Name: Petco CEO: Pandemic Pet Boom is still Booming
Uploaded: 2022-01-20
Duration: 9 min 58 s
Description: CEO Ron Coughlin: “There’s really no one in the pet space that’s operating in health and wellness.”

CEO Ron Coughlin: “There’s really no one in the pet space that’s operating in health and wellness.”

Petco CEO: Pandemic Pet Boom is still Booming

Ron Coughlin - CEO, Petco Health and Wellness

Leadership

Ron. So nice to see you in person to talk about your company, Peco and Pepco has really benefited from what people are calling the pandemic pet boom and it just doesn't seem to be letting up, you know, based on the financial results that you've just reported once again, better than expected sales and revenues. What's behind all this growth? Yeah, well, if you look at 2020 there were 11 million new pets, which is roughly about three million or more than a normal year. First half of 21 kept at that rapid pace. If you look at the second half, there's still elevated pets in the world. The second thing that happened is the adoptions were mainly from gen Z or millennials and gen Z and millennials spend more on their pet. There's a whole humanization trend that they're really driving. We've benefited and against that backdrop we've gained share and a lot of people were predicting that this pet boom was just a pandemic fat, but it doesn't seem to have worked out that way. Right, well, we're now into our sixth consecutive quarter of double digit growth. So it is continuing actually, one of the interesting things is cat in particular is heightened right now. So cat adoptions are up about 20% right now. So phase one was more dog centric and phase two seems to be more cat centric, you've changed Pecos so much since you became Ceo three years ago, I mean, first of all, you changed the company's name to Petco health and wellness company. You took the company public and you've added so many products and services, healthy pet food, veterinary services, grooming training. The list goes on. How did you figure out that this mix of businesses would be a winning formula? What we saw was an opening in health and wellness because there was really no one in the pet space that was operating in health and wellness. And we saw an opportunity to position ourselves there, whether it's higher end foods, whether it's things like ready in terms of high end supplies products, whether it is fresh food, we're leading the fresh frozen shift. So a lot of folks, they make their own food at home and we can make that more convenient with products like just food for dogs or other fresh frozen products. So we saw the opportunity to differentiate ourselves. The second thing was, you know, We live in a world with big online players like Amazon and we wanted to make sure that we were differentiated and being differentiated meant going high end on food and supplies, but it also meant shifting to services, services like grooming and training, but also the fastest vette build out in history? We're now up to 173 vets and providing more affordable vet care, which is an issue today. Well how does Petco deal with the amazons of the world chewy and every single neighborhood has some kind of pet supply store. If we look at our offer. About 70% of our offering isn't sold other places between our own brands and exclusive brands. We work very closely with our partners to build exclusive brands. So we have merchandise differentiation. And then last I checked, you can't get groomed on amazon. Last I checked, he doesn't have any hands on pets for real veterinary care. Um, so making sure that we're differentiating with our services is the second piece. But I tell you what the pandemic really really taught us. Um when we got into the pandemic all of a sudden we went from about 150 to 600 ship from store locations. We launched curbside pickup in two weeks, we launched same day delivery. And all of a sudden, not only were our pet care centers formerly known as stores providing a great experience, but the micro distribution center was getting to the customer faster for lower cost and that's the definition of a competitive advantage. Well, another change that you've made at Petco, you recently opened this retail store ready. Uh, specialty is a luxury accessories for dogs. A lot of fun stuff in this store as I was browsing around. How's it going so far, It's going phenomenally well listen, if you walk around Soho or where I live in SAn Diego, the UTC mall, you'll see Louis Vuitton, you'll see Montalvo's, you'll see Ralph Lauren's I think right across the street, people want fashion, but there's really no power brand in fashion for pets and there's absolutely room for it. And we are really the first scale fashion brand. And I thought, hey, let's do something in Soho because that oftentimes is where fashion brands are built in the United States. Well this is an experiment, This is the only story you have right now in the United States. Um how what would success look like to you that you would open more of these ready stores? Yeah, so we see it as a flagship brand. It's almost like advertising, right people from around the world come to Soho to pick up fashion, whether it's the louis Vuitton balenciaga's right right down the street, Lanvin, they're all around us. So positioning ourselves in their midst is saying we're one of those so sure you can go compete for all these different clothing, but guess what, the only pet fashion brand in Soho? It's us. And so that positioning is number one. So how many of these ready freestanding stores do you plan to have in the next year? So yeah, we'll see, we're early days, we just opened three weeks ago. I would see it as a major metro type approach. Again, it's more of an advertising approach and more of an experiential approach. But we're learning as we go, what is your vision for Petco? What are you picturing, what do you want people to describe Petco as 234 years from now for a pet parent. We will be the only holistic provider of pet health and wellness where the only place where you can go and get the best food, groomed trained veterinary care, all under one roof, digital plus Um, brick and mortar were the only one that can pull that all together. And 50% of parents say that's exactly what they want. In essence, it's a new paradigm of being a pet parent and us partnering with them before you joined Petco, you work for many years at Pepsico and then Hewlett Packard. Can you pinpoint one key lesson that you learned from those companies that's guiding the way that you're reinventing Petco today. One is Pepsico Roger Enrico who is a ceo, early in my days in Pepsico, he said when you want to turn around a business, you have to do big changes to big things. And for us it was october of 2000 and 18 and we were talking about whether or not we were going to get rid of products, food and treats that had artificial ingredients clearly the right thing for pets. But $100 million. Number one, number two scat cat's cube And big pet brands for us. And we went for it and it worked because the consumers said, Wow, they stand for health and wellness. But you know what the Magic Magic was. We have all these partners, 25,000 partners in our pet care centers and it said, wow those corporate people care about pets as much as I do because every day they get up to take better and better care of pets. And it said that the corporation and the mission of the corporation was aligned to their value and that unlocked a tremendous passion we benefit today in terms of attrition and retention and attraction. When you became Ceo I hear that you made a point to visit every state where there was a petco store. What did you do and say with your employees and why was that so important? It was important because we were declining business and I needed to know why we weren't seeing any customers in our san Diego headquarters office. I need to understand what was going on as we faced our customers. I need to understand what was going on with our Petco partners. So we did round tables. I probably have done 200 round tables um since I've been a peco and every round table I learned something new we might have learned that hey you know when a register goes down it's taking I. T. 34 hours to get back to me when you're out of business when that's happening or you know one of the things that you know that I heard was I can't afford to have a baby at Petco and I went to our HR office, head of H. R. S. Office and what's our parental leave policy. We didn't have one, well within three months we had a parental leave policy. And so we were able to not just impact the business but impact people's lives. And we started impacting people's lives. We started unlocking the passion of the Petco partners and they've done things beyond my expectations ever since. Fantastic. And I hear that you're still experimenting with other changes working now on a new service of helping companies to develop pet friendly offices and you have some personal experience in this because I I hear that you bring your yellow lab to work every day. But why do you think that this could be a money making business for Petco? Yeah. So first of all yeah my guy yummy sits next to me every single day. We call him the chief dog officers. I said hey you ready to go be chief dog officers every single morning. Um It's not about money for us. There is no money making on this initiative. Um there was stories earlier in the year about relinquishment so 2000 and 20 pet adoptions took off. There were stories about relinquishment. The good news is relinquishment are not up. However we want to make sure we're ahead of it when people go back to the office and what's interesting is commerce intersects here because it's a tight labor market and in a tight labor market. What we hear repeatedly is employees want to go to work places that are pet friendly or more so employees will leave a workplace that's not pet friendly to go to one that is so it makes good business. We just want to help and take our learnings are tools to help companies become pet friendly workplace is not to mention, um, you know, there's been a lot of talk about mental health and emotional health, and data is unequivocal that people are mentally and emotionally healthier when their pets are with them. So to me, it's a win win.