Pet Industry Weekly

Burt's Bees Expands Product Line Into Dog Care

2013-05-17T11:25:00.001-07:00

Maker of natural personal care products Burt's Bees has entered the pet industry by extending its products to dogs. Grooming and oral care dog products in the Natural Pet Care line, including shampoos, maintain the same standards as their human counterparts, for example containing no phthalates or synthetic fragrances.

By leveraging existing strengths (and love of pets), the company should benefit from this move. Historically, pet trends follow human ones, especially in health. In the pet industry itself, preventive care, holistic treatments and natural products have all seen healthy growth over the last few years.

Disclaimer: as a consumer of Burt's Bees products, I'm biased and can't wait to try these out.

A new breed of pet health care company

2013-04-16T09:55:00.001-07:00

Perrigo Company (PRGO), maker of generic over-the-counter drugs like Claritin, Sudafed and Nyquil, has bought its way into the pet industry by acquiring Sergeant's and PetArmor, adding two OTC flea & tick brands to its portfolio, plus a wide range of products for dogs, cats, birds and small animals.

Veterinary spending has increased steadily over the last decade, reaching $17 billion in 2011. These days, pet diagnostic and treatment options can cost thousands of dollars, and consumer demand for lower cost alternatives has skyrocketed.

Historically, pet trends mirror human trends, and preventive health, over-the-counter pet meds, and holistic therapies have thrived in this environment.

Capitalizing on this consumer demand should allow Perrigo to capture market share from Merial's established Frontline brand. But the company will also compete in other segments; its new range of pet products is wide and includes flea & tick sprays, powders, shampoos and home cleaners, skin & coat, ear and joint care therapies, pheromone-based collars, and toys and accessories.

Pet Industry 2013 Strategic Outlook

2013-03-11T12:22:00.001-07:00

See U.S. market sizes of pet food, veterinary services, supplies and pet services, sliced by demographic group. Includes pet owner spending demographics, core trends and analysis on fragmentation, the retail landscape, changes in the food and vet industries, and opportunities moving forward.

This report provides key spending trends by age, income and household composition that are driving the pet industry. It contains actionable intelligence to help your business, marketing or product development initiatives. Learn more or buy securely here

For instance, the above table shows both overall ($2.4 billion) and segment market sizes for pet owners who have a child younger than six years old. These new families used to be part of a core demographic group with children in the 'pet acquisition years' that can engender loyalty to a brand. These customers continue to increase spending, particularly on food and at the vet.

PetSmart Q3 2012

2012-11-27T10:28:00.000-08:00

PetSmart, Inc. (NASDAQ:PETM) last week reported strong 3rd quarter results for 2012, booking $82 million in net income on $1.6 billion in sales, up 9%. Comparable store sales grew 6.5%. Services sales grew 8% to $175 million.

The company credits its hard goods resets over the past two years for continued differentiation in a competitive industry, supplying a mix of exclusive brands - including GNC, KONG and Martha Stewart - and private labels like Top Paw that align with consumer demand. Hard goods made up for 33.1% of sales.

In consumables, which accounted for 53.9% of sales, super-premium continues to be the largest and fastest growing category.

Services accounted for 10.7% of sales. Pet services like grooming, boarding and veterinary care are an "integral part" of PetSmart's strategy to further differentiate it from the competition, drive traffic and repeat visits to the stores, and provide cross-selling opportunities.

PetSmart adapts well to fast-changing consumer trends and loyalties, which can't be easy with 1,269 stores. Illustrating the humanization trend, the company has increased television advertising spending for the holiday season, jumping on the Black Friday shopping spree with specific ads, and soon to launch a 12 Days of Christmas ad campaign.

Feeling good in the U.S., the company is "dipping a toe in the water" in Asia with a "low-risk learning exercise" in South Korea with Emart.

Source: PetSmart Investor Relations

Pet Food Trends Learn to Stay

2012-10-09T08:39:00.002-07:00

On a recent visit to my local pet food store, I noticed a sign alerting customers that they will no longer be selling Iams, Hills Science Diet, Eukanuba, or any other dog and cat food that does not meet their pet food ingredient standards.

This would not be surprising from a small mom 'n pop store, but from Pet Food Express - the 5th largest pet specialty retailer in the U.S. - it is an eye opener.

A few years ago, it would have been impossible to run a successful pet food retail chain while ignoring top-selling brands from Proctor & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), Nestle (ETR:NESR), and Mars (a privately owned company).

These days, however, consumer demand for higher quality pet food mirrors human food trends. Driven by recall after recall of imported and US-based foods, consumers are demanding less diluted and more pure ingredients. Especially for dogs, whose natural diet does not require large amounts of carbohydrates, these owners can easily perceive glutens, sugars and fillers to be bad.

Similarly, the human trends toward the ancestral diet, or what we're genetically inclined to eat, has its corollary in dog food, for example with breed-specific lines by Royal Canin. Also, many new and smaller brands offer a range of top-quality protein types for those selective pet parents. If a breeder recommends a salmon protein for a Lhasa Apso, for example, the owner is motivated by the wide selection to choose a good one.

Just a few of the popular dog foods sold at Pet Food Express hitting the mark for the California crowd include D.N.A., Taste of the Wild, Grandma Lucy's, Wellness, and Stella and Chewys. Together these smaller brands certainly fill up the shelves.

Pet Food Express notes that national manufacturers also offer top-of-the-line products, which are sold at their stores. However, Colgate-Palmolive's only brand is the Hill's line, so they seem out. That would also include most, if not all, Nestle brands.

But Proctor & Gamble's Natura Pet line and Mars' Royal Canin and Nutro brands make the cut, signifying how these companies have adapted to new - and apparently permanent - consumer spending habits, that emerged after the 2007 pet food recall and continue to strengthen with each news story about sickness from the food supply.

Indeed, Colgate missed the "drive toward natural" in the US, according to the Financial Times, and will reformulate and relaunch Science Diet this year ("Investors seek bigger bite of pet food," by Louise Lucas and Barney Jopson, The Financial Times, Sep 30, 2012).

Another trend, yes, but this one seems to align with innate health requirements for companion animals. Pet Food Express' decision to implement its Pet Food Ingredient Standards is emblematic of a new landscape in the highly competitive pet food industry. In other words, these trends have legs.

NB: this post covers the premium pet food market, but it should be noted that many billions of dollars are spent annually on value brands sold by Nestle, Mars, and Wal-Mart. Learn about both ends in our 2012 Pet Industry Research.

Pet Business Opportunities

2012-09-12T08:27:00.001-07:00

Emerging Market Segments in the Pet Industry

Kudos to BusinessWeek for staying ahead of the curve by reporting on one of the emerging market segments in the pet industry (There's Never Been A Better Time to Be a Dead Pet by Eric Spitznagel, Sep 07 2012). Sometimes it's hard for businesses to get behind an idea that's hard to quantify; the article points out that it is "a growing if untracked segment of the pet care industry."

In fact, the pet death segment is on our list of best pet business opportunities for the second year straight. The aging of America, and of our pets, and increased spending, are only three of the reasons.

Cultural changes and pet owner expenditures that span multiple demographic groups have proactively created opportunities for new business ideas, and perhaps more importantly for existing businesses to tap into a multi-billion spending spree.

Check out our market research for more opportunities moving forward. Buy any report now and we'll include a confidential half-hour phone consultation.

FDA guidelines on functional pet foods

2012-09-10T10:31:00.000-07:00

Dog and cat food with specified health uses - or functional food - has been a booming trend in the pet industry. Although they've been around since the 1980s, there's been a recent explosion in product selection and availability outside of the veterinarian's office.

According to the FDA, "This shift in marketing directly to pet owners without veterinary direction, concerns FDA because these products are formulated for specific needs and may not be tolerated by all animals."

Read them here: FDA Animal & Veterinary

Walmart launches wheat-free ultra-premium dog food

2012-08-14T11:19:00.000-07:00

Walmart (NYSE:WMT) just announced its new ultra-premium dog food called Pure Balance.

Citing the faster growth rate of ultra-premium dry dog food than the value category, the company believes this product will complement the Ol' Roy brand nicely. Reuters reports that this move puts Walmart "into more direct competition" with specialty chains PetSmart (NASDAQ:PETM) and Petco (a private company).

By launching a trendy, wheat-free brand, we think this does indeed align with spending patterns exhibited by dog owners in the U.S., as outlined in our pet industry research published earlier this year.

Source: "Walmart U.S. launches its own high-end dog food," by Jessica Wohl, Reuters, Aug 14, 2012

FTC to Examine Pet Medications Industry

2012-07-18T11:22:00.001-07:00

Ten years ago, pet medications were dispensed mostly by veterinarians. Today, brick-and-mortar, online retail and nationwide pharmacy chains like Kroger also sell pet meds, especially OTC medications.

As we've pointed out in earlier posts and in our pet market research over the years, the evolution of America's pet culture - and corresponding increase in spending - has fundamentally changed the distribution practices and competitive landscape of the pet medications industry. The internet economy and recent flood of generic flea & tick meds onto the market are among many changes responsible for this.

Now, the Federal Trade Commission plans to take a look in a FTC Workshop on Pet Medications Issues later this year.

Issues of competition and consumer protection will be discussed, including prescription portability, consumer choice, veterinarians rights, product supply and quality. The FTC also has questions about business rationales, innovation, and future barriers to entry into the pet medications market.

That's a lot of questions for a lot of stakeholders. This could be a very important meeting that defines the next ten years of the pet medications industry. Upon completion, the Commission may prepare a report on the issues.

Stakeholders include businesses and consumers, and are invited to comment on any of these issues to the FTC before September 14, 2012.

Expanding pet services into real estate

2012-06-28T13:05:00.002-07:00

Luxury dog service company The Spot Experience announced a partnership with New York-based Rose Associates to provide a full line of in-house and outdoor dog services to 4,500 residents in two dozen buildings.

This expansion aligns with consumer spending demographics on pet services, showing that over 50% of the market, or approximately $2.5bn, is supported by households making over $100,000 per year.

A unique selling value combined with a high-income buying spree sounds like a winning proposition to me. The company cites this deal as a "first" of its kind, and my guess is, not the last.

Is Your Business Pet-Friendly? Why Not?

2012-06-15T09:53:00.003-07:00

A good article by SmartMoney Magazine on pet travel also highlights how diverse businesses profit by leveraging their existing pet-owning customer base.

Airlines, hotels, restaurants and retailers like Orvis are mentioned.

Check it out: "Pack Mentality: More People Than Ever Are Traveling With Pets," by Anne Kadet, SmartMoney Magazine, June 13, 2012

Dog Days of Summer TV

2012-06-05T16:45:00.000-07:00

Strong pet industry spending over the last few years is reflected in entertainment media as TV, film and other content providers market to the appealing demographics of dog owners.

Press reports indicate that CBS, Disney, Time Warner and Discovery Communications are all launching dog-related television shows this year ("TV cameras trained on dogs during summer 2012", by Sue Manning, Associated Press, May 29, 2012).

The common theme of rescue dogs, shelter dogs, and misbehaving dogs taps into the deep emotional bond that drives many pet parents to extreme levels of dedication and spending. And more media focus proactively creates new marketing and advertising channels.

Baby Boomer Pet Spending

2012-03-13T22:57:00.007-07:00

A key driver of pet industry growth is the aging of America. These tables show the percent of spending on each segment, and how that mix has changed over 5 years.

Baby boomer spending trends are evident in the data as they purchase a larger slice of the $50 billion pie each year. Comparing older and younger demographic groups clearly highlights the direction of consumer spending on pets in the U.S.

Many more of these tables, plus charts and analysis by Dillon Media, are available in the latest Pet Industry 2012 Strategic Outlook, dissecting the industry by age range, income bracket, family composition and region.

This report is a great resource for companies that market to pet owners on a nationwide basis.

Will this fish tank spill over?

2012-02-21T19:24:00.005-08:00

A four-story, 5,500 gallon aquarium as planned by soccer star Thierry Henry, who is the latest in a line of millionaires installing extravagant fish tanks in their homes.

Holding 300 fish, this tank will cost almost $400,000 to build, according to the Daily Mail

This aquarium will be the latest and greatest among celebrities including Madonna, the Beckhams, and Cher.

Considering there are 151 million freshwater fish owned as pets in the U.S. alone, maybe this trend will spill over into the consumer mass market.

Kroger Offers Prescription Pet Meds

2012-01-30T17:58:00.000-08:00

Kroger is now offering pet medications at its pharmacies nationwide, with many covered under its $4 generic program, according to the Houston Chronicle. "Four legs or two, same pharmacy," by David Kaplan, Houston Chronicle, January 23, 2012 It's a good article, pointing out how this is the natural evolution of the veterinary industry.

Target is piloting a similar program in 670 pharmacies, but Kroger is already full-steam ahead in it's over 1,900 pharmacies in the U.S. Already under pressure from the economy and other factors, it seems veterinarians can't rely on the old business model moving forward and will need to adapt.

On the flip side, this new mass marketing will benefit many segments of the pet industry and satisfy consumer demand for value pricing of prescription (human and) pet meds.

Pet Services Demographics Support the Trends

2011-12-30T09:37:00.000-08:00

A good article on pet services by CNBC highlights consumer demand for comprehensive dog care solutions. High-End Doggy Day Care: No Downsizing For Fido

Combining health-related products with a comprehensive suite of services is a growing trend in pet retail. These pet owners can be stickier than in other segments, spending more money per visit and coming back more often than shoppers in the other pet segments. Consumer spending demographics give a clue as to why: the segment is widely bought by higher income pet owners. For example, over 50% of nationwide pet services spending was by households making over $100,000 per year.

If you operate a pet business, check out our upcoming 2012 pet industry research.

Hurtta dog wear finally available in the U.S.

2011-12-14T18:36:00.000-08:00

Popular outdoor dog apparel from the Finnish company Hurtta is now available in the U.S.

Pennsylvania-based Abel Pet Supply has a selection of these popular and functional raincoats, jackets and fleece available online, and just in time for winter.

Emerging pet trends

2011-12-04T19:31:00.000-08:00

A new study illustrates the health benefits of owning a pet, finding pet owners have greater self esteem, are more physically fit, and more extraverted than non pet owners. Unlike most studies that simply add a pet to the equation to find a benefit but no causality, this one compares pet owners to non pet owners across these metrics.

Apparently pet owners also own a lot of gadgets. A demographic profile of iPad owners reveals that their most common traits are being male, owning pets, and playing video games.

Speaking of gadgets, BusinessWeek notes that chipmaker Qualcomm is entering the consumer market with Tagg, a GPS locator for your dog. A $200 clip on product with a year of free service (on the Verizon network), the device alerts you if your dog leaves a predefined area. Since the broader effort envisions everyday gadgets and appliances wired up using their chips, this product could help evolve the Qualcomm brand.

PetSmart Q3 2011

2011-11-17T10:04:00.000-08:00

PetSmart, Inc. (NASDAQ:PETM) reported strong quarterly earnings yesterday, highlighting increasing store traffic, organic and natural dog food sales, and services revenue.

Total sales in the third quarter increased 8% to $1.5 billion, of which services accounted for $161 million, up 9%. Comparable same-store sales grew 6.1%, based in part on a 2.2% increase in traffic.

High-end dog food brands like Innova, Wellness and Blue Buffalo were key differentiators, bringing in customers and driving sales.

(This is in contrast to Wal-Mart's recent strength in value brand sales. Why? Because about half the dog food market is bought by households making less than $70,000 in annual income, and that half is also growing year-over-year. In fact, strong increases in pet food spending were recently made by households making only $15,000 - $39,000 per year. So it seems there's plenty of room for both value and premium brands to thrive. Check out our pet market research to learn more.)

"Sustained momentum" on exclusive partnerships with Martha Stewart and GNC helped "moved the bar" on proprietary brands from 18 to 22%. In 2012 the company will launch exclusive Toys R' Us pet toys.

The first national television ad campaign for services in a decade was cited as responsible for increases in customer growth, retention and satsifaction for the grooming business.

Pets and Wal-Mart's Growth Strategy

2011-11-15T17:56:00.000-08:00

It seems as though Wal-Mart Stores, Inc (NYSE:WMT) will continue to leverage the pet industry in its own expansion plans. Besides selling Ol' Roy dog food for years, the company has particularly benefitted since a 2005 expansion of pet products online, and a 2006 launch of its own private label organic dog food.

According to Q3 2012 results, the pet supply business was "strong," showing high single-digit comps, in stark contrast to categories like home care and baby care, which had negative comparable store sales. The company states that "assortment initiatives" in the consumables pet category are making a large impact. The dog food category improved 300 basis points in part due to their value brands.

So its no surprise the company is folding pet supplies into its Neighborhood Markets concept now being rolled out across the country. These smaller stores resemble grocery stores, carrying produce, meat and dairy, dry goods, pharmaceuticals, health and beauty products, and pet supplies.

PetSmart Q1 2011

2011-05-27T08:49:00.000-07:00

PetSmart Inc (PETM) reported strong first quarter 2011 results, booking net income of $71 million on $1.5 billion in revenues, with earnings up 33%. The company reported comparable store sales growth of 5%, services sales growth of 9%, and total sales up 6.8%.

Super premium pet food and services seem to be primary drivers of the customer to the store. The company believes it has captured 15% of the $3.6 billion annual market for grooming and boarding services. Further, the company notes strong sales in grooming supplies, and points to exclusive Martha Stewart and GNC branded product launches.

PetSmart has recently matured efforts to drive the customer into cross-selling and defined channel strategies, as well as adding higher margin private label brands into the mix. A good combination in the highly competitive pet industry.

Source: PetSmart Investor Relations

Pet Industry 2011 Strategic Outlook

2011-04-13T10:37:00.000-07:00

A new market research report for pet industry business development is available for purchase online.

U.S. consumer spending continued to grow across all four segments of the pet industry, cementing its reputation as "recession resistant." But shifting demographics reveal changing patterns by core demographic groups. U.S. pet owner spending by age, income, higher income, household composition, and region are charted, with an Executive Summary by Dillon Media.

The Pet Industry 2011 Strategic Outlook analyzes nationwide spending, trends and business involvement in the industry, including how it fared during the recession and opportunities moving forward. The data aggregate consumer spending on all pets in four main segments: Pet Food, Veterinary Services, Pet Purchase Supplies & OTC Meds, and Pet Services.

The latest available data are from 2009, with forecasts through 2015. This report is valuable to participants in the nationwide pet retail market, for business plan citations, for product development strategy, for marketing and advertising plans, and for an overview of the pet industry landscape.

Eye-catching dog food marketing

2010-03-02T21:50:00.000-08:00

The digital video camera used to film this dog food commercial shoots full HD at 1500 fps. What does that mean? It means we see detail and movement imperceptible to the human eye in realtime.

The same camera was used to shoot slow motion Super Bowl footage, and used by NASA to study parachute deployments. Here, its used by Pedigree to sell dog food, marketing a new perspective to pet owners.

For more slow motion videos, check out visionresearch.com

Sanofi Wins Dogfight for Merial

2009-07-29T08:42:00.000-07:00

Sanofi-Aventis SA will acquire the remaining 50% of the animal-health business Merial from Merck & Co, according to Bloomberg. Global animal drug sales - mostly livestock but also pets - were estimated to grow 7.2% to $19.2 billion in 2008 by Vetnosis Ltd.

Animal Health Care News and Forecast

2009-05-19T08:55:00.000-07:00

Consolidation in big pharma is changing the landscape of the companion animal health market. Merck (NYSE:MRK) and Schering Plough (NYSE:SGP) will combine their respective animal health companies Merial and Intervet. Pfizer's (NYSE:PFE) acquisition of Wyeth (NYSE:WYE) includes Fort Dodge, which combined with Pfizer Animal Health would form the largest animal drug provider in the world. According to Pfizer's first quarter 2009 results, the company has "had productive discussions with the [FTC] regarding the possible divestiture of some animal health products." So it seems part or all of Fort Dodge may be for sale.

What do these mergers mean for growth in veterinary services and pet care spending? Competing products may disappear, jobs may be lost, and supply chains may be disrupted. For instance, in fiscal year 2008, MWI Veterinary supply (NASDAQ:MWIV), Pfizer products accounted for 23% of sales, Fort Dodge 12%, Merial 60% and Intervet 9%.

On the flip side, however, it's clear that pet (and livestock) drugs have become an important part of the new diversified business models of big pharma. Pfizer plans to give the group "more autonomy" and global moves imply additional investment as well. Pfizer Animal Health does business in 60 countries and in the first quarter of 2009 opened a new Shanghai office, expressed interest in acquiring an Indian veterinary health company, and announced new product launches in certain countries.

Long term consumer spending forecasts on veterinary services, prescription and over-the-counter drugs are quite positive. We estimate veterinary services spending to grow 4% in 2009 and 8% in 2010, reaching $16.4 billion by 2011, compared to $13.6 billion in 2007. Compelling demographics will drive future growth. In 2003, the $8 billion spent on vet services was split 50/50 by pet owners making less than $70,000 per year and those making more than $70,000 per year. But by 2007 almost $14 billion was spent, and that ratio changed to 28/72, favoring higher income consumers. Married couples without children are the biggest spenders at the vet, according to the Bureau of Labor Statistics, spending over $4.5 billion in 2007 alone.