BEST IN SHOW 2004-05-31 (2)

Stephanie Fagnani

Maintaining a pet aisle in the supermarket channel has become a bit of a rat race.

Sales growth in other venues -- where prices can be lower and the variety more appealing -- has some operators feeling like they're lost in the mix.

"[The category] is a bit of an orphan," observed Bill Brunetti, owner of Bruno's Foods, a single-unit operation in Lakeport, Calif.

For now, supermarkets still lead the pack in total pet sales, accounting for 37% of the market in 2003, according to a recent category report published by Mintel International, Chicago. Yet retailers increasingly have been losing share to mass merchandisers and pet superstores (see chart on Page 50). Stemming this loss in the future might require more fetching product displays in supermarkets, particularly ones that play up the emotional connections between pet and owner, category veterans told SN.

"Not too many years ago, the point of difference for most of our retailers used to be convenience, price and selection. Today, that's the cost of entry," said Paul Cooke, vice president of industry and trade development, Nestle Purina, St. Louis, one of the largest pet food manufacturers in North America. "If you take categories like pet care, you have to add that whole emotional aspect that includes added services, entertainment and an atmosphere that goes beyond what I call 'a thousand feet of canned vegetables.' That's the point of difference that will separate the retailer from their competition."

Total, all-channel sales of pet food and services represent almost a $20 billion business that is expected to grow at just over 4% annually through 2008, or just under 2% after inflation, according to Mintel's report. The fact that consumers visit a supermarket at least once a week gives the channel a huge advantage in terms of convenience, making pet foods a viable category that retailers would be wise to cultivate for more than one reason.

"The pet care consumer is more than just a pet food customer. That consumer shops multiple categories in the Center Store, and the Center Store for many retailers is their life blood," Cooke said, describing one of the primary shopping motivators for this class of consumer -- convenience.

"If a customer leaves any format to buy pet care products, there's a strong likelihood they're going to pick up other products, whether that be paper, household or whatever," he added.

Keeping the pet consumer shopping a particular store today means having to offer as wide a variety of products as possible in a limited amount of space. It's never an easy task, but one that has the potential to stimulate store loyalty.

"We want customers to recognize Giant Eagle as a pet destination spot, and we have placed emphasis on building our product and promotional offering to attract pet enthusiasts that have traditionally turned to pet specialty stores for their vet-recommended formulas," said Eric Carlson, edible grocery category manager at Giant Eagle, Pittsburgh.

"By building our pet category, we aim to not only attract a larger pet customer audience, but also make the overall shopping experience all the more efficient by offering customers a complete and competitive offering of pet products," he added.

Sometimes, keeping pet shoppers from straying is simply a matter of letting them know that a store is capable of meeting their breed's needs.

"We still have a lot of customers that are shocked when they find out that we have pet food, and it's been four years now. So it's been a tough [message] to get out there," said Erik Bolthouse, a merchant at Chase-Pitkin, a 15-store home and garden chain owned by Wegmans Food Markets, Rochester, N.Y.

Granted, pet food might not always come to mind when shopping for plywood or door handles, but Bolthouse has employed some interesting cross-merchandising techniques to remind his shoppers that his store can fulfill both their home and pet demands.

"We've tried some different signage around inside the store," he said. For example, near the carpet section he featured a photo of a cat with a carpet-based scratching post. "We had another one that was a toilet and a dog bowl," he added. That particular sign asked shoppers, "Is your dog drinking out of this? How about a new dog bowl? Check out [our pet] aisle for our pet items," Bolthouse said.

Although pet food and supplies are not big categories for Bolthouse, carrying them helps set his store apart from comparable outlets like Lowe's and The Home Depot. His selections also differentiate the store from nearby supermarkets.

"The customer we look at is the customer that wants super premium. We make it convenient for the customer to get a hold of their higher-end pet foods, which the supermarkets typically don't carry or can't carry except for the Iams now," Bolthouse said. "We tend toward the larger-sized bag because you've got the male shopper shopping us more often, whereas grocery shopping still tends toward a female customer. So a 20-pound bag is about the largest."

However, location also plays a large role in what sells and what doesn't in supermarkets. Larger sizes are also popular at Brunetti's store, which is located in a very rural part of California that services some shoppers with ranch dogs.

"More than anything else, we generally have end displays or lobby displays of large-bag dog food and cat food. If you look at the tonnage in that department, that's where the majority of the dollars are. The old buffet cans, they're OK, but no great shakes," Brunetti said.

Price and convenience are what keeps the pet aisle alive at Bruno's, and his ability to buy product directly from the pet food vendors helps him stay competitive with box stores, he said. Because of the demographic he serves, Brunetti said he doesn't worry much about taking on the latest trendy pet items.

Conversely, Bolthouse, who still faces challenges with his pet aisle, said he will stock a product if it catches his eye. His store is in the process of resetting the front registers, a seasonal task, and he intends to add some facings of Yip Yaps, breath mints for dogs from Chomp Inc., Lebanon, N.J.

"My plan won't be to have that product in the actual aisles, but just have it up at the registers and even include a little sign near that -- 'Have you checked out our pet shop lately?' -- just to make sure the customers know that we do have that. A few years ago, we brought in candy and pop, and were amazed by the success we had with that. Hopefully, I can feed off of that a little bit with a pet product. It's a cutesy item that I think is a great pickup for the customer," Bolthouse said.

Merchandising strategies similar to this are shared with supermarket retailers at the "Nestle Purina Innovation Center," where the manufacturer has re-created a retailer's pet aisle. Topics like assortment, adjacencies, shelving recommendations and product positioning are also discussed. Nestle Purina will also devise a collaborative annual plan with operators to optimize all the opportunities presented in the market.

Again, the emotional aspect of the category is often a key focus, and Cooke said he encourages retailers to try to evoke a certain feel in their pet aisles through merchandising sets that support the category, and by the use of strong signs.

"Pet is part of the family," Cooke said. "Kind of like baby care and greeting cards, there's an emotional attachment. There's nothing more powerful than to walk in [and see] pictures of kids with dogs and kittens. It's that warm, fuzzy stuff that brings it all home and makes people feel good about where they are."

Cooke cited an article in USA Today stating 50% [of pet owners] said they would be very likely to put their life at risk to save their pet.

"Nobody is throwing their life in front of a truck to save a can of peas," he added.

U.S. Retail Sales of Pet Food and Supplies, by channel, 2001 and 2003

Channel: 2001 $ million; %; 2003 $ million; %; Change 2001-2003 %

Supermarkets: 7,236; 42.3; 7,040; 37.1; -2.7

Pet superstores: 3,671; 21.5; 4,490; 23.6; 22.3

Mass merchandisers: 2,481; 14.5; 3,076; 16.2; 24.0

Farm and feed stores: 924; 5.4; 1,044; 5.5; 13.0

Vet/kennel: 855; 5.0; 968; 5.1; 13.2

Subtotal: 15,167; 88.7; 16,619; 87.5; 9.6

Other*: 1,942; 11.3; 2,370; 12.5; 22.1

Total: 17,109; 100.0; 18,989; 100.0; 11.0

*Warehouse clubs, dollar stores, Internet, drug stores, and catalog

Source: Mintel/Pet Food Industry/Based on Information Resources, Inc. InfoScan & reg; Reviews Information