ANIMAL ATTRACTION

RICHARD TURCSIK Additional reporting: LISA A. TIBBITTS

Supermarkets are preening their pet aisles, expanding offerings of pet foods, toys and supplies -- and in some cases even animals -- in an effort to make their departments more stimulating and win back market share lost in the dogfight with mass merchandisers and pet supercenters.

Major supermarket chains, including Kroger Co., A&P, Big Y Foods, Big V Supermarkets, Star

Market Co. and Randalls Food Markets have joined the pack in placing a greater emphasis on the pet aisle.

The leading supermarket pet food manufacturers have developed category management programs for supermarkets that seek to build sales of highly profitable treats and supplies in the category.

"To develop our Paws Professional Pet Center, we partnered with Kal Kan on our cat and dog food categories," said John Corcoran, category manager at Big Y Foods, Springfield, Mass.

Big Y's 1,500-square-foot pet center features Paws Professional premium private label sourced from Topco Associates, Skokie, Ill., along with 1,300 stockkeeping units of pet supply general merchandise.

"The Paws Professional Pet Center has been well received. The customers love it because it meets all of their pet food and pet supply needs. Pet food sales in this store are very good, and we feel that we have gained ground there by having pet supplies and a larger pet presence," he added.

Corcoran said Big Y has the pet centers in two of its World Class format stores and is adding a department to its Worcester, Mass., location, which is undergoing a remodel.

Jeffrey Hill, managing director of Meridian Consulting Group, Westport, Conn., said the development of pet centers in supermarkets is consistent with the store-within-a-store philosophy.

"Because of the additional assortment that can be added when you focus on this store-within-a-store approach, it significantly enhances the overall productivity and profitability of the section. Instead of having to simply carry the largest-volume items, retailers can also increase the variety and the mix to include higher-profit items," he said.

"The critical issue on the food side is to prioritize those categories that the retailer wants to make a statement in. Pet food, in many instances, has been one of those high-priority categories," he said. "Retailers are having positive experiences with it, and we expect an increasing trend in this direction."

Montvale, N.J.-based A&P is one chain that successfully expanded its pet aisle. In its new A&P Food Market prototype store that opened in February in Kenilworth, N.J., an entire 92-foot-long aisle, merchandised under The Pet Shop marquee, is devoted to 8,600 SKUs of pet foods, supplies and related merchandise.

Michael Rourke, A&P's senior vice president of communications and corporate affairs, told SN the department was developed to allow A&P to better compete with pet food supermarkets.

"The Pet Shop department in our Kenilworth store has exceeded expectations," he said. "We have gotten a lot of positive response to the department, both in terms of sales and customer comments."

As a result of the positive reaction, The Pet Shop has been included in another new A&P that opened in Old Bridge, N.J., in March.

Kroger Co., Cincinnati, is also placing a heavier emphasis on pet care.

Officials at Kroger declined comment, but in late March when SN visited a Kroger prototype store that opened in the upscale Dallas suburb of Richardson, Texas, in late 1995, it found full sides of two 48-foot-long aisles strictly devoted to pet foods and related items.

A large overhead sign alerts shoppers to the Kroger Pet Center, located in the rear half of the store, while signs hanging from the top shelf segment the department according to variety. For example, on the full side of the aisle devoted to cat products, signs divide the section according to cat accessories, dry cat food, treats and semimoist cat foods and canned cat foods.

At the head of the department, a TV monitor housed in a giant dog house airs pet care topics.

Big V Supermarkets, Florida, N.Y., which operates 30 supermarkets under the ShopRite banner, is also rolling out expanded pet departments.

"One of the areas I think we need to address is the issue and the challenge of category killers," Joe Fisher, Big V's president and chief executive officer, told SN in an interview last fall.

"We have the benefit over a category killer in that we already have the traffic in the store. We have actually implemented three expanded pet departments and are about to roll out our first full offering of product that will begin to develop this prototype," he said.

Last October, Star Market Co., Cambridge, Mass., opened a new store in Boston that contains a Petcetera pet department complete with live tropical fish. Officials at Star declined to comment, but local observers said Petcetera has been well received by shoppers.

"The philosophy at Star is that anybody who is shopping at a pet superstore is buying groceries, too," said one observer. If Star can make it exciting enough, shoppers need not leave the supermarket to make pet-related purchases, he added.

"The department also sells tropical fish, and from what I hear it has been doing extremely well," the observer said, noting that Star has a service person in the department.

"The department is doing exceptionally well, and Star is expanding the concept to somewhere between five and 10 stores," the observer added.

Rather than develop a department with all the canary bells and dog whistles, Randalls Food Markets, Houston, has opted to better use its existing space by incorporating new shelving from Ralston Purina and adding premium private labels.

"I have taken out a lot of regional brands and moved the customer to private-label products, and that has worked well for us," said Nathan Sliva, category manager. "We're doing that as opposed to expanding the department."

Sliva said Randalls has been hurt by pet supercenters and has sharpened its advertising, though results are still mixed.

"The pet stores can pick on the items that the grocery stores carry because they are not really looking for their customers to buy those. They are using those as draw items to get the consumer into their high-margin products.

"We're still finding though that our overall margins in pet foods are hurting us against people like PetsMart. They have been taking direct stabs at different grocers in the area and taking their pricing on some high-dollar items, like Kibbles 'N Bits, and using that against us. Even though we are promoting heavily on our main staples like Ralston dog food, they find ways to attack us."

Weis Markets, Sunbury, Pa., is attacking the pet supercenters head-on through SuperPetz, a Dayton, Ohio-based pet superstore chain in which it acquired a controlling interest in 1993 and runs as an autonomous division.

SuperPetz stocks 12,000 SKUs in 38 stores averaging 25,000 square feet. "We do take some of the grocery sales away from the grocery store. I won't deny that," Ben Ruby, SuperPetz senior vice president, told SN.

Although supermarkets are beefing up their pet offerings, a securities analyst who tracks the industry and did not wish to be named said they are barking up the wrong tree.

"The customer needs to be told what the benefits of the premium brands are, and to date the supermarkets have not put in a knowledgeable salesperson to just hang around the pet aisle," she said. "One of the reasons these superpremium brands only sell to pet food stores is because when you switch a dog or cat to a new formula they often get sick during the first few days. A customer needs to be told that."