Pet Projects

Ten years of economic exuberance in the United States apparently benefitted even those Americans of the furry, feathered and finned persuasion. The number of pets living in American households is at an all-time high, and the pet supply and pet care product industry exceeds $35 billion in annual sales.Dogs and cats, the most favored pets, live in 55% of U.S. homes, according to the Pet Food Institute's Pet Incidence Trend study, conducted by NPD Group. Most of these pet owners still seem willing to spend freely on their pets in spite of the economic downturn in recent months. In fact, 74% say they would go into debt to provide for their pet's well-being, according to a survey by the American Animal Hospital Association.While the burgeoning economy certainly contributed to the increasing pet population, the emergence of pet superstores also helped drive the spending trend. Category titans PETsMART Inc. and Petco Animal Supplies Inc. -- with nearly 1,100 outlets between them -- have transformed pet product retailing, both in the pet store segment and across other retail channels."Merchandising really started with the advent of the larger stores," says Ted Freese, vice president of trade marketing for Topeka, Kan.-based Hills Pet Products, marketer of Science Diet pet foods. "This industry has gone from the mom-and-pop pet store to the experience of shopping, which involves the visual aspect of more sophisticated merchandising practices and presentation."That's a big shift from 10 or 15 years ago, when in-store displays consisted largely of cut cases or simple header cards, according to Jack Drasner, former retailer and current vice president of sales and marketing for Chomp Inc. The Far Hills, N.J.-based company markets a line of dog candies and breath mints."This was a very stagnant industry where no one really spent much time or money on in-store promotion," Drasner recalls. "Then people began having pets as a 'lifestyle element,' the pet chains sprang up, product innovation went crazy and in-store became hot territory for competition among brands."Today, small pet stores, pet superstores, supermarkets, mass merchants, warehouse clubs and even drugstores and convenience stores all compete for their share of the pet lover's dollar. Most pet owners favor discount merchants, but pet stores and pet superstores are gaining ground by scoring high on service and cleanliness.Making the SalePet product marketers typically advertise in newspapers and magazines, and some major brands utilize broadcast advertising. However, it's the in-store presentation that often closes the deal for the consumer. "Merchandising in the store is critically important," says Hills' Freese. "That's where the customer can really investigate the product and hopefully talk to a knowledgeable sales clerk. The display is where you tell your brand story, especially the benefits and advantages."Retailers also recognize the importance of effective merchandising, and many look to product manufacturers to partner with them on developing P-O-P materials. For large-volume retailers, custom P-O-P programs are often the name of the game."Manufacturers should be coming up with promotions that make it easy for us to sell their products quickly and effectively. We're looking for turnkey programs that fit the needs of our customers and our store," says Adam Jacobson, executive vice president of Pet Pantry Warehouse, a 15,000-square-foot superstore in Greenwich, Conn. Pet Pantry often develops its own displays and seeks support and custom promotional programs from its vendors.Custom P-O-P is now the cost of entry at Petco stores. Later this year, the 536-store chain based in San Diego will roll out its Millennium Store concept, which involves a new approach to in-store signage and product presentation. In making the transition, Petco will cease accepting typical vendor-developed point-of-purchase displays, opting only for custom materials."We're moving away from pre-existing signage and displays from the vendors," says Kim Helgerson, visual presentation manager at Petco. "The pieces they create themselves are excellent marketing tools for their brands, but to separate Petco from the competition, we massage them into our own color palette and template so the structural look is consistent throughout the store. We do maintain the vendor's brand identity and integrity, however. Our thinking is that exclusive, customized promotions differentiate Petco in the consumer's mind."Petco either re-works existing materials through its in-house promotion department or works with the vendor to create custom materials. With the Millennium Store concept, Petco will emphasize "authority messages" that position the chain as a resource for pet care information. To that end, the company will move away from the cute and informal pet illustrations now used on its signage and begin using informational graphics and lifestyle photos of pets.Different Consumers, Different NeedsPetco's shift in focus is partly driven by trends in shopper behavior. Many marketers find the consumers who favor pet stores are highly interested in information about their specific pet's nutrition and health needs. Pet owners who shop in supermarkets and mass merchant outlets seem to be more concerned with convenience and price. As a result, branding and product information is extremely important to the pet superstore shopper, while supermarket shoppers favor price information and incentives."We look for branding and fast messaging with bullet points that convey the product benefits," says Helgerson. "Our customers are concerned about what they're putting into their pet, so the brand has to be specified and the advantages presented quickly and clearly."Hills Pet Products distributes its Science Diet dog and cat foods exclusively to pet stores, an important point of differentiation for the brand. "The challenge for the pet retailer is to provide something other than what the pet owner can get at the supermarket," says Freese. "We focus on the special needs of pets -- sensitive stomachs and skin, hair-balls and life stages -- and provide products not available to all trade channels. This drives traffic into pet stores."Once inside a pet store, consumers encounter Science Diet displays that are information heavy and typically developed in conjunction with the retailer. "We err on the side of information and often provide literature," says Freese. "We also create visual interest and quickly communicate the features and benefits of Science Diet, always using the tagline, 'What vets feed their pets.'"For larger stores, such as Petco and PETsMART outlets, Hills Pet Products customizes displays ranging in size from pallets and endcaps to in-aisle presentations. At the 7,500 smaller independent pet stores where the company's products are sold, the focus is on off-shelf displays, such as corrugated floor-stands. "No matter the size of the store, space is always an issue," says Freese. "It's a universal concern and we work with each retailer to make sure we're using the space effectively."Expanding the ReachSeveral pet product marketers are expanding their distribution from pet stores to supermarkets and other retail channels. Prompted by research revealing that 70% of U.S. pet owners do not shop in pet stores, Iams Co. began distributing to supermarkets in 2000. "The goal was to reach a consumer who doesn't have the time or motivation to cross over to the specialty pet retailers," explains Bryan Brown, director of communications at the Dayton, Ohio-based company. A wholly owned subsidiary of Procter & Gamble, Iams markets its Iams brand dog and cat food in pet stores and supermarket outlets. Its super-premium Eukanuba brand is sold exclusively through the pet retail channel."We've found there's a different set of needs from one channel to the other," says Brown. "We're now set up with channel-specific salesforces that listen to the needs of each channel and help plan appropriate promotions."For example, Iams is continuing its "Legacy" program this year with a limited-edition, collectible food storage canister offer. In large-format pet stores, the canisters are stacked in a floor display topped with a header card. Since this display is too large for supermarkets, shelf talkers, posters and danglers that take up less space but still convey the brand name and benefits are used.Iams also worked with some supermarkets on custom programs. At a New York chain, Iams introduced a motion-activated audio display that emitted barking or meowing sounds to draw customer attention.When it entered the supermarket arena with its Ultra Pearls cat litter in January 2000, Harvest Ventures also found that retailers in different channels have different promotional needs. However, the company discovered that most retailers were willing to give its product the space necessary to ensure a successful in-store launch.The Minneapolis-based company had already successfully merchandised its similar Litter Pearls product in pet stores with a counter display that included a demonstration tray. Patrons could spray a bottle of ammonia water onto the Litter Pearls in the tray and use a litter scoop to see how the silica pellets absorb liquid and odor without clumping."Eighty-five percent of cat owners buy [cat litter] at the supermarket, so this was a strategic move for us. In-store, we had to communicate this new product to a new consumer," says Cindee Kohagen, director of marketing. Harvest Ventures created a floorstand that holds 48 bags of litter and 24 scoops with the demonstration tray on top. "When we brought it into supermarkets under the Ultra Pearls name, we had to show how it differed from traditional cat litter. Our retail partners supported the launch by giving us the space for the demonstration display."As Ultra Pearls distribution continues to expand, Harvest Ventures presents live demonstrations at 25% of supermarkets in each new market. Ultra Pearls is also sold in buckets at Costco stores, where live demonstrations are presented monthly. The company is now working with Wal-Mart and Kmart to gain distribution in those stores.Once the introductory phase is over, Harvest Ventures will revert to more traditional merchandising. "Pet stores are very concerned about space, especially the smaller operators," Kohagen says. "We tend to use shelf talkers, channel strips, counter units and shelf displays. For the supermarket channel, we also use shelf talkers and on-shelf coupons. Cross-merchandising with a cat food on endcaps is another vehicle for supermarkets."Focus on FlexibilityFor pet supply marketers selling in all channels, flexibility is the key to effective promotions. "Every retailer has different demands," says Julie Krauss, corporate vice president of marketing for Hartz Mountain Corp. based in Secaucus, N.J., and known for its flea and tick-control products. "We are as flexible as possible to meet these needs." The most effective displays are those that quickly relay the Hartz product attributes and are also easy for the retailer to set up. Merchandising strips, for example, have been successful because they're easy to set up and carry minimal inventory.Blacksburg, Va.-based Tetra, a leading fish food and supply vendor, recently relaunched its two-year-old Tetra Nutrition System display with updated graphics. According to Carol Huntley-Webber, national trade manager, several versions of the display were developed to meet the needs of pet stores, supermarkets and mass merchants. The purpose of the display remains consistent regardless of the channel its intended for."There are so many SKUs of fish food that the consumer can be easily overwhelmed,'' Huntley-Webber says. "This display helps retailers organize the category for the consumer." For traditional pet stores, a header card above the display unit conveys the Tetra brand name and uses color-coding to categorize the foods by types of fish. Color-coded channel strips and product packaging help customers navigate the display and find the right food for their fish."The aquatic department in a pet store can run eight to 12 feet, so we looked to categorize the food by type of fish and offer a feeding regimen," says Webber. "We adapted the human food pyramid to suggest the proper feeding regimen for each type of fish and presented that on the header."The updated version is being rolled into more than 1,000 independent pet stores, and a custom version was created for Petco. "It involves [all brands] in the category, but Petco allowed us to maintain our leadership position," says Webber. "The display uses our color-coding system and is part of their category management approach."Tetra also customized the display for Wal-Mart by creating a PDQ tray presentation for shelf placement that includes the color-coded format. Supermarkets typically carry far less fish food SKUs than pet retail outlets, so Tetra relies on the label information and fish pictures to help shoppers determine the appropriate foods. Shelf talkers are also used when possible."We're focused on developing programs that meet the needs of the various channels," adds Webber. "But the important thing is that the messages are consistent across the channels and with our other advertising presentations."New TacticsA newcomer to pet product merchandising, Chomp Inc. also creates channel-specific promotional displays. The company markets its Yip Yap dog breath fresheners -- bone-shaped treats packaged in a small tin similar to the Altoids mints package. The company also sells Sniffers treats, which are round, chewy beef and cheese bits packaged in bags invoking the look of M&M candies. Distributed through pet stores, supermarkets and convenience stores, the treats are poised to break with some traditional pet merchandising tactics, according to Drasner."We're trying to bring some grocery practices to pet product promotion," Drasner says. "[These products are] essentially candy for dogs. We believe checkout is the best merchandising location no matter the channel, because these are impulse products."Chomp's doghouse-shaped shipper just recently began reaching stores. The product is displayed on the slanted roof. "Pet stores are putting this at or near the checkout," says Drasner. "Where space is an issue, we have a merchandising strip. The challenge right now is to get supermarkets to merchandise these products with candy at the checkout. We're giving the consumer the benefit of the doubt here -- there are photos of dogs on the packaging. Retailers wouldn't put M&M's or Altoids only in in-aisle displays, so why lose the impulse, add-on sale to the dog lover?" For convenience stores -- a relatively untapped distribution channel for pet products -- Chomp displays its products on merchandising strips.Some pet retailers also are realizing the benefits of displays that drive impulse purchases. According to Jacobson, countertop displays are responsible for the fastest sell-through rates at Pet Pantry Ware house. "Pop-up counter units entice that add-on purchase, much the same way checkout merchandising does in grocery," he says. "Dog biscuits, treats, breath mints and other quick hits merchandised effectively really add to our sales."Chomp may have its own strategy, but the company also understands the need to cater to retailers' specific needs. "Petco keeps its counters clean, so we knew countertop merchandising was out. But they understand this needs to be near checkout to get that impulse sale, so we will likely develop a combination rack for Petco to be placed near the register," says Drasner. "In almost every case, you have to work with the retailer and meet their needs. That's why we created several options and will do something specific when necessary."Keep It SimpleWhile the various retail channels may differ in their approach to pet P-O-P, their needs are basically the same, according to Bucky Webb, national sales manager for Wellmark International. The Schaumburg, Ill.-based company markets the Zodiac line of flea and tick control products in pet stores, supermarkets and mass merchants. "Every retailer wants simplicity and ease of installation," he says.Pet retailers are indeed looking for easy-to-assemble displays. "You can have a great display, but it falls flat on its face if the store personnel can't put it up and keep it up," Petco's Helgerson agrees. At this point, many pet product retailers are reluctant to take interactive displays that involve video or computer presentations. "If you have a technical problem, that reflects negatively on your own reputation," Helgerson says."Freestanding displays, side panels and merchandising strips seem to be the choice of retailers, especially those expanding their pet supply selections," says Webb. "They offer flexibility in placement and the ability to highlight the product."Wellmark uses these vehicles to gain extra in-store display space, Webb explains. "Retailers have been eager to take advantage of the increased store traffic during peak flea season and are displaying a larger assortment in more areas of their stores. We gain awareness and sales from the placement of P-O-P materials in non-category and high-traffic areas."Regardless of the channel, competition for display space is undoubtedly becoming fierce. Although the economic slowdown may dampen spending on non-essential pet products, pet food and care product vendors will continue to duke it out for display space."The treats, candies and add-ons may decline with the economy, but consumers still have to feed their animals," notes Pet Pantry Warehouse's Jacobson. "Everyone is trying to grab a piece of the pet supply pie, so you're going to see branding becoming even more important, especially in-store."

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