Bob Vetere, president and CEO of the American Pet Products Association, discusses the growth of his organization and the overall pet industry, as well as the newly announced Pet Industry Management Conference and Supplier Trade Show.
From your perspective, what is the state of the pet industry?
Bob Vetere: It’s remarkably good. There was a lot of concern around the middle of last year, but everyone has come back with positive reports about the fourth quarter of 2014 and projections for 2015. Depending on how everyone continues to react to gas prices coming back to levels that are almost reasonable, I think the pet industry is going to continue to see strong spending—for this year, at least.
While the industry has seen steady growth overall, what are some of the dynamics at play within the category?
Vetere: The bright spots are coming certainly from Baby Boomers and seniors—people whose pets have become such an important part of their lives, because their kids have moved on. These folks are really trending toward keeping their pets healthier longer, right from the beginning. So, they’re looking for things like healthier foods, supplements and opportunities to keep their pets active, and that really seems to be feeding a part of the market that inherently has higher costs. That is driving growth quite well.
An area of concern I’ve been talking about for the past few years now are the changes in consumer demographics that are starting to catch up with us. I think we can do a better job of trying to address all of the fastest-growing demographics. You know, Boomers are starting to approach the age of 70, and that is kind of a magic number at which pet ownership has historically declined. If that starts to happen, there really isn’t a lot of backfill to come in at the same level. That is my biggest concern.
What are your expectations for the specialty categories that have faced some challenges over the past few years—small animal, bird and aquarium products? What do you think will be the keys to turning those categories around?
Vetere: That is one of those areas that everybody has been scratching their heads about. Everyone was hoping that the Pet Care Trust’s Pets in the Classroom program was going to make a dent in that, and I do think it has kept the decline in these categories from being worse than it has been. But I think turning it around a little bit is going to come down to things like HABRI [the Human-Animal Bond Research Initiative] telling people that any kind of a pet is good for your health. Maybe Boomers who can no longer handle a dog will turn to some of these smaller animals to still derive some satisfaction and health benefits from them, and that will keep their ownership levels a little bit higher than they have been. It’s a complicated issue, but it’s one that I do think there is still time to address in a positive way.
The pet care market has become big business for a variety of retail channels over the past several years. From your perspective, how is the cross-channel competition shaping up?
Vetere: I think that pet specialty retailers still have a big advantage in that they provide much more than simply a place where pet owners can buy a product; they’re providing service and interface with the customer. There are a lot of people who have a million questions about their pets, and the stores that can respond to that are the ones that are doing the best.
Grocery, in my opinion, made a big discovery a few years ago that they know their customers better than anyone else, because they know what sells on the human-product side. And they’ve gotten smart enough to stock similar pet products in their stores, and call attention to the category by almost making it a mini pet store within their aisles.
The pet industry has seen a big influx of private-equity capital over the past several years. What does this say about the industry? What impact has this infusion of capital had on industry dynamics?
Vetere: First of all, it says that the pet industry continues to be a good, profitable target for private-equity investment. It is outperforming other segments of the retail marketplace so much that investors are still jumping on it. Then you look at all of the human product companies that are getting into the pet marketplace—for example, Smucker just jumped in with both feet. The pet industry isn’t recession proof, but it isn’t as prone to some of the hiccups we see in other retail segments. It is a lot more predictable and stable, and there is still a lot more money looking to get into the pet industry.
I think the impact of all this has been interesting. A lot of the private-equity [players] are in to see how quickly they can maximize their investment and turn it over. They want to make the company they purchased desirable for someone else to buy it. They’re not in it for the long haul; they’re in it to turn a profit. That, combined with the trend of huge human-food companies getting into the pet business, is creating a whole different mentality than the small mom-and-pop mindset that the pet industry grew up with.
As pet product companies are acquired and grown to a much larger scale, are you satisfied that there are enough small businesses coming up to fill the breach?
Vetere: Yes, and that surprises me probably more than anything else. This year, APPA set another record for the addition of new members. I thought that we maxed out a few years ago, but we just added 240 new members over the past year. It’s unbelievable.
And this is with consolidation going on and a certain amount of small companies falling out of the industry. There is still backfill of new guys—both domestically and internationally—that are looking to jump into the marketplace.
What are the latest developments from the Human-Animal Bond Research Initiative (HABRI)? What can we expect to see from HABRI over the next year?
Vetere: I really love what HABRI is becoming. It is starting to expand its scope and get its message out, and I think that is reaching a point of making a difference. We’re seeing a lot more articles being published that talk about the health benefits of owning a pet, and we’re getting a lot more contact from human-health companies that are starting to promote those benefits.
We recently went to the North American Veterinary Conference, just to let some of the animal pharmaceutical companies get a feel for what HABRI is all about. We pulled together a quick update meeting where 35 companies showed up, and the enthusiasm that they showed for the program was phenomenal.
Now that we’ve had a year with a dedicated executive director [Steven Feldman] whose day job is actually to make HABRI all that we want it to be, we’ve seen incredible growth. The program has now distributed more than $500,000 in research grants and has identified more than 21,000 relevant studies that have great potential.
All of this is now being used to create an outreach program to legislators and regulators, who have been extremely receptive to our message. In addition, we’ve started reaching out to consumers and media to talk about the health benefits of pet ownership. We’ve even had insurance companies like Aetna and organizations like the American Heart Association reach out to us to discuss different programs that we can partner in. So, there is a lot of momentum behind the initiative.
Is there anything that the HABRI program needs to move on to the next level?
Vetere: Yes, more support from the industry—and I’m not just talking about money; I’m talking about time, people and promotion. You know, we have steering committee members that don’t even have HABRI mentioned on their websites. We’re doing great, but we can be doing so much more on the marketing and communications side if more companies shared their resources—their networks, their social media reach.
A couple of years ago, APPA played a key role in the creation of the Pet Leadership Council. How has the program evolved? What are your goals and expectations for the coming year?
Vetere: We’ve finally reached the point where we have rock-solid financial and in-kind commitments from about 10 companies and organizations across the entire industry. That includes not only APPA, PIDA [Pet Industry Joint Advisory Council], PIJAC [Pet Industry Joint Advisory Council] and HABRI, but also AVMA [American Veterinary Medical Association], American Humane [Association], Central Garden & Pet, Petco, Petland and Pet Supplies Plus. We’ve also reached out to Banfield [Pet Hospital] and Zoetis, which have been participating in meetings, and we’ve even talked to Kroger and Wal-Mart, which have expressed interest.
So, we finally have a real-live entity that is starting to do some things. For example, we’re involved with this lawsuit in Phoenix, where we’re objecting to a pet sale ban as being too broad and misdirected, and not accomplishing what it is meant to do. We’ve won a preliminary injunction, and there is optimism that we can win summary judgment on the issue. What this does is it sets the table for us as an industry to stop getting kicked in the butt by animal rights activists that try to portray us as a money-hungry group that doesn’t care about the welfare of animals. It allows us to proactively position ourselves as an industry that not only cares but is trying to do the right thing.
We understand that banning [pet sales] is actually having the unintended consequence of allowing puppy mills to thrive, because these bans only hurt the legitimate sources of pets. There are other ways to more successfully ensure the welfare of animals, such as putting a more manageable and comprehensive breeder standards program into place.
The Pet Leadership Council is meeting again here at Global Pet Expo to discuss some of the things we’re working on—the PR and social media pieces, as well as the website we’re putting together for outreach. And the council will utilize some of the industry resources that are already out there—like the Pets Add Life [PR campaign], HABRI, PIDA’s Pet Store Pro [online training program for retailers], and AVMA’s and American Humane’s outreach network. All of these things will give us access to parts of the marketplace that we just couldn’t reach before without having to take out a Super Bowl ad.
APPA and PIDA recently announced that they will be teaming up for the first-annual Pet Industry Management Conference and Supplier Trade Show in January 2016. How did this new initiative come about? What can the industry expect from the event?
Vetere: I started with APPA in fall of 2002, and the very first pet industry tradeshow I attended was the 2003 APPMA Show. There, I made it a point to go around to as many folks as I could to ask what they thought was bad or good about the industry, and I was often told that there were too many small events—trade shows and conferences—that just didn’t have the impact that they should. So, over the years, the industry saw the combining of the APPMA and the PIDA trade shows into Global Pet Expo—which has become huge. It shows that the industry responds positively to [this type of consolidation].
The last time APPA did its own management conference was about 10 years ago, and it was well attended. It was aimed at the middle to upper-middle manager and designed to provide them with hands-on training in areas important to them—whether it was marketing, IT or any other type of skills that they need in their business. But at the time we were deciding whether or not to continue the management conference, PIJAC was talking about starting its own conference and PIDA was reorganizing its conference, and we didn’t want to step on anyone’s toes. So, we kept biding our time.
Finally, we sat down with PIDA and suggested that instead of having two separate management conferences, why don’t we do one big event that will really make a difference? We had already proven that we could play nice together by partnering to create Global Pet Expo, so joining forces with this instantly seemed like a great idea. Like Global Pet Expo, we want this to be a huge, must-attend event; and we want it to be useful.
So, not only will the Pet Industry Management Conference provide valuable overviews to upper managers—as well as giving them opportunities to meet and network with other high-level executives—it will also bring in the next level of managers for a hands-on education on a variety of business skills and the types of resources available to them in the industry.
One of the big additions to the conference will be the supplier table-top trade show. Every year, we get so many suppliers to the pet industry asking if they can come to Global Pet Expo, but the companies that come to exhibit at Global spend three days frantically selling their products; the last thing they need is someone coming to their booth to try to sell to them while retail buyers go walking buy. We want to give these vendors access to our industry, but the management conference will be a much better venue.