Built on a Hunch

REVIEW SUMMARY

Company. Ark Naturals

Industry. Pet care

Key. Entrepreneurial instincts sometimes trump careful analysis.

At a glance. Click here for summary information about Ark Naturals.

Sometimes gut instinct beats a fancy business plan.

And it's rare to meet entrepreneurs who acknowledge building a business on nothing more than a hunch. But Jay and Susan Weiss did just that when they launched a pet product business in 1996 called Ark Naturals.

“Let's do the pet thing,” Susan Weiss remembers telling her husband shortly after they moved to Naples in 1995. Neither had any meaningful experience in the pet-care industry, retail distribution or natural products.

In fairness, both had lengthy business resumes. Jay Weiss built and ran garment factories in Pennsylvania and presciently wound down the business before foreign competition decimated the industry. Susan Weiss handled advertising and marketing for a chain of department stores in Reading, Pa., called Boscov's.

But apart from being dog owners, the pet-care industry was another world. “We were very entrepreneurial, but with seat-of-your-pants skills,” says Susan Weiss, the president of the company. “There was not a part of me that thought this could fail.”

They nearly did fail in the late 1990s for a variety of reasons, some self-inflicted. For one thing, they were early into the natural-product fad that only recently has become popular with pet owners. They also hired the wrong people, faced better-funded competitors and lost a costly trademark lawsuit over their company name. At their low point, the Weisses were saddled with $300,000 of credit-card debt.

But the Weisses are no strangers to risk. Jay Weiss started his garment-factory business in Pennsylvania with the winnings from his bowling championships, parlaying his life savings into the major manufacturer of polyester pantsuits that rocked the disco world.

Now profitable, the Weisses expect Ark Naturals to generate $3 million in revenues this year, up 15% from 2009. The company's products are in thousands of pet stores and supermarkets such as Whole Foods. With little debt, Jay Weiss says he expects Ark Naturals to double revenues in the next three years.

First to market

Ark Naturals had the benefit and the challenge of being one of the first to jump into the business of selling natural products to pet owners. Its shampoos, edible treats, supplements and dental products are free of chemicals or artificial colors and flavors.

But when the Weisses launched the business in 1996, the natural-product business was just starting to creep into the grocery stores. It didn't become mainstream for people, much less for their pets, for several years.

When the Weisses traveled to industry trade shows, the absence of pet-oriented natural products surprised them and they saw a business opportunity. With a $150,000 investment, they jumped into the business and hired a biochemist to develop new products.

Susan Weiss says she and her husband did very little market research initially. They didn't even know what their competition charged and their lack of industry knowledge and connections meant they didn't get much business at their first trade show.

So they hired a sales manager who promised to boost their business. When that didn't work, they realized they'd have to do it themselves. “One good thing about hiring a loser was that I had to learn the business,” Susan Weiss chuckles.

While Susan Weiss researched the industry (in her younger days she had earned a masters degree in history and loved research), Jay Weiss, the company's chief operating officer, made personal connections. “I've always been a schmoozer,” he says. “I've been lucky in that regard.”

Noah vs. Noah

The Weisses had barely been in business for one year when a letter arrived in the mail from a New Jersey lawyer representing a competitor called Noah's Kingdom. When they had launched the pet-product company in 1996, the Weisses had named it Noah's Ark Natural Products for Pets.

A Naples trademark lawyer had assured the Weisses that their corporate name was protected and they fought their New Jersey competitor. After all, the Weisses had invested thousands of dollars designing brochures, labels and a trade-show booth. Still, they lost the case.

While they were fighting a losing battle in court, a well-funded competitor called Dancing Paws launched. A group of investors who got rich from the dotcom boom in the late 1990s started that business, offering retailers promotions, free displays and free samples Ark Naturals couldn't offer.

So the Weisses turned to a traditional financing source for small business: credit cards. While they accumulated $300,000 in credit-card debts, cut expenses and recovered $70,000 from their lawyer in a settlement over misrepresentation in the trademark case. “It gave us breathing room,” Susan Weiss says.

Ark Naturals is not a capital-intensive business. Jay Weiss purchases the raw materials for the products the company sells and outsources the manufacturing. It has a network of distributors that sells its products to thousands of pet stores around the country.

New products such as a glucosamine treat that helps dogs' mobility combined with a growing interest in natural products for pets ensured growing sales. What's more, the terrorist attacks of Sept. 11, 2001, focused peoples' attention on home-related matters such as pets.

Bark for shelf space

The Weisses were relentless in their pursuit of shelf space in stores, eventually shifting from selling directly to retailers such as pet stores, vitamin stores and supermarkets to working with distributors to supply these outlets. “Our business is now almost 100% through distribution,” Susan Weiss says.

Retailers such as Whole Foods have opened more shelf space to natural products for pets. It's all part of a trend of the greater humanization of animals by their owners, says Susan Weiss. If a pet owner puts a premium on natural food and products, chances are she will do the same for her pets.

The trend isn't just in the U.S. Ark Naturals now sells its products in Asia in countries such as Japan and Singapore. It's a tedious process, though, because of food-safety issues and trade wars. “The paperwork to export is voluminous,” says Susan Weiss. It's taken a year and a half to export to Turkey, for example.

Large pet-food companies are keenly aware of the trend too, though the natural pet-product category is still a small fraction of the pet market. Companies such as Purina, Mars and Procter & Gamble are launching their own natural products. “Now, every day there's a new competitor,” Susan Weiss says.

Although Ark Naturals has an online store, it doesn't push it. “We charge retail and ridiculous postage,” says Susan Weiss. “Getting the shelf space was so near and dear to us we don't want to compete with our retailers.”

Because the business could be located anywhere in the U.S., Susan Weiss says Naples has been a good place to grow, though the couple recently moved their residence to Bonita Springs in Lee County to be closer to Southwest Florida International Airport because they travel so much. Because of the jump in unemployment, the Weisses say they've been able to hire better-qualified people who were laid off from the construction industry.

While they're in their 60s, the Weisses say they have no intention to sell the business now. Jay and Susan Weiss each have clearly defined their jobs. He purchases the materials and handles the finances; she does the marketing and new-product development. “She's got the vision and I have the patience,” Jay Weiss smiles.