Amid Packaged-Goods Dreams of Service Plays, Mars Goes All In

Why the Company Behind M&Ms and Pedigree Is the Nation's Biggest Veterinary Operator

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Mars-owned Banifield Pet Hospitals have more than 900 locations and 3,200 veterinarians.
Mars-owned Banifield Pet Hospitals have more than 900 locations and 3,200 veterinarians.  Credit: Mars Petcare

Packaged-goods companies have long dreamed of getting into services: See Procter & Gamble Co.'s forays into dry cleaning, laundry pickup, car washes and concierge medical care. But they've yet to turn those ambitions into big businesses-with one exception.

Mars-the privately held company perhaps best known for candy brands like M&Ms and pet food brands Pedigree, Iams and Nutro among many others-also happens to own the biggest veterinary operation in the U.S. Its Banfield Pet Hospitals have more than 900 locations and 3,200 veterinarians, mostly inside and sometimes outside PetSmart stores. Mars took an even bigger plunge into the fragmented business late last year with the acquisition of BluePearl, with 55 emergency and specialty clinics staffed by around 750 vets.

While Mars doesn't disclose sales for its veterinary business (or anything else) it's huge. By industry benchmarks, the company's nearly 4,000 veterinarians would give it $2 billion to $3 billion in annual sales. The company employs around 4% of all U.S. vets and more than 9% of those just serving pets (as opposed to farm animals). That compares to $3.7 billion in retail sales for dog and cat food brands based on 2014 Euromonitor estimates.

Then there's Wisdom Panel, which does DNA testing of dogs and this year is expanding to cats. It has sold more than 400,000 test kits since Mars launched it in 2007, with kits currently going for around $70 to $85 a pop on Amazon.

In short, while other consumer packaged-goods companies have experimented with services, Mars is all in. And with a couple of good reasons, as Mark Johnson, president of Mars Petcare U.S., sees it.

"We have a very clear mission to make the world better for pets, built off a fundamental insight that pets make our lives better," he said. "There's no better way to improve the well-being of pets than in a healthcare business."

He's also quite clear on the finances and business strategy. "It's not rocket science to map the pet market in the broadest possible sense and identify the areas where you want to play, both from a growth and profit perspective," Mr. Johnson said. "The largest part of the pet-care market is not in food."

That's been abundantly clear to him as a dog owner, who, despite buying high-quality kibble, finds his greatest expenses in veterinary care, home sitting or pet sitting.

Mars didn't jump into things overnight, originally buying a minority stake in Portland, Ore.-based Banfield in 1994 but not taking a majority stake until 2007, as the company also launched Wisdom Panel.

But while there can be synergies between the food and service businesses, keeping distance is necessary too.

"We share a common vision, but we work very independently," said Jeannine Taaffe, senior VP-marketing, sales and product management for Banfield. "In fact, we deliberately stay out of any of the negotiations between PetSmart and Mars brands."

Realistically, PetSmart needs to sell a lot of brands beyond Mars, and Mars needs to sell through a lot of other retailers. Banfield veterinarians may recommend a food sold by Mars, such as a Royal Canin prescription product. But they may also recommend a Mars competitor.

Banfield produces an annual State of Pet Health report showing trends in conditions affecting pets nationally and regionally. And while that informs product development at Mars, it's available to everyone.

There's more direct synergy between Banfield and Wisdom Panel-though the latter is also trying to develop a stronger business with all vets.

The DNA tests are on one hand for fun-helping owners of mysterious mutts unravel what's in the mix. But that identification can also help people find enrichment activities and training best suited to their pets, and discover propensities to medical conditions such as arthritis that can be minimized through diet, said Cindy Cole, director-research and development for Mars Veterinary.

Wisdom Panel also tests for 140 genetic mutations common in purebreds, but has found they also pop up in mixed-breed dogs, Ms. Cole said. It also tests for a common mutation that can make dogs more sensitive to many medications, including anesthesia, which can lead vets to adjust dosages.

"We really want to be moving from preventive care to proactive health and wellness," said Ms. Taaffe, "and the first step in that is to understand the makeup of the pet and customize their care."

That also includes test kits for breeders aimed at getting the most genetically diverse pairings and minimizing conditions common to certain breeds.

So will genetic test-ing become common for new veterinary patients? "Certainly that's our goal," Ms. Taaffe said. "Mars Petcare thinks that should be the standard of care."

Realistically, Mars has the most diversified portfolio of any pet-care company-not just in services but also in dog food-with everything from more mass-market Pedigree to Royal Canin and its 200 formulations. When people find out more about what their pets need, there's a good chance Mars has a product for it.

Even at pet shows, people from the Pedigree booth may refer questions to the Eukanuba or Royal Canin booths, said Tiffany Bierer, health and nutrition manager at Mars Petcare. "It's really nice to work for a place that always has an option for everybody," she added.

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