets still issued the certificate. The owner of “Ramfud” Michael Kerstein, remembers Dmitry, called partners, “mad men”, but “experiments” is still allowed. But at the same time provided in the lease and a private cold-storage areas and raw material beef and mutton, rabbit meat and turkeys, and other ingredients partners purchased from the suburban farmers, separately buy the cereals (rice, buckwheat) and vegetables.

Initially, production was tiny, every two weeks for one hour partners produced 200-300 kg of feed for cats and dogs. Partners made a bid for steam pasteurization of the product at 85 degrees a temperature sufficient to kill pathogenic flora and allow the meat rolls and pies to preserve freshness. But to store such food can only be in the refrigerator for no longer than 90 days.

In early 2015, the product entered the Moscow market under the brand name MiniMe.

Help “Martians”

Dmitry Shirshov pulled out his phone and shows a photo. “This picture was taken on the first day of the start of sales in our first store, he explains. We kept it in memory”. In the photo shopper who approached you just installed the refrigerator and grabbed a few boxes of rolls.

First experience with the Moscow networks were unsuccessful. “We immediately asked “entrance fee” million”, says Shirshov. Had to ask for help to former colleagues from Mars they have helped to build relationships with stores, “ZOOMARKET”. “If not for the help from the “Martians”, it would be much harder to get to his feet,” admits Dikalov.

Retail used to work with food that does not need to be stored in the refrigerator. For example, the largest network of Beethoven carries the products of their cars with its own distribution center. If you go this way with the production of MiniMe, the food will spoil before getting into the retail point.

“We originally built the cold chain from the warehouse of the meat in the refrigerator the product is transported to the warehouse of our distribution center in Sokolniki, and from there transported to the pet shops,” says Shirshov. The first time the partners were themselves engaged in merchandising each drove in car fridge, used to deliver products in 5-6 shops. Now hired four drivers who deliver food around the city on personal machines.

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PepsiCo and Coca-Cola long ago, have flooded retail stores with their coolers with soda. “Minimi Pets” decided to go on the same way he bought, branded and become free to distribute to pet stores refrigerators. Expensive: each fridge costs about 25 thousand rubles, and in total, the company has purchased over 200 of them (it took more than 5 million rubles). But the producer receives a guaranteed place in the store, where retailers can not place the products of competitors. However, if the vendor is spent on commercial equipment, retail stores usually agree to cooperate with the manufacturers without the “entrance tickets”.

Still accepting merchandise from the Arsenal international corporations: the company was to pay the sellers, so they actively promoted the new product in the sales area.

Direct competitors of the “minimi Pets” not fresh pasteurized pet food to the Russian manufacturers do not produce, and Western counterparts have not reached. So the company actually competes with manufacturers of premium canned meat. For comparison, the 100-gram pack of canned food from Animonda is 83 rubles, Schezir 62 rubles, the price of 100 grams of meat roll Minime 77 rubles. For comparison, a 100-gram package of wet food with beef and Pedigree lamb (low price category) is in the retail of 17 RUB.

“The premium segment is much narrower segment of the economy or medium class, but it is more stable, says Dmitry Toppelberg, R&D Director of “Klinvet”. Consumer, the bulk of the conservative enjoys the products are checked and not doubt”.

“Pepsicola brotherhood”

Shirshov says that by October 2015, the demand for novelty were excessive. According to the business plan, MiniMe for the year was to reach the payback in revenue by the end of 2016 at 40-50 million rubles.

But in the fall of 2015, the demand began to fall sharply. “We saw a dip in consumer premium segment people started to save. With the premium feed cats and dogs translated into economical Whiskas and Pedigree. We had to respond to drastic changes of the market,” says Shirshov.

At the end of 2015, the project was joined by another partner Sergey Curly, ex-colleague Shirshov job at PepsiCo. Curly was a commercial Director, along with Dikalova began to market products segment under the brand name Cooldog.

<p>Owners&nbsp;the company MiniMe Gennady Dikalov and&nbsp;Sergei Curly hair (from left to right)</p>

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Photo: Oleg Yakovlev for RBC, assistant Nadezhda Gribova

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The owners of the company MiniMe Gennady and Sergey Dikalov Curly hair (from left to right)

If premium stern MiniMe contains 50% meat and 25% offal (heart, liver), economical Cooldog proportion of other offal 30%, of meat 39% and also contains buckwheat. 200-gram package Cooldog is 71 RUB, 400-gram 134 RUB, it’s half the price of the MiniMe. Margin on both lines are the same, about 50%.

Accumulated earnings for the time ended to scale production under a new ruler, the partners needed new investments. According to Shirshov, – “even the man on the Forbes list”. In the end I chose two private investors. One of them is a former CEO of Mars in Russia, Igor Salita. He advised the project at different stages. Investor Fund “Nord-West Capital”, which included the former Director of the northwestern branch of PepsiCo Evgeny Loginov, the regional distributor of the same Corporation Vladimir Zasorin and worked as a sales Manager in one of St. Petersburg Toyota dealerships Andrey Petrochenko.

“Here is pepsicola brotherhood in us and invested,” says Shirshov. In total, the partners attracted MiniMe 60 million rubles, and investors received about 20% of the share capital. The investment round is divided into two tranches: the first has already taken place, and the second is planned for early 2017.

According to the research company GfK, the decline in the purchasing power of Russians has not affected the market of forages for Pets. Sales of feed in terms of money raised in 2015 by 25.4%. The fastest growing category of “human” food, for comparison, was grocery, which increased in volume by 5.1%. “People are very sensitive to household Pets, willing to spend money on them, says the former Manager of Nestle, responsible for sales and promotion of feed (brands ProPlan, Purina). New product MiniMe will take its share of the premium niche. Is how expensive organic food is a small segment for “advanced”.

In 2016, revenues “minimi Pets” is growing by 15 to 27% per month. The company opened an office in St. Petersburg and rented the area under the distribution center.

Come from multinational corporations accustomed to to make ambitious business plans, but in the private sector to keep up with their ambitions would not be easy. By the end of 2016 Shirshov wanted to install in retail more than 500 boxes, but now they are a little over 200. According to his calculations, within 6 months after the installation of a refrigerator in a retail outlet must have been selling an average of 25 thousand rubles. per month, such sales discourage investment in a few years. It turned out differently: in fact every refrigerator brings an average of 15 thousand rubles. in Moscow and 10-12 thousand rubles in St. Petersburg. A plan to resolve the payback had to shift from 2016 to 2018.

“In the early stages of many projects, the costs far exceed income. The effectiveness of investments is assessed usually does not yield profitability and growth of turnover, revenue, number of orders”, said General Director of investment platform StartTrack Konstantin Shabalin.

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Closer to people

Fresh food under the brand MiniMe is sold almost in all major zoomah Moscow, Moscow region and St. Petersburg Cats&Dogs, “Dinosaur”, “Beethoven”, “Zoogalereya”, “Phil”, “Lemur”, etc. From November 2016 MiniMe appeared in “human”. Negotiations are underway with network “I am”, a variety of meat rolls and pies from the beginning of November you can buy in Ozon.ru. “While consumers are not familiar with this new product, but we see her potential,” says Maria Nizamutdinova of Ozon.ru.

Traditionally, manufacturers of animal feed around 70% of the sales goes through the usual retail and only 30% through pet stores. “The potential of tokanov was not as promising as we initially thought, so for us it is important the presence of a “human” networks. If we will gather there at least 10-15% of revenue,” says Shirshov.

Manufacture copes volume of feed is 9-10 tons per month. 80% of production falls on the dog food (a line of five flavors for small dogs and puppies and three for medium to large dogs), the remaining 20% were cats (one flavor for kittens and five adult cats).

Until the end of 2016, the owners plan to expand the range by launching new formats such as dairy desserts and sauces shaped food for cats in glass jars and blister containers.

The need to continue experimenting motivated primarily by the fact that the space in the refrigerator, which the owners MiniMe is already placed at retail outlets, a lot, and the company’s range is quite small. If a startup does business under the rules of the corporations, he will sooner or later have got the same range. “I think for too long the background of the work of the founders of the project in corporations is the main risk of the project. Not always the methods of international corporations work in the Russian startups,” believes Konstantin Sinyushin, CEO and co-owner of the Untitled Venture Company.