Well-Heeled Chains Are out to Change the Way Food and Products Are Sold

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As Iams and Hill's Pet Products try to get their paws on grocery stores' pet food sales, they're getting an assist from a fast-growing partner: the pet superstore.

It's not Pets "R" Us yet, but this group of well-heeled chains are out to change the way pet food and pet products are sold.

The pet superstore boom is being led by Petco and PetSmart, two chains that went public within the past year; together, they plan to have more than 400 superstores open by yearend. But local chains like Chicago's PetCare Superstore also want a bite of the $15 billion market for pet food and pet supplies.

"Grocery stores and the local mom-and-pop retailers are under tremendous pressure now," said Brian Devine, chairman-ceo of Petco Animal Supplies and a former senior VP at Toys "R" Us. "Over time, chains like ours will handle the dominant share of pet product sales." He estimates Petco and PetSmart control only about 5% of total pet supplies sales and 4% of pet food volume-leaving ample room to grow.

PetSmart has 115 stores around the country and just acquired 30 more by purchasing another chain. PetSmart prefers 25,000-square-foot, warehouse-style stores, with grooming shops and obedience classes; it also offers a "Double the difference" low-price guarantee.

About a third of Petco's 200 stores are superstores: 10,000-square-foot stores selling about 7,000 individual items.

Not included in that list of items are grocery-store brands of pet food. "We want to focus on where the business is going, and the industry is moving into a higher and higher percentage of sales from premium foods," Mr. Devine said. Instead Petco focuses on brands from Iams Co. and Hill's Pet Products, plus regional lines like Bil-Jac and Nutro Max.

Grocery stores, once the primary outlet for pet food, now sell less than two-thirds of the industry's total $8.4 billion in sales, according to Ralston Purina Co. Although some supermarket brands are building business in mass-merchandise chains like Wal-Mart-and some superstores, including PetSmart, sell grocery brands like 9-Lives and Friskies-the growth is in the superpremium brands, now accounting for 22% of total pet food sales.

Mr. Devine said his chain's experience shows Petco can double category sales in markets it opens stores. Partly the chain is encouraging consumers to buy premium foods, but a larger selection of supplies and other small companion animals-fish, birds, reptiles-boost average purchases as well.

Petco reaches pet owners through direct mail, newspaper ads and radio spots done in-house.

Other chains sometimes go beyond conventional advertising to groom customers.

Although price is a main lure for PetCare's 60 Midwestern discount stores, for example, pet owners can bring their dogs in for photos with Santa and for Easter egg hunts (with smelly treats helping the dogs track down the plastic eggs). "We want to have the lowest price all the time," a spokeswoman said. "But we also want to be the neighborhood pet store as well."

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