IAMS TO EXPAND TO GROCERY CHAINS

BARBARA MURRAY

DAYTON, Ohio -- The Iams Co. here is now calling on grocery chains, as well as mass merchants and the club channel, to expand distribution of its select dog and cat foods. The premium products, in a line of 120 stockkeeping units, should be on retailers' shelves by March or April, with broader distribution by summer, according to Iams and its parent company, Procter & Gamble, Cincinnati.

The expansion will be supported by the brand's first national television advertising campaign.

While some industry analysts called the move risky, Oklahoma City wholesaler Fleming, for one, is excited by what it perceives to be an opportunity to attract high-end shoppers out of the specialty pet food channels where Iams was formerly found.

"You'll see a lot more promotional money brought into the category," said Tom Rose, director of category marketing for Fleming. He called the Iams' expansion into the grocery channel "something we've asked for for a long, long time."

Rose said Fleming will carry the velocity items in a three-tier program, based on division volume and retail volume, for the 180 stores that are company-owned. Independents will make their own decisions. Having Iams products in the grocery store should not affect the private-label brands, Rose said, "because it's a totally different customer."

"We're excited by the opportunity to attract customers from the specialty stores," he said.

P&G, which paid $2.05 billion to buy Iams last September, hopes to reach the majority of shoppers who don't buy pet foods in specialty stores.

"I think pet food buyers are brand loyal," said John McMillin, an analyst with Prudential Securities, New York. "There is risk and there is reward. I would not underestimate Ralston-Purina's ability to protect its investment. Ralston did a lot to bring growth back to the grocery pet aisle," McMillin said. "They worked in conjunction with the supermarket industry, and developed the EDLP strategy."

Iams said the brand was sold in 200 grocery stores in Northern and Southern California, the Pacific Northwest and other regions, and it found sales in grocery stores to be incremental, based on comparisons with pet specialty stores within five miles of those grocery stores.

McMillin, however, doubted that those markets were representative, and further said "it defies basic logic, that all business will be incremental and the specialty stores won't be hurt." He also thinks P&G runs the risk of angering the pet food specialty retailers, who might move the Iams brand products to less-desirable locations in the stores.

Typically, Iams products have been sold only in pet supply stores, veterinary offices and clinics, feed and farm stores, and pet grooming and boarding outlets. The company's Eukanuba brand will remain in the province of the pet-food chains, vets and breeders.