Luiz C. Luccas, DVM, MBA
Despite economic and family income growth during past 4 years, especially among C Class (with average family monthly income of R$ 1.062,00)1, recent figures from Brazilian Pet industry show growth rates below expectations. The sales of animal health products for dogs and cats grew nominally at 13% per year from 2002 till 2005 and reduced its pace to 7% annually from 2005 till 2008. Important segments such as dog vaccines, volumes are practically the same since 2002. Still only 20% of dogs in Brazil are vaccinated against distemper annually. Cat vaccine shows faster growth but yet represents less than 5% of pet vaccine segment.2 Data from pet food manufacturers confirm these trends. After experiencing annual growth rates superior than 20% during 90's, the volume of pet food is growing at lower rate, around 5% annually, mostly driven by low priced products. Yet less than 50% of pets are on industrialized pet food.3
Stimulated by early and highly business growth rates and low entry barriers, the number of pet shops and clinics grew vigorously during past decade. In absence of precise figures, industry estimates are pointing to more than 20.000 clinics and pet shops today.
Differentiation among vet clinics and pet shops are fading. Vet Clinics are incrementing its businesses by selling pet food, veterinary products and services such as grooming, while Pet Shops increasingly offer Vet services, helped by a large number of DVM graduated annually. Brazil now has more than 160 Veterinary schools.
Consequently, the distinction between pet shop and vet clinic at the pet owners' mind virtually disappeared. Pet owners in search for convenience are looking for places that offer affordable products and services, if possible close to home.
Pet Shop and Clinics Profile4
Brazilian pet shops and clinics.
Monthly Gross Sales
Figures in R$ thousands
| |
S. Paulo
|
Rio
|
|
Below 5
|
24%
|
21%
|
|
From 5 to 15
|
33%
|
30%
|
|
From 15 to 30
|
25%
|
32%
|
|
Above 30
|
18%
|
17%
|
|
Avg. month
|
R$ 18,50
|
R$ 23,00
|
Brazilian pet shops and clinics.
Products and Services Breakdown
| |
S. Paulo
|
Rio
|
|
Vet drugs sales
|
100%
|
95%
|
|
Accessories
|
94%
|
80%
|
|
Pet food
|
85%
|
84%
|
|
Grooming
|
86%
|
58%
|
|
Vaccination
|
75%
|
58%
|
|
Vet services
|
71%
|
58%
|
|
Pet hotel
|
30%
|
16%
|
|
Puppy sales
|
21%
|
13%
|
Compared to a similar survey done in 20054, the clinics and pet shop average income fell on real (ex-inflation) terms.
There are no doubts to most pet business players in Brazil, especially at large towns, that current competitive environment is quite challenging.
But actual scenario should not discourage good professionals, especially those already established in the sector. Brazilian society is naturally following demographic and sociological trends being experienced today by developed countries. This combined with gradual disposable income growth will surely lead to faster growth cycles in near future. High and low growth cycles are familiar to several other businesses, and pet business will not be an exception.
Low growth business cycles function as a filter for low performing companies and preparation period for those will benefit most when the business compass turns north.
In fact, in Brazil, right now we have a large number of pet shops, clinics, pet store chains, etc., that are thriving, growing much faster than their rivals and the market itself.
Vets and other professionals that are looking to succeed in the area must learn from them.
They need know the following:
What those successful clinics and pet shops have in common?
Is my business one of those or not? Why?
How can I succeed in this highly competitive scenario?
Is my business prepared to reach even better results in the future?
The first fact we should be certain of is that, in this or any other business, successful companies have chosen the right strategy. This choice many times happens informally following bright leaders, but it's almost never by chance.
But choosing and implementing the right strategy can be done in a more thoughtful manner, applying the fundamentals of Strategic Planning.
Using the basics of Strategic Planning through day-to-day examples of clinics and pet shops we can determine:
Who are my real competitors?
What are my competitive advantages or weaknesses compared to them?
How to identify business opportunities and threats?
Which strategic path should follow: Differentiation by cost or superior quality?
Finally we need learn how to implement and monitor the chosen strategy, identifying and avoiding classic pitfalls such as pricing and imitation traps.
References
1. Observador 2008 - Cetelem-Ipsos
2. Comac-Sindan
3. Anfal Pet
4. Diferencial/Merial Research 2008