On pandemic pets as a 'furry annuity' for the next decade: What trend means for pet-care industry

NEW YORK — Yummy, a 12-year-old Labrador retriever, is in Petco’s San Diego offices so much he has his own title. “We call him the chief dog officer,” says CEO Ron Coughlin, the real top dog at Petco, who brings Yummy to work every day. “He sits right next to me in my office.” It’s a good time to oversee a company that sells leashes and squeaky toys. Americans spent a record $103.6 billion on their pets last year, up 7% from 2019, as more people sought the comfort of a furry friend during the pandemic, according to the American Pet Products Association. Nearly 13 million households got a pet last year, the trade association said. Coughlin calls those pandemic pets a “furry annuity,” since he expects pet parents to come into Petco’s 1,500 stores for years to come to groom their dogs, visit a vet or buy a new collar. And like Yummy, he also hopes some of those new pets will make their way to offices as their owners head back, too. The company is offering free tips to employers, like how to keep office-bound pets healthy (“always provide fresh water”) and keep the workplace smelling nice (“bring pet beds home to wash”). In a recent interview with The Associated Press, Coughlin also talked about when he thinks the current pet food shortage will end and why the pandemic made people pick bigger dog breeds. The interview has been edited for length and clarity. Q: Some pet food is hard to find right now. What is going on? A: There was no crystal ball that said they were going to be millions of new pets in the United States in 2020. So, the food manufacturers didn’t have the supply. There is a backlog from vendors. It varies by brand, it varies by type, even by form. There’s more tightness in cans, believe it or not, than there are kibble-type products. But if you look at the results that we posted last quarter, we’re able to switch people into products that are equal quality, but that are available. Q: During the pandemic people got used to shopping online. Will they still come to Petco stores? A: I have to admit, I was worried about that. But that is not what we’re seeing. Our brick and mortar is very strong. They’re coming in to get advice, but they’re also coming for grooming. They’re coming to get training. They’re coming to see our vets in our hospitals and clinics. This whole idea of a one-stop shop is resonating both digitally, but also in brick and mortar. Q: How has Petco benefited from the pandemic? A: We call it the furry annuity. There’s a lot of people who talk about these COVID beneficiaries. Yeah, you get an exercise bike and you get one. You remodel the garage? You don’t have another garage to remodel. With us, there’s millions of pets that are basically a furry annuity for the next decade. And that’s unique to our industry. And they’re going to give us a tailwind for years to come. Q: I’ve heard you say before that people are getting larger dog breeds. Why is that? A: There’s a macro trend in the United States on the back end of COVID-19 of migration away from cities toward suburbs or rural areas, places that have larger size homes. And there tends to be a correlation between the size of the living space and the type of pet that is adopted, which makes sense. If you have a yard, you’re more likely to get a larger, more active dog. The good news for us is that larger dogs have more food in their bowls and the supplies cost more. Q: What’s the benefit of bringing your pet to work? A: It just makes for a better environment and you don’t have to leave your loved one at home. There’s statistics that show that people are more likely to stay with companies or much more likely to switch to a company if they have a pet-friendly workplace. It just makes people happier and gives us something to talk about and share experiences. Q: Don’t pets at offices have accidents? A: It happens far less than you would expect. I’ve been bringing Yummy here for three years and we’ve had two situations, both of which were my fault because I didn’t take him out and I didn’t read the tea leaves. But there was one funny story where we had a new vendor in, and we were pitching them on expanding distribution to Petco. It was my turn to present and I brought Yummy in the room with me and he went to the head of that company and peed for about a minute right in front of him. I got down on my knees and I cleaned it up. And the next day they said that they’re going to expand distribution and the deal closer was me on my knees, cleaning up the pee from Yummy.