Meeting Tomorrow’s Challenges Today
Bob Vetere, president and CEO of the American Pet Products Association, discusses the important steps that the pet industry is taking to proactively address the issues that will inevitably rise in the future.
From your perspective, what is the state of the pet industry? What is your outlook for the future of the industry?
Bob Vetere: Well, I think we’re at a good point right now. Back in December, I heard from a couple of folks that they weren’t doing as well as they had hoped—they were doing better than the year before, but the holidays weren’t quite what they expected. But then all of a sudden in January, I started getting comments from just about everybody that the year was kicking off with a bang. Everything seems to be picking up at an even better pace than they were hoping for.
Add to this the perspective that economist Brian Beaulieu [ITR Economics] provided at the Pet Industry Leadership Conference a couple of months ago, where he predicted that the overall economy should not be any kind of a drag on the pet industry, and it looks like as good as 2015 was, 2016 is going to be even better.
One factor that really makes me feel good is that while the oldest Baby Boomers will hit 70 this year—typically an age threshold where people do not replace pets—we’re finally seeing an uptick in ownership among Millennials, and that looks like it’s going to be more than enough backfill as Boomers start to slow down a little bit.
So, I think there is good reason—at least for the next two to three years—to be optimistic.
That shift in consumer demographics as Millennials replace Baby Boomers as the major driver of the pet business has presented a major challenge for the industry. Are you satisfied that the industry is doing enough to meet this challenge?
Vetere: I’m going to hedge a little bit and say that I believe we’re in the process of doing what needs to be done. I think, in the past, we were trying to treat the Millennials the same as we were treating Baby Boomers and Gen-Xers, but they are a different breed. However, while their behavior is different, they are still supportive of the industry. I think we’re getting a feel for that and responding.
If you just watch the ads and the marketing programs that are out there, they’re now hitting a lot more of the hot buttons that ring true with Millennials. These consumers are going for convenience products. They’re going for products that allow them to treat their pets as substitute families. And I think that marketers are finally starting to catch on to that. So I think we’re transitioning to really treat Millennials the way we need to treat them.
One of the similarities between the Millennials and the older Baby Boomers is that both groups are looking for ways to ensure that their pets are being well cared for. In the Boomers’ case, since they’re going to be slowing down, they still want to make sure their pet is going to be taken care of. In the Millennials’ case, their lifestyles are so active, they want to make sure that while they’re being active, their pet is still being taken care of in a positive way. So, a lot of products overlap both demographics, which is a good thing.
I think the thing that Millennials are even more sensitive to is having products that are specifically designed for their pet—whether that means the product is breed-specific, age-specific or condition specific. What’s going to help their pets’ bones and joints? What’s going to help their pet’s teeth, or fins, or whatever? They’re looking for targeted products more than any group of pet owners that came before.
Another important issue facing the industry is ensuring a plentiful supply of healthy, well-bred puppies. How do you see this issue playing out over the next five to 10 years and beyond?
Vetere: Yeah, this is the crux of so much of what the Pet Leadership Council is all about—even beyond puppies. Of course, puppies are certainly in the news most, and it is true that there are not enough breeders. But a lot of the puppy sale bans we’ve seen around the country have morphed into overall pet sale bands.
The statistics we are looking at, which are being verified through a study by Mississippi State University, show that maybe three to five percent of all the puppies sold in the United States go through pet stores. While it’s not a completely zero number, it is not very much.
And there will always be a supply of puppies to meet demand. If you can’t get them from the pet store, you’re going go get them from a friend or the guy in the Kmart parking lot selling dogs out of his trunk. People are going to find dogs somewhere.
So the supply of dogs is not going be impacted so much by these pet sale bans. However, where else are you going to buy a fish, bird, gerbil, hamster or any other type of small animal other than in a pet store? We now have almost 120 areas in the country that can’t sell some kinds of pets, and that number is growing. That’s going to become a real big problem—even bigger than the puppy sale ban problem.
Now, moving back over to the puppy side—as more responsible breeders get put out of business, the breeders who will be left are those who don’t necessarily take it seriously and are not doing things like becoming USDA-certified and following best practices. This is going to become a bigger and bigger problem. And more dogs are going to start getting sourced from overseas. In fact, more dogs are going to get sourced from wherever people can find them.
Heck, we’re at the point where shelters are looking overseas for dogs. They’re looking to backyard breeders. They’re looking to breeders regardless of whether or not these breeders are certified—all just to stay open.
If we don’t get smart and get a workable, enforceable and marketable breeder standard program in place, and find ways to help the quality breeders meet those standards and continue to produce quality dogs, we are going to have a big problem. There will still be enough dogs, but where they’re coming from is going to become really challenging, and I think it’s going start to bring in problems that we have never faced before.
The industry is growing up and recognizing that we’ve got to do something, and we can’t do it by ourselves. We have to engage the more reputable animal-welfare groups and breeders to get everybody to start realizing that if we don’t work together on this, then we’re going wind up hurting ourselves.
Purdue University’s Center for Animal Welfare Science is currently developing a uniform set of standards for the commercial breeding and raising of dogs. But are good standards enough? How can the industry increase the supply of well-bred puppies as opposed to simply stopping it from shrinking?
Vetere: That’s a great question, and I think it requires a multi-pronged answer. On one hand, we have to educate the consumer on what to look for in a quality breeder; but at the same time, we’ve got to develop some source of low-cost funding to help the breeders that really want to get into compliance with accepted standards. And I think in large part that’s on the industry. I think the industry should set up some kind of fund that could allow quality breeders to reach the standards and become the kind of breeders that the consumer is going to be looking for.
The demand for healthy, well-bred puppies will continue going up while more breeders go out of business, either because of consumer reactions to breeders in general or because they’re not willing or able to step up. That’s why I think helping fund the ones that want to step up to that level is going to be important, but having the consumers know what they should be looking for is also key.
Over the past several years, the industry has seen some key mergers and acquisitions on the manufacturer, distributor and retailer levels. How has this consolidation impacted the industry overall? Do you believe that this type of activity will continue to reshape the industry?
Vetere: I’m going to answer your second question first. I think consolidation will continue to play a role in reshaping the industry. Remember, six, seven, eight years ago, we had all these mergers—it seemed like everybody was buying somebody else. Then the mini-recession hit and everybody kind of started biding their time and backing off. So, it went through kind of a lull, up until about the last year and a half, and now we’re starting to see another uptick.
But in this new round of acquisitions, we’re starting to see traditional human product companies now jumping into the picture. Some companies that never really had pet product lines before are suddenly bringing these products on board—like Smucker’s. I think that’s going to continue for maybe the next year and a half to two years. We’re going to see a lot more companies peeking at the pet industry now, not just pet companies buying pet companies.
That is going to reshape the industry even more, because as these huge companies get involved—like Smuckers, like Procter & Gamble, like Mars—they are going to influence the pet side of the business a little bit more. I think it’s going to be interesting to watch that dynamic happen.
On the distributor side, they almost all bought each other, so I think consolidation there has just about reached its limit.
I think the retailer side is going to get more interesting. As we all saw, the rumored Petco/PetSmart merger didn’t work out. Are they now going to continue to buy smaller retail chains as part of their ongoing competition with one another? I think that dynamic is going to be very interesting to watch develop.
And I think that the big-box pet chains—and all pet retailers—are going to have to continue to step up their game as competition from outside channels heats up. I think you would be hard-pressed to tell me the last store you walked into—any kind of store— that didn’t have some type of pet-related product somewhere in that store. I mean, I could walk into Harbor Freight or Pep Boys and they’ve got a pet section. While I’m looking for tires, I can also browse a whole section of things to do with your pet on car trips.
Pet products are everywhere. And because the retail marketplace has gotten so broad, we will probably wind up seeing a little bit more consolidation for strength amongst pet specialty retailers.
That will be combined with the strength that pet specialty retailers will always have, which is, if I walk into Walmart or Kmart or Pep Boys and ask about a pet product, the person I’m talking with may be from the garden department, or it could be the guy changing tires in the back, and they have no idea what I’m talking about.
On the other hand, if I walk into a pet store and I ask the same question, I can at least feel comfortable that I’m going to get answers. Ultimately, that is what’s going to keep people going to pet stores and why we’re going to see consolidation to become the strongest and biggest and most active pet store out there. That could become a way to fight against even the Internet retailers.
We may even see a mass retailer like Walmart or Kmart start to buy up local pet stores that they can either merge with or can use as some kind of outreach to pet owners.
In the past, as pet product companies have been acquired, we’ve seen a new crop of small upstarts rise to fill the vacuum. Are you confident that we’ll continue to see those dynamics?
Vetere: Right now, we are able to say that every single year since I joined APPA in 2002, we’ve had more new members than the year before. We have about 280-290 new members this year alone. I kept thinking, at some point, things had to just start leveling off, but that is not happening.
Regretfully, some of them will go out of business because the owners have no idea how to source their products, how to make enough of their products, how to account for their products, etc. But new companies are always coming up. There will be over a thousand products in our new products section this year, so that pipeline of new ideas is still there.
Something that I think would really be a positive for the industry is if there was more cooperation between smaller companies. You might have someone who has part of a good idea over here, and somebody else on the other side of the show floor that’s got a similar idea but is strong in a different way. If the two sides would talk to each other and combine forces, they could come up with a hell of a product. Add someone who really knows finances and where to get funding, and someone that has contacts for distribution, and now instead of four individuals that can’t come in out of the rain separately, you’ve got a well-rounded team developing a product line that could be influential and impactful in the industry as a whole.
I hope APPA can help to make those kinds of connections—at least get companies talking to each other. Unfortunately, many of them say, “Well, I don’t have time to do stuff like that.”
It’s too bad, but we keep trying to move in that direction, and I really hope that dynamic starts to take a foothold at some point because I think it will help the industry continue to thrive.
Competition from online outlets represents a big opportunity for manufacturers, and a big concern for retailers. From your perspective, what will be some of the keys for both online and brick-and-mortar retailers to coexist in balance?
Vetere: It really is interesting to watch because a lot of what I’ve been hearing over the last six months is that online sales look like they may be plateauing a little bit. Because pets have become so humanized and such a part of the family, people still like to be able to talk to somebody knowledgeable before making a purchase for their animal companions. Of course, you can go to different websites that allow you to ask questions, but brick-and-mortar pet stores still have that touchy-feely factor going for them.
But pet retailers have to be smart enough that when they have a customer in the store asking questions, they have to be not only informative but also be competitive. These retailers have to be in a position where they can convince the customer to make the purchase in the stores instead of going online and buying whatever they were just shown for a 20-percent discount.
On the other side of the equation, manufacturers have to be smart enough to know that, if they are a big enough company and selling into multiple channels, what they need to do is offer different branding for different channels. This way, everybody can have some brand exclusivity.
I think a lot of companies are starting to figure that out, especially now that human product companies are joining the industry. They’ve already been doing that with human products, so they know it works.
Are there any other key issues that you feel the industry has to address, whether it’s today or in the future?
Vetere: I think that it’s important that we recognize that preparing for the transition that’s happening among Baby Boomers doesn’t just involve engaging Millennials. Everyone keeps forgetting about the Gen-Xers, but they are at the point where they’ve started families, and they have to be a big part of encouraging the next generation of kids to have pets. I believe that we have to be very sensitive to that.
I’m glad that the Pets in the Classroom program is getting so much more successful, because I think that still keeps pets at the forefront with children. And when done correctly, it shows everyone how an interaction with pets can enrich children’s lives and help make them better, more productive people.
How is the health of the American Pet Products Association? How is the organization improving the value that it provides to its membership?
Vetere: APPA is healthier than ever, and it’s bigger than ever. Global Pet Expo has already surpassed last year’s record numbers—in buyers and in booths and exhibitors—and our membership is higher than it’s ever been.
APPA itself is doing very well, and I’m very proud of our board and all the folks who help run our initiatives. They are reaching out beyond just APPA to do things like funding HABRI [the Human Animal Bond Research Initiative]. They’re funding the PLC [Pet Leadership Council]. They’re funding Pets in the Classroom. They’re funding some bird initiatives and some aquatic initiatives. They’re focused on the industry as a whole.
We dropped the word “manufacturers” out of our name almost a decade ago, and we’ve lived up to what we intended to do with that. We’re looking beyond just manufacturers. Of course, we’re still very engaged with manufacturers because that’s the lifeblood of the industry. We’re doing everything we can to help support them, but we’re also recognizing that manufacturers are a piece of the overall puzzle, and we’re trying to make the whole industry strong.
We’re offering more and more services to our manufacturer members. For example, we recognize the fact that a lot of import/export is going on, so we’re ramping up the amount of services we’re giving in these areas. We also have a very strong partnership with a key law firm up in Washington, D.C., to give support to folks that have specific lobbying issues that are product related.
We also continually try to improve our services. For example, we keep improving the Pet Owner’s Survey to provide more useful and meaningful data to our members. We try to make Global Pet Expo even more inclusive and comprehensive so that everybody can truly benefit from what’s going on here. It’s a challenge that we continue to strive to meet, and I think that we are doing a good job.
Are there any new developments with HABRI to report?
Vetere: HABRI is one of those things that, when I’m old and gray and ride off into the sunset, I will still look back on and smile. It is a really good idea that continues to grow. It continues to get stronger. Steve Feldman [executive director of HABRI] has been a very positive, strong influence on the program.
HABRI is now recognized as an expert source on the CDC [Centers for Disease Control] and National Institute of Health websites, and gaining that kind of credibility with the government is phenomenal. We’re even working right now with the government on making flexible spending accounts encompass spending on your pet because, derivatively, if your pet is healthy, it will keep you healthier.
Right now, we are doing our third round of funding for research, and this year we’ve added one of the lead people in the National Institute of Child Health Development to be one of the judges on the panel, evaluating all of the research proposals. In fact, a record number of research proposals have been submitted for funding by HABRI this year.
I could go on about HABRI for hours. It’s such a positive force and represents an important direction for our industry. Human health organizations like the American Heart Association have reached out to us, and we’ve even gotten interest from human insurance companies.
We’re now trying to work with some of the insurance companies on things like developing a brochure that can be made available in doctors’ offices talking about the health benefits of having a pet. We did some surveys that showed more than 90 percent of physicians truly believe that there are many human-health benefits associated with being in the presence of a pet. Even in school situations, there’s evidence that students with pets perform better on tests and in classroom situations. Recognizing that a pet’s well-being is dependent on them teaches kids responsibility, and it teaches them to feel good about themselves—that they’re meaningful and contributing to something outside themselves. And we’re seeing all of these benefits being validated with sound research.
At the end of the day, we’re not trying to get people to get pets just so that the pet industry can sell more products. We’re trying to get people to get pets because it’s good for them.
A few years ago, a broad group of pet industry members got together to form the Pet Leadership Council (PLC). How is the council shaping up?
Vetere: We’ve finally gotten to the point now where PLC is moving forward and we’re doing things. The last meeting we had, which took place at the Pet Industry Leadership Conference in Tucson, Ariz., had such positive energy and more people joining, more people getting to be a part of it. And the funding for PLC is actually greater than HABRI’s right now—by a lot.
People have really jumped in with both feet on this effort, and we’re doing more and more on an industry-wide basis. One weakness that we had as an industry is we didn’t have a unified industry voice. We didn’t have the one group that was willing to forget whether you’re a manufacturer, a retailer, distributor, veterinarian, groomer, breeder, or whatever, and think about what the industry, as a whole, needs. We’re doing that now. As a result, I think that we’re going to start developing more positive, proactive messaging.
We’ve got a lot of influential people involved with the council beyond the key trade associations—Petco, PetSmart, Central Pet, Mars, Petland, Spectrum—I could go on and on. All these big guys are coming to the realization that in industry, you can’t just worry about defending your own little private turf; we all have to defend our common turf. That is really what has put us over the top, and we finally have the impetus now that the PLC is going to work, and it’s going to continue getting stronger and stronger.
APPA has long been a big supporter of the Pet Industry Joint Advisory Council (PIJAC), which had a change in leadership recently. How is PIJAC doing?
Vetere: PIJAC has really changed with the development of its contract for funding through the Pet Leadership Council. Now, the organization doesn’t have to worry as much about fundraising and is free to do what it’s supposed to do—focus on being a positive voice for the pet industry in shaping legislative and regulatory action. I think promoting Mike Bober to the role of president and CEO is a big plus. He’s the right leader to get the organization focused on that core responsibility. Ed Sayres did a good job in helping to begin this transition, and PIJAC is now in a stronger position than ever.
The board has been trimmed down now to the folks that really are concentrating on what’s best for the industry as a whole, instead of just worrying about the little guys in the industry who make the most noise and the big guys who whine about funding them. Now everybody’s represented.
Every year, Global Pet Expo honors a member of the media with its “Excellence in Journalism and Outstanding Contributions to the Pet Industry Award.” Can you tell us who this year’s honoree will be and why?
Vetere: This year, we involved a lot of the younger folks within our organization to weigh in on whom we should pick as our honoree, and I’m glad we did, because it brought us to Dr. Heather Loenser, DVM. She comes from an emergency veterinary medicine background and does many radio and television appearances on shows such as the TODAY Show and Dr. Oz, where people look to her as the authority on keeping pets safe, healthy, happy and out of the emergency room.
She uses her expertise to report on a variety of animal health and welfare issues, including breaking news and research, emergency medicine, behavior, lifestyle tips and trends.
We see her as a very deserving selection at this year’s show, as she is a strong force for the industry in promoting pets, pet ownership and, most importantly, responsible pet ownership and responsible pet care.