Note: This interview was conducted prior to Steve King’s retirement effective December 31, 2021. He has served the pet industry for decades and we wish him well in his new ventures. The APPA is conducting a new search for a president & CEO.
Ask anyone about getting a pet during the pandemic, and the answer’s the same, “how did I live without him (or her?) before!” Steve King, the American Pet Products Association (APPA) President & CEO wholeheartedly agrees. Goodnewsforpets.com Editor Lea-Ann Germinder has long been an admirer of King’s work on the human-animal bond. He recently shared the story of how his beloved pet came into his family’s life, the association’s work during the pandemic and insights behind the $103.6 billion in pet industry sales in APPA’s 2020 State of the Industry Report – and what more to expect in 2021.
Let’s start with the basics. Tell us about Chase the Beagle.
When the pandemic started, we did not have a pet. We had lost our dog and were deciding what to do next – like many pet parents we weren’t quite ready to take the plunge again. My wife and I were working from home and we said, we need to get another dog. So, Chase the Beagle came into our lives.
We adopted him in July actually on my birthday last year, and as they do, he has made his way into our hearts. We love going out on our boat and he loves that too. I’m still on the Pet Partners board and Pet Partners sponsors the world’s largest dog walk every year and he and I participated in that. He’s just a wonderful addition to our family.
You were named President & CEO of APPA in 2019. The pandemic hit in 2020, just a year into the job. At the time of Global Pet Expo 2020, all of us were missing our colleagues in Asia and we didn’t yet know what was ahead. Any reflections on what that felt like in 2020 and how it feels now?
Like everyone else we were taken aback by the severity of the pandemic. Early on, other than the effects of the travel ban from China and the inability of our friends and colleagues from there to attend the show, it almost seemed like it was business as usual when we were at Global Pet Expo last year. We didn’t know within a month the whole world would be shutting down. APPA immediately looked at how we needed to change what we did to help our members — again not knowing how long the pandemic would be. Most people felt we were talking about weeks, not months and months turned into a year. APPA started providing educational content for our members that revolved around dealing with various aspects of the pandemic.
A critical move we made was helping our members take advantage of the various government programs that were being implemented to help businesses during that time, i.e., the Cares Act and the Paycheck Protection Program (PPP). We had webinars on topics designed to help businesses survive. APPA worked with the Pet Industry Joint Advisory Council (PIJAC) and other industry organizations to have pet stores declared as essential businesses so that retail pet stores could continue to operate. With many other retailers shut down that was really important because clearly pet owners needed a place to get the food and supplies that they needed for their pets.
We conducted a series of Covid-19 Pulse Studies that looked at pet owner behavior and trends relative to how they viewed their pets during the pandemic and how their shopping habits had changed. This helped our members understand what consumers were doing and really provided value during a critical time.
PETS HELPING US THROUGH THE PANDEMIC
You’ve been a tireless champion of the strength of the human-animal bond through “Pets in the Classroom” and the Pet Care Trust before becoming President & CEO of APPA. How have pets helped us through this pandemic?
People turned to their pets during the pandemic in droves. The ability to have pet companionship in the home when you couldn’t be with friends and even other family members was incredibly important. The whole social isolation and mental fatigue that was brought on by the pandemic was very tough. Certainly, with kids being kept at home and having so many of their other normal activities curtailed like sports and not being able to interact with other children in school having a pet in their day was important.
In fact, when some of the first stimulus checks went out to families in March and April, we saw a big increase in sales in the types of pets that you would commonly associate with families with young children. Sales of animals like guinea pigs and hamsters really spiked as a direct result of people having some additional money in their pockets to keep the kids entertained and the inability to spend it on things like vacations and travel. There was a direct correlation between those two things.
CONTINUED GROWTH IN GIVING LOVE TO SMALL PETS
We love our dogs and cats, but in fact, according to the APPA, the small animal category increased 30 percent increase in total. Do you think that portends even more activity in the small animal category?
This category includes aquatic fish, reptiles, birds, and the hamsters, gerbils for young children we mentioned previously. A big boost during the pandemic was people were spending a lot more time at home. It is likely to be sustained over time. These animals will continue to need to be cared for and need food and treats and toys. They will need to keep the animals healthy and happy.
Another aspect is the freshwater fish tank being a part of the home decor. People have been spending a lot more time at home and have spent a lot more money on upgrading their overall home decor and adding things like a beautiful fish tank.
We spoke earlier about the value of pets during the pandemic. We know that fish in particular lower blood pressure and make people feel more at ease during a time of high anxiety like we just went through. I think people will see the value not only in making the home environment more beautiful but in how they feel too.
DOG AND CAT ADOPTIONS DOWN
Dog and cat adoptions are down. What does this signify for the industry overall moving forward?
The shelters didn’t have the pets (because of importation restrictions and being closed etcetera) so that was more a driver than lack of interest on the part of the public. It’s important to note that adoptions represent about a third of dog acquisition and about 35% from cats. Two-thirds of those animals are from other sources, the one being families and friends and breeders, of course, and then strays wandering in. It’s concerning that the number adopted from shelters was down, but that’s likely to rebound.
It is important to note will the supply of dogs keep up with the demand particularly after seeing what we did with the pandemic. The number of animals that are in American households has increased and can be expected to continue. APPA is supporting a bill that was introduced in the last Congress that has been reintroduced this year called: The Healthy Dog Importation Act. We’re working with groups like the American Veterinary Medical Association (AVMA) and the American Kennel Club (AKC) and others that would improve the federal government oversight of imported dogs. We want to make sure that they have proper veterinary certification so that potentially harmful zoonotic diseases aren’t coming in with these animals.
APPA thinks importation is probably going to be an increasingly important source of dogs in particular that are not being met by the shelters and other sources. We want to make sure that these animals are healthy and well cared for. This bill could be an important element with money to help the federal government regulate those imports more closely.
PET FOOD GROWTH AND TRENDS
According to the APPA, pet food and treats led the market in terms of volume increase with $42 billion in sales or a 15.1% increase. There continues to be a proliferation of product choice. Is the volume in trends, trial or stocking up? Do you see this category flattening as the pandemic lessons?
Stocking up on pet food has already receded. There was a lot of concern early on that people wouldn’t be able to get food for their pets. That’s largely subsided although there are some spot shortages here and there. That’s more related to raw material supply issues and some slowing of the manufacturing process due to COVID safety protocols. What we’re seeing is a continuation of the premiumization trend along with a concern for general pet health that’s driving the increase in sales dollars.
What hit home with the seminars that were held at Global was that some of the fastest growing categories of pet food are the higher-end categories. While they are a relatively small portion of the total market, their growth is much higher than other food categories. Refrigerated and fresh fast food grew 21% last year and frozen food was up 14%. The other element is all the new pets that are in households will continue to grow and need more food so that’s going to have an impact.
Finally we’re likely going to see some inflationary factors come into play this year in commodity prices. Some of the estimates that I’ve seen indicate about a 5% increase in pet food prices across the board simply as manufacturers pass along some of the increased cost that they have for raw materials.
PET OWNER DEMOGRAPHICS
Millennials have surpassed boomers in terms of their share of pet ownership and expenditures the last few years. Statistics on Gen Z were reported for the first time in 2019. Is there anything remarkable to comment about these demographics and their purchases for 2020?
The most recent national pet owners survey that looks into all the generational demographics very closely will not be out until June. We did not want to skew the numbers by being out in the field during the pandemic. In general we know that these generations view pets as members of the family, even more so than the Boomer generation. They use products that Boomers used to view as luxuries as essential to the care of their pets. Pet tech, supplements, fashion have grown as Millennials have become the largest pet-owning segment of the market.
Some of the work that we did last year looking at and identifying the trends particularly with the Gen Z generation will be interesting to look at further. They’re really coming into their own as far as pet owners. They very much see their pets as friends and companions, more so than the Millennials. As they start to form households and enter the workforce, they’ll continue to support those types of products that they feel helped them to keep their pets healthy and happy and part of the household. The strong buying habits of Millenials continue with the Gen Z generation.
INCREASED VETERINARY CARE FOR NEW PETS
Let’s talk about vet care and product sales, which represent a significant $32.3 billion. Can you break that down a little bit more in terms of what is driving those purchases of services?
The American Veterinary Medical Association (AVMA) reported that veterinarians experienced a 50% increase in new pets being brought to veterinary clinics per week during March – August 2020 timeframe. Banfield in a report in late January or early February this year reported seeing a 9.2% increase in juvenile dogs and 12.4% more juvenile cats for veterinary visits in 2020 vs. 2019. Clearly the largest chain of the veterinary clinics in the country with over a thousand hospitals, saw a significant increase in the number of new pets coming into their clinics.
E-COMMERCE VS. IN-STORE
With e-commerce driving so many purchases and manufacturing challenges, what are some ways independent retailers are successfully competing?
One thing that has had surprising success was buy online/pickup in-store. You can order online and pick up in the store the same day. It’s hard for the pure online companies to offer that speed and convenience. A number of retail stores are also using third parties like Uber to deliver to customers’ homes. That’s a part of their omni-channel approach to serving their customers. Customers also tend to interact with traditional stores in an omni-channel matter. The customer that comes into the store to purchase will also make online purchases through the store’s website and either have it delivered to their home or pick it up in-store.
Stores that have invested in their online presence and their ability to conduct e- commerce through their website are being successful. Stores are using their online presence to create a community and content for their customers. It keeps people coming back to their sites and seeing what new information they have or the ability to connect with other pet owners. These are all strategies that pet stores are employing very effectively to compete with e-commerce. As vaccines get out and people feel more comfortable in shopping in-store, the ability to bring your dog with you into the pet store and walk around and see new products, in-store sales will rebound.
The industry has been steadily on the upswing. Then the pandemic hit. Did you ever think the industry would break over $100 Billion in sales in the pandemic? What is your prediction for 2021?
We were certainly surprised. Our original projection for 2020 was under a $100 Billion. In the early days of the pandemic, we received reports that indicated sales of products, hard goods in particular, would be down considerably for the year. The boost that the industry got surprised everyone, even with about a 21% decline in pet services. That was the category that was really hit hard during the pandemic. Understandably with people not traveling there was less need for board and pet sitting. Early on in the pandemic, groomers were not able to operate because they were not considered essential businesses.
For 2021, we see a big rebound in the pet services category, about a 20% increase over last year, which will about make up for the decline. We will see continued strength in the larger categories with pet food and treats still being in the largest. We saw a 6.75% increase across all categories last year and we’re projecting a 5.8% increase for 2021.
The year 2021 is shaping up to be another very strong year for the pet care community as people continue to work from home. Long term it remains to be seen how businesses approach that but everything we’re hearing is certainly those in service industry jobs are likely to work in a hybrid environment. We are likely to see these trends continue as people are home feeling more comfortable having a pet because we’ll be with them.
I’m anxious to see is how businesses approach the ability of workers to bring their pet to work with them. We were already seeing a trend in that direction. There’s going to be a lot of pressure on businesses from their employees who have gotten pets during this time to say, “I want to bring my dog or my cat for that matter with me to the office because they’re not used to being left at home alone. In addition, I’ll be a more effective and efficient employee if my pet is allowed to be with me.”
It’s going to be a really interesting trend. We’ve already done a lot of research in this area to show that workplaces that have brought in a policy allowing pets have much happier employees. They have employees stay longer and they’re more likely successful in recruiting employees. There’s a lot of good reasons for businesses to be pet friendly.
WRAPPING IT UP
Anything else you would like to add?
We covered a lot of territory! We knew as we were planning in 2020 that there was a certainly a chance, we would not be able to have a live Global Pet Expo event. We were ready to pivot to a digital platform, which we just concluded two weeks ago. The feedback we’ve gotten from folks is that they still were able to interact with new customers and show products. One bright shining light is we had twice as many people take advantage of the Global Learning Series during the digital event than usually attends during the live show. We’re taking some lessons from that to how we could consider making that an element of a live Global Pet Expo next year. That said, we were still terribly disappointed to not be able to be with everyone in person. We look forward to seeing everyone in the pet industry live at Global Pet Expo next year March 23 -25, 2022.
Thank you Steve. See you in person at Global Pet Expo 2022! – Lea-Ann Germinder