The recent news that specialty pet food players Champion Petfoods and Fromm Family Foods are pulling their products from Chewy.com in the wake of the ecommerce company’s April 2017 acquisition by PetSmart may mean a movement is afoot. When Tuffy’s Pet Foods made the same announcement shortly after the acquisition, it was definitely newsworthy, but it was just one company (albeit an important one). Now it has bedfellows in its quest to help shore up the independent pet specialty channel.
All three companies said they made the move because of their long-term support of independent pet stores and family businesses; Chewy’s now being owned by the largest “big box” pet store chain was not consistent with that philosophy and business model. “Fromm Family Foods is a fifth-generation family owned-and-operated company with a long history of selling our products exclusively to independent pet retailers,” read a statement on the company’s Facebook page. “Fromm believes our products are best sold by retailers who know our product and can offer pet parents what’s right for their specific dog or cat.”
Independent pet store owners, such as Bentley’s Pet Stuff, are very happy about these announcements, of course. “Unsurprisingly, moves like these have been well received by brick-and-mortar pet stores across the country,” wrote Mark Kalaygian, publishing director and editor-in-chief of Pet Business magazine. Yet, he also commented that Chewy’s has long been a thorn in pet stores’ sides, even before the acquisition. “For years now, Chewy.com has been a particular focus of ire for many independent retailers because of what has been perceived as its predatory pricing practices. In fact, many in the pet industry say that overwhelming pricing pressure is exactly what eventually drove PetSmart to acquire the online pet food seller.”
Interestingly, these three pet food companies in the news did business with Chewy before, despite its pricing practices and the companies’ professed support of pet specialty retailers. Perhaps the fact that Chewy was independent was enough to meet the companies’ criteria for selling their foods, while its new status as a subsidiary of PetSmart does not. And, to be fair, plenty of other pet food companies did and still do business with Chewy, though many are moving to instituting minimum advertised price (MAP) policies to keep online pricing comparable to that charged by brick-and-mortar retailers.
Regardless, Tuffy’s decision, followed by Champion and Fromm, is significant. According to our Top Pet Food Companies database, Tuffy’s ranks 27th on the list of the top 50 global pet food players, based on 2016 revenue of US$200 million. Champion’s not far behind, at number 30 and US$180 million in annual sales. While we were unable to obtain revenue data for family-owned Fromm, its 150 employees likely put it within the same level of companies as the other two: Tuffy’s reports 250 employees and Champion, 300. These types of numbers give the companies enough size and influence that when they make a move like pulling their products from Chewy – and do so publicly – it has an impact in the marketplace.
Even pet food giants feel that impact and the reverberations from acquisitions like the PetSmart-Chewy deal. Indeed, Mars Petcare, the largest pet food company in the world, is not immune to such changes in the market. “The way people are buying the product is changing dramatically,” remarked Mark Johnson, president of Mars Petcare North America, to me recently. “You’ve got an incredible shift to ecommerce, which is proving a challenge for our customers and for us,” he added, referring to retailers as his customers. “And just the customer set change. PetSmart buys Chewy, Amazon buys Whole Foods, what’s next?” (Watch for an article on Mars later this year.)
Kalaygian also alluded to the Amazon-Whole Foods deal and its potential impact on the pet food and pet care landscape. “It is still far too early, and this acquisition has too many fundamental differences from the PetSmart-Chewy.com deal to draw any definitive conclusions. Yet, one prominent pet food vendor who sells through Amazon has already told me that he will cease to do business with the online retailer should it try to bring the company’s products into Whole Foods stores,” he wrote.
No doubt such deals and changes will continue and likely happen faster and more often. “The pace of business is going up. The need to increase the pace of change is going up. The lead times of things are going down,” Johnson commented.
If it’s any consolation, the same types of dynamic shifts are happening in many other industries and market segments, not just pet food. I recently overheard a TV commercial for Benjamin Moore paint; the last statement from the voice-over announcer was about how you can find the paint sold only in independent, family owned stores. There may be lessons to be learned all around.