Case 1

Dogswell
Will a small company’s new product line put it in peril?

W ithin months of the failure of his first company, Clear Day, As with many new products, sales were slow, and the coupons
a natural beverage company, Marco Giannini was busy launch- that retailers were submitting for rebates were straining the com-
ing another business, Dogswell, a company that makes all- pany’s cash flow. However, Giannini and CFO Berenice Officer
natural, healthy dog treats that contain supplements to help with were distracted by ongoing meetings with TSG Consumer Part-
conditions such as hip dysplasia and arthritis—problems that ners, a San Francisco-based private investment company that
his childhood dog, Emily, suffered from. Giannini experimented Dogswell had been negotiating with for months in an effort to raise
with recipes before hitting on the right one and found a manu- capital to fund the company’s brand-building strategy. Giannini
facturer to make the treats. In a tribute to guerrilla marketing, and Officer closed an equity investment deal with TSG on
Giannini loaded his car with Dogswell treats and visited more December 31, but when they returned to their Los Angeles head-
than 200 independent pet stores, asking them to give his new quarters they discovered that the coupon giveaway was costing the
product, Happy Hips, a chance. Many of them did, and in its company $100,000 a month and devastating its profits and cash
first year Dogswell’s revenue was $500,000. Four years later, flow. In addition, the promotion was not generating repeat buyers
Dogswell appeared on Inc. magazine’s list of the fastest grow- fast enough. Giannini and Officer also realized that customers
ing small companies in the United States, with 21 employees purchased dog food less often than they did treats and that the
and sales of $17 million. profit margins on dog food were less than those on dog treats. For
Giannini had bigger plans, however. He wanted to launch a the first time in its history, Dogswell had incurred a quarterly loss
line of pet foods to round out the company’s successful pet and was clearly heading for another one. “I felt like I was losing
treats, taking the company into the much larger market for control of the company,” says a frustrated Giannini.
natural pet food. “I wanted to become a household name, and Giannini and Officer had less than 3 months to create a plan
I figured food was the way to get us there,” he says. He worked to stop the damage that the pet food line was causing and put
with several food scientists to develop a recipe for a healthy together a presentation for TSG explaining their strategy and why
grain-free dry dog food called Nutrisca and set up a series of it would work. Giannini knew all too well the stories of other
canine focus groups. The results were even better than Giannini companies whose equity investors had ousted their founders at the
had expected: Dogs preferred Nutrisca 15 to 1 over the leading first sign of trouble. Would he suffer the same fate?
natural dog food brand. Giannini sent his sales force into the
field to conduct focus groups with pet owners to determine the Questions
most effective packaging. 1. What dangers do entrepreneurs face when they court equity
Giannini faced the same question he had years before when investors to provide capital to finance their companies’
he first launched Dogswell: What is the best way to launch a growth? What steps can they take to minimize these risks?
product on a limited marketing budget? Making personal calls on 2. Develop a strategy to return Dogswell to profitability.
retailers was impractical now that major chains such as Target 3. Outline at least five components for a guerrilla marketing
and Whole Foods carried the company’s products. Giannini strategy for Nutrisca. How could Dogswell tap into the
hired 15 new people, most of them in sales, to roll out the new power of social marketing as part of its guerrilla
line of dog food. To entice customers to try Nutrisca, Dogswell marketing strategy?
offered coupons for a free bag of Nutrisca (normally priced at
$10.99) with every purchase of a bag of Dogswell treats, which Source: Based on Nitasha Tiku, “Case Study: Dogswell,” Inc., December
retail between $16 and $20. 2009–January 2010, pp. 56–63.

811