INTRODUCTION... XVI REASONS FOR THIS STUDY AND ITS IMPORTANCE... XVI OBJECTIVES OF THIS STUDY AND ITS CONTRIBUTION... XVI THE AUDIENCE FOR THIS REPORT... XVI SCOPE AND CONTENT OF THE REPORT... XVII METHODOLOGY AND INFORMATION SOURCES... XVII SUMMARY... XVIII PETS AND THEIR OWNERS... 1 DEFINITION OF PETS... 1 PET OWNERSHIP TRENDS IN THE U.S.... 1 DOGS AND DOG OWNERS... 3 Profile of Dog Owners... 4 CATS AND CAT OWNERS... 5 Profile of Cat Owners... 6 FISH AND FISH OWNERS... 7 BIRDS AND BIRD OWNERS... 7 SMALL MAMMALS AND THEIR OWNERS... 8 REPTILES & AMPHIBIANS AND THEIR OWNERS... 9 CONSUMER EXPENDITURES ON PETS... 9 PROFILE OF THE BEST CUSTOMER... 14 WILL THERE BE ENOUGH BEST CUSTOMERS IN SHORT AND MEDIUM TERM?... 14 Demographic Trends Age... 14 Demographic Trends Household Types... 16 Demographic Trends Home Ownership... 17 Demographic Trends Income... 18 CONSUMER ATTITUDES TOWARD PETS... 18 PET INDUSTRY OVERVIEW... 20 SUMMARY... 20 FORCES SHAPING THE INDUSTRY... 21 CONSOLIDATION IS CHANGING THE COMPETITIVE LANDSCAPE... 21 COMPETITION AMONG RETAIL CHANNELS HAS INTENSIFIED... 23 Comparison of Primary Retail Outlets for Pet Products... 23 Pet Superstores Victims of Their Own Success?... 24 PetsMart and PETCO The Dominant Players... 24 1999 Performance Comparison... 26 Store Growth Trends... 26 PetsMart, Inc.... 28 Business Segments... 28
PetsMart Revamping Its Strategy... 28 Expansion into Foreign Markets Put on Hold... 29 PetsMart Invested Heavily into Its Net Ventures... 29 PETCO Animal Supplies, Inc.... 30 PETCO Doing Better than PetsMart, though Will Be Adversely Affected By the Iams Expanded Distribution... 30 Company s Decision to Go Private Seen as Part of a Larger Trend... 31 PETCO s Alliance with petopia.com Less Costly than Petsmart s Net Venture... 31 Supermarkets Continue Losing Share to Other Channels... 31 Mass Merchandisers Achieved Spectacular Growth During the 1990s... 33 The Independents Channel Experiencing a Shakeout... 34 GLOBALIZATION OF THE PET INDUSTRY... 36 DIVERSITY OF PET CARE MARKETS... 36 GLOBALIZATION OF PET CARE MARKETS... 37 Changes in Social Trends and Attitudes to Pets Worldwide... 38 TRENDS IN THE PET INDUSTRY... 39 E-COMMERCE IS REDEFINING THE PET BUSINESS... 40 E-SALES STILL REPRESENT A VERY INSIGNIFICANT FRACTION OF TOTAL INDUSTRY SALES... 40 THE NEW BUSINESS MODEL FOCUSES ON ENHANCING CUSTOMER EXPERIENCE... 41 THE SHAKEOUT IS IMMINENT, AND THE BRICK RETAILERS ARE WELL-POSITIONED TO BENEFIT FROM IT... 44 1999 Performance... 44 THE PET INDUSTRY IN THE NEW DECADE... 46 PET FOOD... 48 SUMMARY... 48 DOG AND CAT FOOD... 48 DOG FOOD... 49 Classification of Dog Food by Product Type... 49 Largest Share, Fastest Growth Dry Dog Food... 50 High Growth, Second Largest Share Treats... 50 Slight Decline in Sales Overtaken by Treats in Share Canned Food... 51
Soft Dry Food Low Growth, An Interim Category... 52 Share and Sales Declining Moist Food... 53 Concentration of the Top Brands in the Dog Food Segment... 53 CAT FOOD... 55 Classification of Cat Food by Product Type... 55 Largest Share, High Growth Canned Food... 55 Large Share, High Growth Dry Food... 56 Fastest Growing, Share Increasing Treats... 57 Share and Sales Declining Moist Food... 58 Concentration of the Top Brands in the Cat Food Segment... 58 DOG AND CAT FOOD MANUFACTURERS... 59 Consolidation Among Dog and Cat Food Manufacturers... 60 Performance of the Top Manufacturers During the Second Half of the 1990s... 60 Largest Manufacturers Profiles... 62 Ralston Purina... 62 Company Overview... 62 Major Developments in 1999-2000... 63 E-Partnerships... 64 Introductions, 1999-2000... 65 Friskies PetCare (Nestlé)... 65 Company Overview... 65 Major Developments in 1999-2000... 66 Introductions in 1999-2000... 67 Heinz Pet Products... 67 Company Overview... 67 Major Developments in 1999-2000... 68 Introductions in 1999-2000... 70 Hill s Pet Nutrition Co.... 70 Company Overview... 70 Major Developments in 1999-2000... 71 Impact of Increased Competition in the Premium Food Segment on Hill s... 71 Introductions in 1999-2000... 72 Doane Products Co.... 73 Company Overview... 73 Major Developments in 1999-2000... 74 The Iams Co.... 75 Company Overview... 75
Major Developments in 1999-2000... 76 P&G Acquisition... 76 Introductions in 1999-2000... 77 Kal Kan Foods... 78 Company Overview... 78 Recent Developments... 79 Introductions in 1999-2000... 80 Nutro Products, Inc.... 80 Company Overview and Major Recent Developments... 80 Introductions in 1999-2000... 82 NEW PRODUCT TRENDS... 82 Premium Foods... 82 Manufacturers of Premium Foods... 85 Other New Product Trends... 86 Nutraceuticals... 86 Foods for Special Needs... 87 Natural and Organic Products... 87 Recent New Product Introduction Trends... 89 DISTRIBUTION CHANNELS... 91 OTHER PET FOODS... 92 BIRD AND SMALL MAMMAL FOOD... 92 Bird Food... 92 Small Mammal Food... 93 Bird and Small Mammal Food Manufacturers... 94 Central Garden & Pet Co.... 95 Kaytee Products, Inc.... 96 FISH FOOD... 97 Fish Food Manufacturers... 98 Tetra/Second Nature... 99 REPTILE FOOD... 100 PRODUCT TRENDS IN OTHER PET FOODS... 101 DISTRIBUTION CHANNELS... 102 REGULATION OF THE PET FOOD INDUSTRY... 103 FDA REGULATIONS... 103 AAFCO REGULATIONS... 104 AAFCO Labeling Regulations... 104 The 95 Percent Rule... 104 The 25 Percent Rule... 104 The 3 Percent Rule... 105 The Flavor Rule... 105
AAFCO Nutritional Adequacy Statement Requirements... 105 Recent AAFCO Regulations... 105 State Regulations... 106 PET SERVICES... 107 SUMMARY... 107 VETERINARY SERVICES... 107 VETERINARY CARE UTILIZATION AND EXPENDITURES FOR DIFFERENT PET TYPES... 109 SEGMENT STRUCTURE... 110 CONSOLIDATION IN THE SEGMENT CONTINUES... 113 Veterinary Centers of America, Inc.... 115 Company Overview... 115 VCA s Acquisition Strategy... 116 VCA s Operational Model... 117 Vet s Choice... 118 Veterinary Centers of America Has Gone Private Again... 118 Competition and the Future of VCA... 119 VETERINARY CARE IS GETTING HUMANIZED... 119 Continuing Specialization of Veterinary Services... 120 Increasing Need for Senior Health Care... 121 Wider Popularity of Alternative Treatments... 121 Wider Availability of Pet Health Insurance... 122 New Forms of Pet Care Management... 123 VETERINARY SERVICES ARE INCREASINGLY DELIVERED THROUGH OTHER CHANNELS... 124 Web-Based Veterinary Service Delivery... 125 REGULATION OF VETERINARY PRACTICES AND VETERINARY MEDICINE... 126 The Animal Drug Availability Act... 126 Animal Medicinal Drug Use Clarification Act... 127 Regulations on Dispensing Veterinary Prescription Drugs... 128 OTHER PET SERVICES... 128 PROFILE OF PET SERVICE USERS... 130 GROOMING AND BOARDING SERVICES... 131 Overview of the Boarding and Grooming Businesses... 131 The New Trend in the Segment Is Toward the Upscale, Humanized Establishments... 132 DOG TRAINING SERVICES... 133 Overview of Dog Training Businesses... 134 BREEDING SERVICES... 134 Overview of the Breeding Businesses... 135 PET-SITTING SERVICES... 135 Overview of the Pet-Sitting Businesses... 136
IS THE PET SERVICES SEGMENT RIPE FOR CONSOLIDATION?... 136 ONE-STOP SHOPS A TREND OF THE FUTURE?... 137 SALES OF OTHER PET PRODUCTS THROUGH THE SERVICE CHANNEL... 138 PET SUPPLIES... 139 DEFINITION OF PET SUPPLIES BY PRODUCT CATEGORY... 140 CONSUMER EXPENDITURES ON PET SUPPLIES... 141 PET SUPPLIES SECTOR STRUCTURE... 142 HARTZ MOUNTAIN CORP.... 143 New Product Introductions and Modification in 1998-2000... 144 DOG AND CAT SUPPLIES... 145 CAT LITTER... 146 Leading Marketers in the Segment... 148 Clorox Co.... 148 Ralston Purina Co.... 149 American Colloid... 151 Oil-Dri Corp. of America... 152 New Product Trends In The Cat Litter Category... 153 OTHER DOG AND CAT ACCESSORIES... 155 DOG AND CAT TOYS/GIFTS... 156 FLEA AND TICK PRODUCTS... 157 Product Types and Trends in the Flea and Tick Category... 158 Prescription Versus OTC Products... 158 Marketers of Flea and Tick Products... 158 New Product Trends in the Flea and Tick Segment... 159 DISTRIBUTION CHANNELS... 160 FISH SUPPLIES... 162 SEGMENT STRUCTURE... 162 DISTRIBUTION CHANNELS... 163 BIRD SUPPLIES... 164 BIRD SUPPLIES SEGMENT STRUCTURE... 164 DISTRIBUTION CHANNELS... 165 SMALL MAMMAL AND REPTILE SUPPLIES... 166 SEGMENT STRUCTURE... 167 DISTRIBUTION CHANNELS... 168 TRENDS IN THE DISTRIBUTION CHANNELS... 169 SUPERSTORES ARE HAVING A DIFFICULT TIME COMPETING IN THE SEGMENT... 169 MASS MERCHANDISERS CONTINUE TO DEMONSTRATE SPECTACULAR GROWTH... 169 SUPERMARKETS ARE FOCUSING ON PET SUPPLIES TO PREVENT FURTHER SHARE EROSION... 170
INDEPENDENTS HAVE SURVIVED COMPETITION FROM OTHER CHANNELS, THOUGH SHARES AND MARGINS HAVE DECLINED... 171 THE PET SUPPLIES BUSINESS IS ONE OF THE MOST COMPETITIVE AND HEAVILY FUNDED SECTORS OF E- COMMERCE... 171 GOVERNMENT REGULATION... 172 FDA... 172 Animal Drug Regulation... 173 EPA... 174 1996 EPA Regulations Concerning Improved Label Directions For Dog And Cat Pesticide Products... 174 INTERNATIONAL ASPECTS... 175 EXPORTS OF U.S. PET PRODUCTS... 175 OVERVIEW OF EXPORT TRENDS... 175 PET FOOD EXPORTS... 175 Dog and Cat Food... 175 Other Pet Food... 177 PET SUPPLIES EXPORTS... 179 Cat Litter... 179 Dog Accessories... 181 IMPORTS OF PET PRODUCTS INTO THE U.S.... 183 OVERVIEW OF IMPORT TRENDS... 183 PET FOOD IMPORTS... 184 Dog and Cat Food... 184 Other Pet Food... 185 PET SUPPLIES IMPORTS... 187 Dog Accessories... 187 Cat Litter... 188 OVERVIEW OF THE LARGEST MARKETS... 189 CANADA... 189 Trends in Pet Ownership... 189 Pet Industry and Trade with the U.S.... 189 EUROPEAN UNION... 192 Trends in Pet Ownership... 192 The Pet Industry and Trade with the U.S.... 193 Pet Foods The Largest Segment... 194 Largest Pet Food Manufacturers... 195 JAPAN... 196 Trends in Pet Ownership... 196 The Pet Industry and Trade with the U.S.... 197 Pet Food... 198 Pet Supplies... 200
APPENDIX I: U.S. BASED PET INDUSTRY ASSOCIATIONS... 202 APPENDIX II: FOREIGN-BASED PET INDUSTRY ASSOCIATIONS... 205 APPENDIX III: PET INDUSTRY: U.S. TRADE AND CONSUMER PUBLICATIONS... 209 APPENDIX III... 210