Freshpet investors howl as top executives quietly work for rival pet-food seller
Investors in Freshpet — an upscale pet food maker whose stock soared during the pandemic but has tanked this year — are hissing and howling after learning that some of the company’s top executives and directors have quietly been moonlighting at a startup that also sells pricey pet food, The Post has learned.
Freshpet’s president and operating chief Scott Morris, who co-founded the Secaucus, NJ-based manufacturer in 2006 and is now its No. 2 executive — also indicates on his LinkedIn page that he launched a website in 2019 called Hive Brands that sells sustainable consumer goods.
Among Hive’s pricey offerings are a 4-pound bag of grain-free chicken dehydrated dog food from Honest Kitchen recently advertised at $51.99. That compares to a 4.5-pound bag of shredded chicken dog food from Freshpet recently selling on Petco’s site for $42.89.
The conflict has come to light as Freshpet’s stock dropped as low as $39 a share last month — shrinking its market value to $2.1 billion from a peak of $8 billion in April 2021, when the stock traded above $184.
Last month, the hedge-fund Jana Partners — headed by billionaire activist investor Barry Rosenstein — took a 9.6% stake in Freshpet, calling for a new slate of directors and proposed that the company consider selling itself. Freshpet’s shares rose 16% on the news. The shares on Friday closed at $56.59.
Freshpet revealed slowed growth as it released second-quarter earnings last month, blaming “quality issues,” “labor” challenges and inflation. Freshpet CEO William Cyr has said the company’s rapid growth during the pandemic posed “a unique set of opportunities and challenges.”
Morris, meanwhile, got singled out in an Oct. 2 CNBC op-ed piece by Ken Squire, founder of 13D Monitor, an institutional research service on shareholder activism.
“If you want to know how focused [Morris] is on the company … he co-founded a new company, Hive Brands, while presumably working full time as president and COO of Freshpet,” Squire wrote. “Shockingly, the board had no issue with this.”
The overlap between Freshpet and Hive doesn’t end with Morris. Richard Kassar — Freshpet’s vice chairman who also was named interim chief financial officer last month, reassuming a role he’d held from 2006 to 2020 — was also Hive’s CFO last year, according to securities filings. Kassar stepped down from that role in August, according to a source close to the company.
Freshpet director J. David Basto, an executive at buyout giant Carlyle Group, is also a director and investor in Hive, securities filings show. Meanwhile, at least one Freshpet employee, Katy Pisick, has been a project administrator at both Freshpet and Hive for the past 18 months, according to her LinkedIn profile.
“The people who are aware of this think it’s the most insane thing they’ve seen,” said a rep for an institutional shareholder in Freshpet who asked not to be identified.
“It’s very odd that a senior executive at a publicly traded company is founding another business,” another concerned institutional shareholder with a smaller stake than Jana’s told The Post. “Most full-time executives have employment agreements stipulating that this is their only full-time job and that they are not generating income from multiple employment opportunities.”
Kassar, Morris and Basto did not return emails and calls seeking comment.
In a written statement to The Post, a Freshpet spokesperson pushed back on concerns that Morris’ role at Hive was a distraction from his duties as president.
“While Scott co-founded Hive, he has no operational role with the company, nor is he involved in any of its day-to-day business matters and decision-making,” the Freshpet spokesperson said. “Freshpet’s Board is fully aware of Scott’s affiliation with Hive, which Freshpet has disclosed it in its proxy statement and 10-K filing.”
“Hive is not a competitor of Freshpet,” the spokesperson added. “Freshpet manufactures and distributes fresh, refrigerated foods and treats for dogs and cats. Hive, as a retailer, sells a wide range of products, with pet food comprising a de minimis portion of its sales.”
The 53-year-old Morris, a former Purina executive, started both Freshpet and Hive out of his house in Chatham, NJ. As recently as December, his home address was listed as the headquarters for Hive, according to government filings.
In a recent interview with the news site NJbiz about Freshpet, Morris conceded that there are “many different parts of the market that we haven’t developed as much as we’d like,” including outreach to the veterinary community.
“I think of my role [at Freshpet] as a helper,” Morris added.
Freshpet, which pioneered the refrigerated pet-food niche, operates 27,000 dedicated refrigerators in the pet food aisles at big-box chains including Target and Walmart. But it’s now facing a slew of new competitors, including Farmer’s Dog and subscription services like PetPlate and NomNom.
“Publicly held companies need full time CFO’s, presidents and COOs and they need to have directors who are not serving on the boards of companies that are considered competitive,” Eleanor Bloxham, a corporate governance expert, told The Post. “The board members who are serving both places should know better. There would be a question about their true independence with Freshpet and Hive.”