-- Deborah Cohen covers small business for Reuters.com. She can be reached at firstname.lastname@example.org --
By Deborah L. Cohen
CHICAGO (Reuters.com) - Marco Giannini, the son of a physician and grandson of an Italian grocer, arguably has a bit of both science and food retailing in his blood.
After an attempt eight years ago to launch a functional beverage company failed in the early stages, Giannini dusted himself off and set his sights on bringing health and wellness products to a new and unlikely audience: four-legged consumers whose owners can’t seem to do enough to ensure their pets get the best of everything.
Giannini took many of the processes he applied at beverage venture Clear Day, as well as a more focused approach toward business development, and applied them to Dogswell LLC, which was founded in 2003. The company produces supplement-enhanced natural treats and foods for dogs under names like Happy Hips, Mellow Mut, and most recently, Shape Up.
“Tolerance of small business and taking chances - doing what you want to do - is something that runs in my family,” says Giannini, 33, who was encouraged by his mother, a part owner in a promotional products company, to nurture his entrepreneurial spirit.
This year Los Angeles-based Dogswell is on track to reach more than $20 million in annual sales, or more than twice that of 2007. Its employee rolls have also doubled since that time to 42, with most of the expanded staff relegated to sales and marketing.
Part of the company’s success may be attributed to a smart bet on a growing channel. According to the American Pet Products Association, the U.S. pet industry - including food, supplies, vet care and related services - grew to some $43.2 billion in 2008 from $34.4 billion in 2004; sales are projected to reach $45.4 billion this year. Food accounts for nearly one-fourth the total.
But Giannini also applied strong financial discipline and sweat equity to his latest venture. He built the company from the ground up with just $30,000 - $20,000 in savings and a $10,000 line of credit, less than half of what he and a former partner invested to start Clear Day. Only recently did Dogswell receive its first undisclosed round of private equity investment from TSG Consumer Partners.
Giannini reserved most of the initial capital to produce the first round of Dogswell products. In lieu of a pricey design firm, he found a graphic artist at the Academy of Art University in San Francisco. He subleased warehouse space from a friend, packing and shipping the early orders himself. He canvassed some 200 independent pet and natural food stores, convincing them to take just $200 each worth of initial product.
“Don’t spend too much money when you start,” says Giannini, who still shares office space with his CFO at the dog-friendly headquarters. “Spend as much as you need to get a first run going and put it into the marketplace right away.”
Dogswell still favors a hands-on approach with the growing network of 10,000 stores that carry its products. The company stays in close touch with customers, gleaning feedback through in-store sampling and attendance at nearly 100 yearly trade shows. Part of the company’s measured approach is not to reach for overseas markets until it has exhausted domestic channels.
“There’s so many opportunities here in the United States,” says Giannini. “If you don’t focus on your low hanging fruit you could miss it altogether and spend two to three years spinning your wheels.”
Despite the recession and publicity over recalls of tainted Chinese-made pet foods in 2007, demand for Dogswell products has remained steady. Giannini attributes this in part to assiduous quality controls, knowledge of his supply chain and regular product testing. Customer queries must be answered within 48 hours.
“We’ve always watched over (suppliers) and made sure we knew where everything was coming from,” says Giannini, whose company outsources manufacturing to plants in the United States, China, and soon, Thailand.
Customers can’t seem to get enough of products such as Happy Hips dry food, which is made with fresh chicken, antioxidants, glucosamine and Chondroitin; a four-pound bag sells for $22.99 on the company’s website, including shipping, and goes for about half that in stores.
“If we’re going to be more health conscious for ourselves, people are going to start looking to alternatives for their pets as well,” says Harrison Watts, part owner of Anaheim Feed and Pet Supply, which caters to well-heeled Orange County, California pet owners and has given progressively more shelf space to Dogswell products. “These animals are their children. They’re really like family members.”