Rebuilding Block

In the pet care business, at least, the dog is still wagging the tail.

While pet supplies?including accessories, toys, rawhide and grooming aids?continue to gain stature in retail outlets, many supermarket retailers report that they want to use these segments to recapture sales in the pet foods category.

Surely, pet supplies are becoming more important to supermarket retailers, especially with margins that range between 30 and 55 percent and a growing demand by consumers for quality merchandise for their animals. Yet virtually all the retailers contacted by Supermarket Business report that what they really want to do is rebuild their troubled pet food sections, where as much as half of their volume has been lost to mass retailers and such specialty chains as Petco and PetsMart in the last half-decade.

"We use pet supplies as a way of attracting consumers into our stores for pet food," says one supermarket retailer. "If we expand pet care, offering a healthy assortment of product and supplies, we can show the consumer that we are extremely serious about the overall pet foods category. Plus, we can use pet supplies, with their great margins, to offer better, more competitive pricing on food."

Supermarkets do have their work cut out for them. According to Information Resources, Inc., mass merchant dollar volume of pet supplies expanded 11.4 percent for the 52 weeks ended July 19, to $1.2 billion. Drug store sales dropped 10.4 percent and food store sales were down 0.9 percent. Discount stores account for almost 70 percent of the $1.7 billion spent in drug, food and discount outlets on pet supplies.

Yet even with flat pet care sales, supermarket retailers still seem to be interested in using the category to get some pet food volume back. Jeff Manning, vice president of nonfoods for Phoenix-based Bashas', could be a perfect example. While he says he is upgrading his pet care departments, adding more impulse-oriented items to the front of the section, he quickly adds that pet food is very important to the health of the overall chain.

"We are going to make a bigger statement with pet care to let consumers know that we are in the business," he says. "We are going to have 30-foot departments with a wide range of product. We have a great opportunity to use pet accessories to show consumers that we are as serious about pet care as other retail outlets. It's a good, profitable category, one that we should be trying to expand."

Don Pulsi, vice president-general merchandise for Imperial Distributors (Auburn, Mass.), takes a similar stance. While he notes that pet supplies are producing big sales gains in the supermarkets his company serves, he adds that the category is vital to show the consumer that the supermarket is in the overall pet business, including, of course, food. "My feeling is that the specialty stores do not have a price advantage over us in supplies," he says. "Our prices are very often less than what they sell the products for. Yet they have an advantage because of perception, which we can only change with larger sections."



'Pet Care Is Dynamite'

Pulsi estimates that Imperial now offers its 800 retailers about 2,100 SKUs in pet care. He suggests retailers look at pet care sections up to 24 feet. "Pet care is dynamite," he adds. "It is the best producing general merchandise category in the last two years."

Pat McGivern, vice president of nonfoods for Supervalu, says nonfoods retailers can actually use the attempt at rebuilding the pet food category to their advantage. "We have allies on the grocery end of the business with this category," he says. "Pet food buyers want a larger pet care section because they know it will help build pet food sales. Nonfoods buyers can take advantage of this to get larger pet care sections."

McGivern says Supervalu offers its retailers pet care sections that can reach 120 linear feet, with full canopy signing. "Most of our progressive retailers who have seen a loss in pet food sales are embracing the pet care department concept," he adds. "They see the advantage of accommodating a total pet care department that should help get the pet food business back."

As could be expected, pet care suppliers are pushing the concept of total integration between food and supplies. "Pet superstores courted customers away," says Cecil Campbell, vice president of sales and marketing for F.M. Brown's, Inc. "Mass and grocery lost 30 percent of their business. Now they are waking up and realizing they have to offer more of a selection?not just the basic core of merchandise."

Perhaps the most aggressive players in the field are the largest, who have the most to gain or lose from the trend in sales. Ralston-Purina and Hartz Mountain have joined forces to present Total Pet Care, a mini version of a pet superstore under a food store roof. The program is used by supermarkets such as Price Chopper in Independence, Mo. The anchor of the department is pet food, but high margin accessories, such as rawhide bones and pet supplies, are prominent.

"Our goal is twofold," says Tony Buono, corporate vice president with Hartz. "First, we want to attract the consumer into the department with eye-catching signing, packaging and popular products. Then, we want to create adjacencies with food products to help build sales among those products. It's time for supermarket retailers to step up and do the right thing with the pet care category. There are so many advantages to expanding this section."

Retailers are jumping on. "We felt that it was necessary to do something dramatic to make consumers aware that we are still in the pet care business," says one retailer who utilizes the Ralston-Purina/Hartz program. "Awareness is the key to building a pet care section because letting the consumer know that the products are available is the first step."

Some merchants are acting independently. Food Lion, for example, has a concept called Animal Stuff with more than 10,000 stock keeping units. H-E-B, ShopRite and Shop 'n Save also have pet boutiques within many of their supermarkets. An official with a Midwestern-based supermarket chain says his company is about to test a pet care section that emphasizes a number of brands besides Hartz and Sergeant's. "We have to carry products from the two big suppliers because those are the items that consumers are looking for," he says. "But there are other quality products out there, many offering solid margins. We want to give them a chance."

Some merchants suggest caution with pet care, despite the category's growth at mass merchandisers and specialty stores. As with so many other nonfoods categories, supermarkets cannot be everything to everybody, especially with space at a premium.

Jay Gellerman, president of Jaydon, Inc., a service merchandiser based in Rock Island, Ill., says that while he is recommending that retailers continue to emphasize the pet care section, he suggests that they concentrate on the items consumers are most often looking for. "Stay with the basics and the best movers," he says. "Yet I don't recommend going overboard on the price-sensitive stuff. We still have to make some profit from this category."

Pet owners are an attractive audience. Almost 60 percent of all households in America own a pet; 40 percent of those owners have a dog. Owners lavish attention on their pets and don't scrimp on spending for them. "People don't stop buying for their pets even in a recession," says Lynn Moore, vice president of sales and marketing for General Cage. "Also," she adds, "the pet category is notorious for high profits."

A major part of keeping up with superstores is offering a merchandise mix?sometimes in limited space?that keeps pet owners satisfied. Joel Adamson, vice president of marketing for Sergeant's, suggests a hybrid, multi-brand approach for retailers looking to lure in pet owners. "The hybrid set shows retailers have almost hand-picked the best items to offer shoppers," he says. The trick is, he adds, to do so without too much product duplication. Sergeant's is one of several pet firms offering planogramming assistance.

Others suggest stocking a number of new items because of consumer demand. Lois Singer, national accounts manager at Lassie Pet Products, says her company has found more and more pet owners are using floor protection pads for more than training. After noticing sales of its Puppy Pad soaring, the company created a line of At Home Pet products with larger pads so people can leave animals home longer without having to walk them. "This is especially good for the elderly who want pets, but can't always walk them," she says.

Even toys and treats are no longer run-of-the-mill fare. "We're unique and go beyond rubber steaks," says Joyce Steele, a spokeswoman for Multipet International in Carlstadt, N.J. One of Multipet's best items is Look Who's Talking, a series of plush toys that emit a sound when a dog plays with them. "It is important for mass merchants to realize people are looking for unique items for their pets. And discounters are looking for things to separate them from the competition. People will pay more for an interesting item," she says.



Plenty of Products

In addition to Look Who's Talking, Multipet has items like Bionic Bug, Motor Mouse and an array of bird products.

Ethical Products also tries to stay ahead of the pack by introducing as many as 20 new items per year, says Jonathan Zellinger of Ethical's fashion pet division. "This year we came out with new tennis balls that have been popular. People today are spending more money on upscale food and more money on accessories and toys."

In addition to making a fashion statement?with licensed characters such as Looney Tunes and Garfield?Conimar vice president of sales and marketing Ron Dempier says place mats protect the floor. They were so successful, he says, that a larger size has been added to go under cat litter boxes.

Space efficiency is the key word at Conimar, he adds. First the place mats are reversible, with one side for dogs and the other for cats so that retailers don't need to double up on inventory. Also, Conimar has created shelf fixtures that attach to existing gondolas to house the mats so the products are merchandised in previously unused space.

Even the leash and collar segment has new twists. Cado Manufacturing, for example, has introduced a new stretch leash that is made out of material like a bungee cord. The net result is less pull to the hand of the pet owner, says Terry Cochran, vice president of sales and marketing for the firm, which markets under the Rainbow Pet logo.

Both Sergeant's and Hartz offer mass market versions of squeeze flea and tick remedies. "Mass marketers are now able to control more of the business," says Adamson at Sergeant's. He says that the trend to using ingested flea products from veterinarians has subsided. "The real growth is in squeeze applications," he adds.