EFTA Document EFTA01381305

Form S-1 Table of Contents BLUE products arc sold in specialty channels. including national pet superstore chains, regional pet store chains, neighborhood pet stores, farm and fetid stores. °Commerce retailers, military outlets and hardware stores. Our sales in the Vet channel are currently minimal. We sell our products directly to retailers in the specialty channels and through distributors that focus on the specialty channels. Whether we sell our products directly to retailers or through distributors primarily depends on the size of the account and whether the account has account-operated distribution centers for its own outlets. We review accounts on a regular basis and may re-designate them as a direct or distributor account depending on our cost-to -serve them, trends in their business and channel and changes in their distribution capabilities. The majority of our products are sold directly to retailers. Our direct accounts include large national and regional chains with their own distribution capability, such as PetSmart, Petco, Tractor Supply Company and Pet Supermarket, as well as larger online retailers. In 2014. 73% of our net sales were generated from sales to national pet giperstores. PetSmart and Petco. BLUE's sales to national pet superstores grew 25% in 2014 compared to 2013, while our sales to all of our other accounts grew 35% for the same period. Most of our retailers in the regional and neighborhood specialty channel and the fawn and feed store channel are served through our distributors. We have multiple distributors in most of our geographic areas. These distributors specialize in, and typically carry a wide assortment, of pet products. We believe we arc one of their largest and fastest growing brands. Ow distributors provide mainly logistics services and limited in- field sales support, with sales and account acquisition being driven primarily by us and through in-bound interest directly from retailers. From time to time, we offer certain promotional incentives to distributors to help them build our business. Our sales teams are organized by the type of retail accounts they sell to in order to optimize sales strategies and tools. Our National Accounts Team services large national chains, while our Regional Accounts Team services regional pet store chains, neighborhood pet stores, farm and fetal stores and eCommerce retail accounts. Both teams share a sales operations team, which assists them with planning. fulfillment. sales and market analytics and pet parent relations. We also have a Regional Accounts field sales force, which works closely with distributor representatives to acquire new accounts and improve our position at our existing accounts. I laving started selling BLUE products in national pet superstores. a substantial majority of our sales arc to national accounts, although we believe regional retailers are increasingly seeking out BLUE products as our brand awareness grows. After having doubled our Regional Accounts field sales force in 2013, we believe we now have one of the largest sales forces dedicated to the regional and neighborhood pet and farm and feed channels. Order Fulfillment and Logistics All customer orders are ptw. as. d by our Customer Service team based in our headquarters in Wilton, Connecticut. Orders arc then assigned to our two distribution centers based in Bellevue, Nebraska and Monroe. Ohio or our Heartland warehoust. Our Bellevue and Monroe distribution centers are operated by third-party logistics partners who arc managed by our team members at each site. Our contract manufacturers ship ow products directly to our distribution centers. We gore and ready products for shipment for all of our retailers and distributors from these facilities. Our third-party logistics partners typically charge us for the shipment of our products on a handling fee basis and, in some cases, on a cost-plus basis. Our Heartland warehouse is operated by our own team members. Our Growth Strategy With the investments we have made in our brand, our people and our infrastructure, we believe we arc well positioned to continue to deliver industry-leading growth that outpaces both the fast-growing Wholesome Natural market segment and the overall pet food industry. We expect to continue to grow our volumes and increase our revenue per pound. We plan to grow our volumes by reaching and feeding more pets, and by feeding them more of our products. Our goal is to increase 87 httplAvow.see. gov/Arehi vas/edger/data/ 609989/000119312515218883/d734898dsl.htm17/20/2015 10:30:13 AM) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL DB-SDNY-0080174 SDNY GM_00228358 EFTA01381305