Cold Shipping Makes Catullo’s Company Hot

YOUNGSTOWN, Ohio – What’s great about the keto-friendly nutrition bars produced by the California-based MCT Co. is, “You can pronounce all the ingredients,” says Kevin Healy, its marketing director and chief revenue officer.

Using all of those natural ingredients, however, can make life difficult when shipping to customers throughout the United States. The cocoa and cookie dough bars, for example, use chocolate, which melts at 75 degrees.

“Our bars are tough to ship in the summer, to say the least,” he says. “Shipping was a nightmare last summer.”

Without proper cold shipping, products arrived melted to customers.

For a company that’s been only around since May 2019, it cannot afford that kind of customer experience while it continues to build its brand, Healy says. That’s in addition to the financial cost to the startup, which has to send a replacement box and refund the customer’s money.

MCT Co. ships a few thousand orders monthly. So it needed a cold shipping solution. With just a handful of employees, developing a cold-shipping solution in house was too challenging a task, Healy says.

In June 2020, the company met Danny Catullo, founder of Perishable Shipping Solutions in Youngstown. Perishable Shipping worked with MCT Co. every step of the way through the onboarding process up to and including determining the best packaging to use so the bars reach customers intact. Now all products are delivered with two-day insulated cold shipping.

“We were just so excited to see someone whose focus was all about the cold shipping,” Healy says. “These guys are completely focused on just cold shipping itself.”

That focus is what drew the interest of investor groups SJV Ventures in North Carolina, Grotech Ventures of Virginia and Maine-based Supply Chain Ventures.

In August, the groups announced an $8.7 million Series A round of financing it was investing in Perishable Shipping Solutions to add new fulfillment centers and personnel, as well as further develop its multichannel direct shipping and analytics platform.

The investors are familiar with the food and beverage shipping realm, says David Griest, managing director for SJF Ventures. As more consumers bought groceries online, they recognized the value of a company that specializes in cold shipping, he says.

That value was augmented by the coronavirus pandemic, which caused investors to “hit the pause button in March and April,” Griest says. While other sectors were being hit hard, Griest says the pandemic accelerated the demand for cold shipping in e-commerce by three, five or 10 years in the last three to four months.

“This was already an emerging area in e-commerce,” he says. “And then COVID hit and that only accelerated the adoptions.”

The investors were impressed with the team for “bootstrapping” a company that had already gone from a startup to more than a $10 million revenue run rate on its own without raising capital, Griest says.

“Anytime you can get double-digit revenue run rate without having to raise equity, that’s a good thing,” he says. “They figured out a scalable model that’s profitable and hasn’t required a lot of outside capital to develop their run rate.”

Perishable Shipping is on track for its third consecutive year of tripling its year-over-year business with $14.5 million in revenue, Catullo says.

In August, Inc. magazine ranked Perishable Shipping Solutions No. 315 on its 500 list for fastest growing private companies based on percentage revenue growth in 2019 from 2016. In that time, Perishable Shipping Solutions enjoyed 1,445% revenue growth.

Because of the pandemic, initial contact between the investors and Perishable Shipping had to be conducted via Zoom, says Grotech’s managing general partner, Lawson DeVries, so having some familiarity with the industry was a benefit. The group toured Perishable Shipping’s Performance Place location a few months ago.

“We’ve toured a variety of facilities and one of the unique things about Perishable Shipping Solutions is obviously they’re totally dedicated to cold chain,” DeVries says. “It is different to see the way that the temperature controlled facilities work. It’s very cool and very impressive.”

The investment allows Perishable Shipping Solutions to expand its operations with a nearly 100,000-square-foot distribution center in Sacramento, Calif., which is three times the size of the 30,000-square-foot center the company opened in Reno in 2018, says Catullo.

The Sacramento center should be fully operational by the end of September.

The company is also moving its Youngstown operations to a 75,000-square-foot center in Lords-town, just down the street from Lordstown Motors, which Catullo expects to be operational in October. The Lordstown site is three times as big as the Youngstown location, which the company will keep as backup, he says.

Danny Catullo is the co-founder and chief operating officer of Perishable Shipping Solutions. 

Perishable Shipping is “enthusiastically hiring right now,” he adds, and looks to beef up its management team with professionals who have operations experience in small parcels and e-commerce. Currently, the company employs 77, including 50 in Youngstown.

For the investors, that vision for growth and expansion is key to the investment.

“We all see the ability to build a big business here. Part of that process is building out the facility footprint to allow for significant scaling,” DeVries says. “I think you’ll see an even more impressive operation.”

Amid the coronavirus pandemic, having a company that’s actively benefiting from trends the virus creates makes investors more comfortable in taking the risk, he adds.

Along with market research, the group performed an analysis of Perishable Shipping’s current clients, its retention rate and what the near-term funnel looks like in terms of potential new customers, DeVries says.

“They landed a huge customer in the middle of our due diligence process, which was very favorably received,” and it is becoming one of the company’s largest clients, he says. “You get to see the sales motion in process.”

With all of its locations, Perishable Shipping currently works with as many as 150 companies and ships to 93% of the U.S. population in two days with ground shipping, Catullo says.

The company is accepting new clients as it can handle the volume. With its economies of scale, it’s positioned as a much more affordable option for e-commerce logistics for new clients rather than companies trying to set up their own systems, he says.

“We’re still able to provide a cheaper cost for those services than they otherwise would be buying for themselves,” Catullo says.

For MCT Co., the company has seen its cold shipping costs “drop significantly” while customer perception and retention have increased ever since it began to ship through Perishable Shipping Solutions, Healy says.

On a single box,  he estimates, the company saves about 15% in costs, and 25% on large orders.

The company is on track to increase its sales 5% to 10%. It is shooting for 2,500 to 3,000 orders monthly, he adds.

“After we made the switch to PSS, our online reputation drastically improved,” he says. “Comments on our social media posts are so much more positive. It went from 50/50 to 90% positive and 10% negative, which is just a massive change.”

Helping small businesses to expand their customer bases while helping the company to grow is what makes Perishable Shipping “such a win/win” for the investor group, says SJF’s Griest.

While the companies are great at producing their goods and marketing, supply chain and fulfillment “is rarely an area of expertise for them,” he says.

“They’re able to solve a real pain point for their customers,” he says. “There’s a reason why a lot of these brands weren’t in e-commerce prior to using Perishable Shipping Solutions.”

Pictured: With its cold-shipping logistics offerings, Perishable Shipping Solutions will allow MCT Co. to ship its nutrition bars intact, say CEO Joe Christenson and Kevin Healy, chief revenue officer.