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Pet industry flourishes on furry family members

An increasing number of people now consider pets members of their immediate families. And that has spawned to a booming industry.
/ Source: Business Week

Andrea Weiss calls Desi, her 10-year-old Chihuahua, "my everything." Weiss, a Los Angeles radio agent, takes her pint-sized pooch everywhere -- on vacation, on dates, even on visits to the dentist and gynecologist. She patronizes only dog-friendly restaurants and bars, and boycotts establishments that are not. A veteran traveler, Weiss has crisscrossed the globe with Desi. During a vacation in Cabo San Lucas, Mexico, last year, Desi enjoyed an in-room massage, side by side with Weiss. "Everyone knows me as Desi's mom," she says proudly.

And like increasing numbers of pet owners these days, Weiss loves to shower Desi with gifts. She shops at Wagging the Tail, a Los Angeles pet boutique that sells $225 vintage mink coats for dogs and $125 pet strollers.

Recently, she bought him a sterling silver charm in the shape of a bone. Price tag: $150. Desi has a collection of fancy collars and an enviable wardrobe of raincoats, angora sweaters, and a fluffy robe. One year, Weiss recalls spending $10,000 on her baby. "It's tapered off a bit, because he has a lot of stuff already," she explains. "But if I see something really cute, I have to get it."

New categories
Weiss is hardly alone in her desire to pamper her pooch. It's a growing phenomenon: an increasing number of people now consider pets members of their immediate families. And that has spawned to a booming industry.

According to the American Pet Product Manufacturers Assn. (APPMA), consumer spending on pets continues to climb, expected to reach $35.9 billion this year, up from $17 billion a decade ago. No longer just Alpo and chew toys, the category of pet products has expanded to include everything from crystal-studded collars and organic kibble to upscale pet spas and vacation packages.

Excluding the equine category, veterinary services and catalog and e-commerce sales, the association projects a compounded annual growth rate of 6 percent through the end of the decade, which Standard & Poor's Equity Research recently labeled a "strong base of growth" for pet-supplies retailers such as PetsMart.

Far from saturated
Close to two-thirds of all U.S. households now own a pet, up from 56 percent in 1988, when the APPMA first started collecting statistics. That represents 69.1 million homes. With the growth in Baby Boomer and empty-nester populations, and more people delaying marriage and children, many pet owners have elevated the place that their animals have in their lives. "The biggest trend in the industry is the humanization of pet products, from food to even medical care," says Bob Vetere, APPMA's chief operating officer and co-managing director.

Although large corporations like PetsMart and Petco have certainly ridden this wave, small businesses continue to make their mark in the traditionally entrepreneurial industry.

At March's APPMA Global Expo in Orlando, sellers introduced more than 600 new toys, treats, and other products. "It finally dawned on marketers that when I shop for my dog, I am making the buying decision," Vetere says. "They no longer have to appeal to what is practical and what makes senses and have begun to attract a human frame of reference that is desirable for pets."

In response, many businesses are taking luxury items and high-tech gadgets from the human world and putting an animal kingdom spin on them: $900 sterling silver Gucci dog bowls and computerized smart-aquariums among them. Petsmobility, based in Scottsdale, Ariz., sells the Petcell -- a bone-shaped mobile phone that hangs around an animal's neck and allows owners to talk to their beloveds when they are away from home. "If there is a saturation point," Vetere says, "it's several years away."

Taking notice
Many of these entrepreneurs are pet owners themselves -- folks who needed personal solutions, devised them, and discovered a business in the process.

Four years ago, Brandon Hochman, a former professional snowboarder, came home to find one too many accidents on his carpet. So, he designed the Pet-a-Potty, a portable plastic tray with reusable, absorbent synthetic grass or real sod. "I decided to make it a commercial product after I saw the reaction people had to it," he says. "People train their pets on it and take it traveling. It's good in hotels, boats, or when people can't get home to walk their dogs."

Sales of Pet-a-Potty -- available online and at Target and 50 other retailers for $169 to $259 -- totaled $230,000 in 2004. This year, he expects to triple that. And his Los Angeles-based outfit is planning to introduce an odor eliminator and extend its services to home-cleaning and sanitizing of the Pet-a-Potties. "I see this as a growth business," Hochman says.

Pet chains are taking notice. Once the go-to place for value-priced flea collars and puppy chow, the big names have greatly expanded their product selections to reflect the current boom. For instance, San Diego-based Petco sells pet insurance and offers grooming services on-site. And Phoenix-based PetsMart operates pet hotels, where animals lounge on hypoallergenic lambskin beds and watch pet-themed TV in their rooms.

Special foods
One of the fastest-growing areas in the industry is the pet spa, with such offerings as pedicures, massages and birthday parties. Formed just five years ago, the North American Dog Daycare Assn., based in Kitchener, Ontario, already has 746 members.

Outfits like Woofspa and Resort in Manhattan's trendy meatpacking district offer the kind of pampering one would expect at Canyon Ranch. For starters, a car service will pick up and drop off your favorite canine or feline. A full day-care program is provided. And grooming services include oatmeal baths and hot oil treatments. While boutique day-care facilities continue to sprout up, some companies, like the Milwaukee-based Central Bark, have found growth through franchising.

Pet beauty-care has also taken off. In 2003, San Francisco entrepreneur Sharon Mueller launched Spa Dog Botanicals, an aromatherapy line of botanical pet care. Today, her catalog of 20 items, including $6 glycerin soap bars and $13 lavender healing spray, are sold online and attract customers from across the U.S. and as far away as Japan and Australia. "People are trying to find more interesting and better product for their pets," Mueller says. "That's how the market has changed -- people are more aware of what they are using."

And that extends to pet food, which has also come to mirror offerings available for those holding the leash. With pet obesity at an estimated 25 percent, low-carb and vegetarian pet foods have gained popularity. The Honest Kitchen, based in San Diego, features natural, high-protein, low-carb foods considered the Atkins diet of the dog world. According to the Organic Trade Assn., organic pet food is one of the fastest-growing segments of the market -- up 64.5 percent in 2004 and projected to grow an average of 17.4 percent a year until 2008. Small outfits like Montgomery City, Mo.-based Spectrum Pet Foods have helped make it a $14 million category.

Fur is flying
Even the observant canine can nosh on kosher meals thanks to KosherPets, based in Ft. Lauderdale, Fla. Its line of Deli Doggie Treats and Fancy Schmancy Chopped Liver, prepared according to Jewish tradition, can be found at Petco, a number of specialty shops and online.

Pet travel has also skyrocketed. Fourteen percent of all U.S. adults say they traveled with a pet on a trip of 50 miles or more in the past three years, according to a poll taken by the Travel Industry Assn. of America. Now in its sixth edition, AAA's Traveling With Your Pet is among the many books devoted to the topic, along with a slew of Web sites like, which offers information and listings of pet-friendly hotels and their policies. Big chains like Petco offer SUV ramps and travel beds.

More hotels not only allow four-legged guests but also offer plenty of amenities. One of the most expansive programs belongs to the Kimpton Hotel Chain, which features a variety of pet packages at its 38 locations in the U.S. and Canada. They include turndown service in designer beds, walking, grooming, acupuncture, room service and the assistance of special pet ambassadors.

Pet class
Not to be outdone, some airlines have launched pet frequent flyer programs. In January, United Airlines introduced its Pet Class, where Mileage Plus members earn 1,200 bonus miles when they travel with their pets.

Industry watchers suggest that life-enhancement goods and services have the strongest growth potential. Pet insurance, once viewed as a frivolity, has blossomed, as surgeries and medical care have grown commonplace. The oldest such firm, Brea, Calif.-based Veterinary Pet Insurance, still holds an estimated 83 percent share of the market, but more are on the way.

Embrace Pet Insurance, which began as a business plan at Wharton in 2003, will officially launch in Cleveland this October. CEO Laura Bennett expects that more carriers entering the market will actually help boost its numbers rather than cannibalize them. As it stands, pet insurance premiums total only about $120 million annually. Bennett expects that number to more than double to $476 million by 2008 and then continue by 30 percent annually -- providing plenty of opportunity for her firm and others.

And don't expect the industry to slow anytime soon. Already on the way: electronic food dispensers, cat breath mints, and reptile lunch boxes. Man's best friend, indeed.