PET STOP

Liz Parks

After years of losing pet food market share to mass and specialty stores, supermarkets have realized the way to woo pet owners is to be warm and fuzzy themselves.

To that end, retailers are grooming their pet aisles into destination centers.

Minneapolis-based Supervalu has organized the category into what Craig Espelien, general director of store brands and strategic sourcing, called a "celebration department for pets." It's a centralized pet care center with point-of-purchase aids to drive traffic. The aisle features pictures of dogs and cats, a canopy and informational pamphlets. All are designed to foster an emotional connection between the store and the consumer.

"The pet food shopper is very important to us," Espelien said. "We want consumers to associate shopping for pet care products in our stores with having healthy pets."

Wild Oats Markets, Boulder, Colo., launched a pet store-within-a-store department branded Wild About Pets. This is just one of its strategies to grow its share of pet food sales.

"We are aware from research that we have a lot of pet owners shopping our stores," said Brad Johnson, pet food category manager, Wild Oats. "Our pet food sales are growing, but we don't have our fair share of category sales."

Salt Lake City-based Associated Food Stores is testing a program called Pet Kingdom, which brings all pet supplies into one department.

"We are trying to better organize the section for our shoppers," said Rex Housley, pet foods category manager. "Before, we had large bags in the front of the store, and there were other categories in the pet aisle like automotive. Now, it looks like a pet food department, a mini store."

The aisle allows for display of informational brochures and pictures of dogs and cats. "We're trying to attract customers emotionally," said Housley. "The pictures of a child holding a dog or a cat help us do that."

BUYING POWER

Retailers can establish an emotional bond with shoppers through the pet aisle using "the fuzzy stuff that separates pet food from the canned vegetable aisle and makes people feel good," said Paul Cooke, director of industry relations for leading pet chow maker Nestle Purina PetCare. "There is nothing more impactful than making somebody smile when they walk into the pet aisle."

If they do, they might shop, and there's more than just a few cans of Fancy Feast at stake. Pet owners shop for much more than just Fifi and Rover. So the food retailer that loses that shopper to mass merchandisers or to big-box specialty stores loses incremental sales, Cooke said.

"The influence that the consumer has beyond the pet aisle is huge," he pointed out. "The pet food category is in the top five of annual shopping basket expenditures for most supermarket retailers."

According to ACNielsen research, if a supermarket loses a pet care shopper to an alternative format, it loses about $9.50 in other purchases that the consumer could have made if she had shopped in that supermarket.

"If you lose $1 million in pet care sales, you, as a retailer, have put at risk another $9.5 million in potential purchases throughout the rest of the store," Cooke said. "So the pet owner is much more important to retailers than just the sales they create in the pet aisle."

BEYOND THE AISLE

Retailers' pet strategies go beyond aisle canopies and paw print designs on the floor.

At Wild Oats, window posters promote Wild About Pets. In some of its stores, pictures of customers with their pets are posted in the aisle. The retailer will offer consumers the chance to win a year's supply of pet food by writing an essay about their pets. It has run sales pledging 5% of the event's proceeds to animal welfare organizations. A pet club is on the way, too.

There's more: This summer, Wild Oats plans to add pet care as a focus of its in-store events, which already include wine tastings and cooking classes.

"We try to attract new customers who are interested in their health and well being," said Johnson. "Many of these individuals have pets, and they have the same concerns for their pets' well being."

Supervalu determines what other products pet owners might pick up while shopping their stores, then cross merchandising them accordingly. Many have children, Espelien said, so it makes sense to cross sell pet care items in the cereal aisles. Stocking stuffers for cats and pups are cross merchandised in the power aisle at Christmas. Rawhide is often paired with beef jerky. "Someone going on a hunting trip might buy the beef jerky for themselves, and the rawhide treat for their dog or dogs," Espelien said.

Retailers are throwing themselves into store-brand pet lines as well. Some, having firmly established their own brand, are thinking of extending it to general merchandise items like leashes, toys and bowls.

Supervalu has positioned its signature store brand, NutriPlan, as "higher than average," Espelien said. For retailers selling NutriPlan, it provides "a high-quality brand they can use to build customer loyalty," he said. "It also gives our retailers an opportunity to compete against the mass merchandisers and the specialty stores in a category that we have been losing share in over the years."

In time for Christmas 2004, Supervalu extended NutriPlan into the fast-growing segment of rawhide treats. Recently, it introduced a cat litter under the brand. Supervalu is considering expanding it to leashes and other nonfood items.

Steve Mogg, co-owner of Hy-Klas Foods, Plattsburg, Mo., said his wholesaler, Associated Wholesale Grocers, Kansas City, Kan., has redesigned its private-label pet food's packaging and underscored its nutritional benefits. Thus, it's made the brand appear more like a premium than a value product.

"I've heard commercials on the radio for premium dog food," Mogg said. "And people are saying things like, 'I've put my dog on that diet, and they are livelier, their coats look better, they seem healthier.' That's what people want."

REWARDS

Tapping into consumers' emotional connection with their pets seems to be paying off. Associated's Housley said once-flat sales for the pet category are up 20% in the roughly 21 stores featuring Pet Kingdom centers.

Espelien said sales of Supervalu's NutriPlan have been growing dramatically. He thinks it's helped stem the wholesaler's loss of share to mass merchandisers and specialty stores.

"We think NutriPlan will ultimately do more than increase sales and profitability. We think extending and building that brand will create more consumer loyalty," he said. "If we build NutriPlan as an overarching brand, we think the consumers will develop a trust and think that if the brand is good for their pet, then any pet product within that brand will be acceptable in their household. That will bring the consumer back more regularly."

At Wild Oats, Johnson said sales of Pet Promise -- a line of natural pet foods, pet treats and supplements it recently launched -- have been growing dramatically. For that matter, he noted, the entire pet food category has been up. "I don't really see one segment of our business outpacing any other," he said. "We are seeing strong double-digit growth everywhere."

Pampered Pets

Total spending on pets, including food, supplies and health care, 1998-2005

Year: at current prices, $billion; at current prices, Index; at constant prices* *, $billion; at constant prices* *, Index

1998: 23.0; 100; 25.9; 100

2001: 28.5; 124; 31.5; 122

2002: 29.5; 128; 31.5; 122

2003: 31.0; 135; 32.2; 124

2005 (exp.); 34.0; 148; 34.8; 134

Adjusted for inflation using the All Items CPI Sources: American Pet Products Manufacturers Association/American Demographics/Mintel