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Supermarket NONFOODS Business: Ahead of the pack

"The pet industry is warm and fuzzy -- we're not selling medical supplies, we're selling squeaky toys." This comment, from Portland, Maine-based Planet Dog co-founder and chief creative officer Alex Fisher, though comical, makes a relevant point.

As warm and fuzzy as the pet products industry is, the average pet aisle in grocery tends to reflect the state of supermarkets' pet supply sales -- flat and rather dull.

It shouldn't be. Pet product sales are growing. The number of pets in the United States is on the rise. There's a much larger variety of pet supplies in the market than ever before. In fact, according to the American Pet Products Manufacturers Association, pet owners in the United States currently own 77.7 million cats, 65 million dogs, 16.8 million small animals, 17.3 million birds, 8.8 million reptiles, 7 million saltwater fish, and 185 million freshwater fish.

Everyone's doing it

The problem, however, is that there are thousands of Wal-Marts, Kmarts, Petcos, PetSmarts, dollar stores, drug stores, convenience stores, and mom-and-pops that also sell pet products. "The pet category is extremely fragmented," says Paul Cooke, v.p. of trade and industry development for St. Louis, Mo.-based Nestle Purina Co. "But it's also extremely profitable. Pet owners make more than 1 billion trips to the pet aisle every year, and Americans spend nearly $30 million a year caring for their pets."

Indeed, manufacturers of pet products agree that key to boosting pet sales is drawing customers into the aisle with the staples, such as dog and cat food, but then offering a constantly refreshed selection of pet toys and supplies, which generate a much higher margin, for the most part.

According to Brian Connolly, co-owner (and "pack leader") of Castor & Pollux Pet Works in Portland, Ore., there are three ways that the market for pet products can be segmented:

-First, those people who view their pets simply as pets. This group of consumers buys its pet products based on price alone.

-Next are those consumers who view their pets as family members. For these pet owners, price isn't as important as quality and variety, and they're always seeking out something new and interesting for their pets.

-The third group consists of those pet owners who treat their dogs or cats like pampered children. "There's no limit to what these consumers would do or what they would pay for their pets," Connolly says. "It's similar to the typical natural-food or organic customer who's concerned with quality ingredients as opposed to price."

Although grocers want to cater to all three groups of customers, it's the second and third groups that drive margin in the pet aisle, since they're the ones interested in premium products such as toys, chews, and other supplies. "Food is the destination item," says Bob Devine, president and c.e.o. of the Hartz Mountain Corp. in Secaucus, N.J. "Pet supplies, such as toys and chews, is where the margin opportunity lies; they should be well integrated with the pet food for the best effect."

Hartz has also committed to creating products that make a difference in the well-being and lives of pets, and its products reflect this philosophy, being both fun toys and healthy dental tools. This year alone, the company has introduced more than 130 new products, and plans to introduce 50 to 60 new products every year. Some of these new items include:

-Dental Breath Strips for dogs are microthin, quick-dissolving breath strips in a convenient pocket pack, formulated with parsley seed oil to eliminate and neutralize breath odors, and natural mint and vanilla scents to mask odors.

-Chew Dent rawhide chews feature enhanced flavor to promote chewing, which aids in the reduction of plaque and tartar. "It will occupy the animal while providing dental benefits and quality-of-life benefits for the pet," Devine says.

-The Chew 'N Clean teething ring is a toy in a circular shape with several polyurethane rings, allowing teething puppies and smaller dogs to get the dental benefits of a good cleaning through play.

"We conducted research with veterinarians and learned that the No. 1 reason people get rid of their pets is for behavioral issues," Devine says. "We created products that, in addition to eliminating boredom and alleviating separation anxiety, help with the dog's dental care."

TFH Publications of Neptune City, N.J., maker of Nylabone products, has also launched a line of products to help with Rover's oral care. Called Nylabone's Quest Multi-Care Dental System for Dogs, it consists of three different-sized chew bones that brush and floss dogs' teeth while freshening their breath. "The increased interest in dog dental care has paralleled the increase in human oral care products we've seen in the past year, such as whitening products and toothpastes," says Mark Johnson, s.v.p. of TFH.

And, like humans, dogs also appreciate variety in flavor and texture, according to Johnson. "You want products with a variety of sizes, shapes, and textures for every type of pet," he says.

Nylabone's Quest products include Nutri Dent brush chews, which clean teeth while freshening breath with natural chlorophyll, parsley, and other ingredients; the Chew 'N Floss, which includes a patented ridge design to "floss" food particles from hard-to-reach places; and the Chew 'N Fresh bone, a breath freshener made with spearmint and eucalyptus.

As the name of its parent company states, TFH is also a publishing company specializing in pet books. Originally launched as Tropical Fish Hobbyist magazine, the company has diversified into a major pet book publisher with more than 1,200 titles. While many books are too specific for grocery stores to carry, Johnson believes a mix of several general titles -- such as those on puppies, kittens, and tropical fish -- allow some cross-marketing opportunities and enhance a grocer's image as a pet expert. "Books are critical to the health of the pet business," he says. "The more educated pet owners are, the healthier and more active their pets will be, which, in turn, helps the pet products business."

The high margin of pet supplies doesn't mean anything if they don't last long. "Duration is an important factor for consumers," says Jim Cunningham, president and c.e.o. of Bedford Park, Ill.-based Harper's Pet Products. "The consumer assigns a certain level of value to the length of time a product will last."

As a major manufacturer of American-made rawhide, Harper's has created a line of specialty rawhide dental chews that last long and provide dental benefits through hexametaphosphate, an active ingredient licensed from Indiana University School of Dentistry.

With fresh, clean breath and a set of pearly whites, dogs may find that their owners are taking them out on social calls more often, and Puppy and Pet Products International of Paradise Valley, Ariz. is trying to make these excursions easier for pet owners and safer for their pets with its line of EZLeash and EZCollar products. The EZLeash items combine a wide, padded collar with a nylon lead, allowing owners to quickly and safely restrain their pets. "The wrong collar can damage the esophagus of the dog," says Greg Vartanian, sales manager. "With the EZLeash, if the dog has a tendency to pull, they will not be choked."

The company is also developing a swivel model that turns as the animal turns, helping to avoid having its legs tangled in the leash, and has plans to develop a safe car harness for dogs that travel with their owners.

Even with all the new healthy products on the market today, there's still a big market for toys. Planet Dog is all about fun and games, offering a variety of products for pet and pet owner alike, including Frisbees, leashes, collars, fetching toys, and, of course, squeaky toys.

Among Planet Dog's newer products are a bone and ball created from an Orbi-Tuff compound developed by the company. The items are made from a thermoplastic elastomer that provides a unique chewing texture and durability. When they do eventually break, they can be sent back to the company to be recycled into more Orbi-Tuff products -- which is especially pleasing to Planet Dog's environmentally conscious customers.

The human/animal bond

Planet Dog looks to strengthen the human/animal bond further with new rawhide products shaped like pasta, potato chips, and Chinese food, among other items. "How many times do pets watch you eat?" Fisher muses. "Now you can feel as if they're sharing your food safely."

Planet Dog also provides products for the pet owners themselves, including bags, hats, and apparel. "For many people, being a pet owner is a lifestyle, and we provide products for that lifestyle, which includes both the pet and the owner," Fisher says. "Plus these products build our brand in the market, which is also very important."

Image is highly important among pet product companies, many of which include pet images in their logos. "Image is important because you want your products to be instantly recognizable to consumers," Harper's Cunningham says. "Remember, these are items that are typically not on the shopping list -- they're 100 percent impulse."

Castor & Pollux Pet Works, which boasts a company name derived from the names of its mascots, Castor the dog and Pollux the cat, manufactures a variety of upscale natural and organic pet products -- such as organic catnip toys in various vegetable shapes, and toys made from natural cotton -- aimed at the pet owners with the strongest bonds to their pets. "Pet supplies are a very emotional purchase," co-owner Connolly says. "We build stories around the company mascots to bring our customers closer to us on that level."

Working closely with retail customers helps, too. Castor & Pollux is teaming up with Giant Eagle to help the retailer broaden the amount of upscale pet products it offers. "We're supplying fixtures and planograms for natural and organic pet food and supplies, as well as toys," Connolly says. "We'll be tying the new section into mailers and promotions that are directed at the grocer's customers who shop the organic section."

Since the pet industry is so fragmented, Connolly expects the new merchandising and promotions to swing some more of the business in Giant Eagle's direction. "They're already buying these pet products, and they're already shopping at Giant Eagle," he says. "We just want them to handle both at Giant Eagle."
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