This is an audio transcript of The Morning Brief podcast episode: Furrynomics - The Business of Pets

BG Sound 0:00  

So this is the morning brief from the economic times.

Mihir Shah 0:14  

I always wanted a pet, and COVID gave me the wonderful opportunity, I could somehow convince my wife to get a pet. When I got a pet, I grossly underestimated the pain, at the same time grossly underestimated the pleasure that a pet will bring to a family.

Kiran Somwanshi 0:30  

That's Mihir Shah, whose story is similar to 1000s, who took on the role of being pet parents during the pandemic, but it was not all rosy.

Mihir Shah 0:39  

So while we were enjoying the pleasure it was the pain was bothering me, then I started looking out in market. Are there any service providers who could solve those pains? I wanted something more locally, more reliable that I could rely on. But those things were not available or very expensive.

Kiran Somwanshi 0:56  

But he soon found a silver lining. 

Mihir Shah 0:59  

Then the intrapreneur main said that there's a business opportunity. That's that's how the business came about.

Kiran Somwanshi 1:06  

Mihir quit his job and is now the co founder of Woof n Goof pet care services. And he is not alone. Hundreds of business owners have converted the love for pets into a living and it's not a small pet project. The pet care industry in India is to be anywhere between 7500 to 9000 crore rupees ecosystem. In fact, the space has become so hot and attractive now, that large listed consumer companies like Nestle, India and Emami, have recently announced their small forays into this segment through acquisitions. It is Friday, the fifth of August from the economic times. I'm your host, Kiran Somvanshi and you are listening to furry nomics, the business of pets. On the morning brief. We explore the good, bad and sometimes the ugly side of India's pet economy.

BG Sound 1:59  

I became a pet parent around 2019.

BG Sound 2:03  

I've been a pet parent for a little over eight years now.

BG Sound 2:05  

I've been a pet sibling and then a pet parent for as long as I can remember,

BG Sound 2:09  

I've been a pet parent for almost 10 and a half years now.

Kiran Somwanshi 2:13  

So pets have been part of Indian households for quite a while. But what has changed is the pet pampering the care and the cost.

BG Sound 2:22  

My expenses are only ranges from five to 6000 per month 

BG Sound 2:26  

we've always had stray dogs in our family. we've incurred very less expense in raising her maybe under 1000 rupees a year.

BG Sound 2:35  

Pets are fairly expensive. You end up spending anything between two to 5000 rupees a month. Depending on the size of your pet

BG Sound 2:43  

monthly food costs, pet supplies, the grooming and maintenance costs. And the pet visits can range anywhere between 8000 to 15,000. 

BG Sound 2:53  

We spend somewhere about 10 to 15,000 rupees a month on her food and toiletries.

Kiran Somwanshi 3:02  

And this increasing expenditure is not just limited to food and medicines, exotic snacks, birthday parties, picnics, spas, photoshoots, pet hotels, foreign trained coaches, pet nannies spiritual healing, and yes health insurance too. if you can think of a service chances are that someone out there is providing it for the pets.

Rashi Narang 3:26  

Pet Food is definitely the biggest. that's followed by treats and then by grooming products like shampoos and brushes, etc. Then toys and then lifestyle categories like collars and harnesses and beds and and more. So that's really how most people's average baskets look like. 

Kiran Somwanshi 3:43  

That's Rashi Narang founder heads up for tales that operates 60 pet specialty retail stores across India, and is the largest in its category. In fact, India has become one of the fastest growing pet care markets in the world, says Salil Murthy, Managing Director of Mars Petcare India, which sells pet food brands such as pedigree and whiskas that are household names today.

Salil Murthy 4:10  

A lot of things have contributed to this. We have rising incomes, we have nuclearization of families, and we have frankly change in attitudes towards pets, which is driving some of this growth. So we've seen some pretty radical shifts in terms of the landscape of the pet care and the pet nutrition industry in India. Our current estimates is that there are close to about 26 million pets across both dogs and cats primarily across India.

Kiran Somwanshi 4:37  

That is on an average around one pet for every 11 to 12 households in the country.

Salil Murthy 4:42  

The market growth has been historically 15 to 18%. But the pandemic has significantly accelerated some of the trends that we have seen. And so there's been a very significant increase in the number of pet adoptions that have happened during the pandemic and people have adopted pets. both cats and dogs for a number of different reasons, right. Some of it is for companionship. Some of it is just for warmth. Some of it is just, hey, I'm working from home and therefore I have more time to be at home and look after my pet.

Kiran Somwanshi 5:11  

A slew of startups such as head up for tails, just dogs and super tails have raised funding in the past two years of the pandemic, the businesses that were set up before and during the pandemic. Were in for a strong bout of growth. Because people got more pets during the lockdowns. Take for instance the case of Sanchu animal hospital chain. In 2018. CK Ranganathan, the founder of FMCG company, CavinKare, started an animal hospital chain, named after his favorite pet Sanchu. This is what his son Manuranjith Ranganathan, the managing director of Sanchu Animal Hospital, and director retail at CavinKare has to say about what worked in favor of the hospital chain

Manuranjith Ranganathan 5:57  

Sanchu animal hospital as a pet project of my father, and his first experience, his business was related to pet. So he is he's very passionate about pets after work, it's only spending time with pets for him. And in his house, he has a huge collection of birds, dogs, exotic birds, ostriches, it's actually been a very interesting journey, because they've always been part of our lives, like he'll have some birds inside the house, they'll keep talking to us and Papa would train them. He before going to work, he'll record his voice and 10 minute long conversation, he would just leave it on loop with a bird and so that it can start mimicking him. So they've grown up with all these kinds of things. So I think Sanchu Animal Hospital was just bound to happen. It just needed the right shape and structure and, and India also had to be ready. So I think we've entered at the right time. Our hospital is a one stop solution for grooming, spa services for your pet, a pet supermarket, and a proper state of the art hospital with laboratory services as well. And the response has been amazing. That is because I think we also started around COVID Or just a year before Covid that we just had one hospital and we opened many during that time and the pandemic is still happening but our focus was only on hygiene. And how do we ensure that's consistent throughout all hospitals, you would be amazed by the quality the space the quality of doctors the hygiene, but we give it at such an affordable rate. where competition is nowhere close to us.

Kiran Somwanshi 7:48  

Manuranjith may not have to bother about competition. But there is a quite a lot of interest in the pet care space by the FMCG companies. Last month, Emami acquired a strategic stake in pet care startup Canis lupus. And Nestle India acquired the pet food business of Purina, a company owned by Nestle Swiss parent. With pet food comprising the dominant part of the pet care economy. Salil is aptly placed to give us a peek into the global changes in pet care that are being witnessed in India as well.

Salil Murthy 8:20  

I think the first one really is humanization pet owners are increasingly treating their dogs and cats as members of the family. It's It's funny, if you go back to the US even 50 - 60 years, not a very long time ago, a dog started off by well, if you imagine a typical American home, a dog started off by being somewhere out there in the yard. And then from there, the dog kind of moved inside the house but still had a specific area for it maybe in the drawing room. And from there, the dog kind of began to gravitate a little bit more into the bedroom, for example, and stay with the parents. There's some interesting data that we saw, which is 42% of millennials globally prefer to sleep with the dog and cat and would want the dog cat to kind of share the bed at night. And so we're seeing increasingly that whole humanization trend grew up very, very quickly. And so pet parents are keen to take better care of the pet's health and nutrition needs. And the other trend that we're seeing in terms of humanization Is this a lot more of hybrid lifestyle, a lot more work from home. And so pet owners are spending more time with their pets and are therefore kind of thinking a lot more deeply about what their needs are. And it's a really interesting trend that we have our eye on. The second one I'd say is purchasing habits are changing. We're seeing very strong growth in E commerce globally. I think ecommerce globally, last year was about 23% of global Petcare retail sales. And so pet parents are really embracing this whole convenience of online shopping. And then the third trend which we're really seeing is the role of functional and natural ingredients, right and so, as pet parents become more involved with their pets, they're saying, hey, my dog has a little bit of a joint issue. What from a nutrition standpoint, can I give my Rocky in order to solve for that particular joint issue, which may be different from the generic food that every other dog is having, I think the fourth one, and this is a little bit more of an emerging trend for me is this whole area of sustainability, which is very, very interesting. So whether it's in terms of alternative proteins that they're looking, so if I'm vegan, for example, or the plant based protein foods that I can provide for my pet that is consistent with my value system and my sustainable lifestyle, how can I think about recyclable packaging, and ensure that what I'm feeding my pets continues to be good for my pets, but also for the planet as well, right. And so those are some of the core trends that we're seeing globally. And I suspect that these trends are already here, and are going to be quite big in India as well.

Rashi Narang 10:43  

People are now evolving from being pet owners to pet parents. I don't actually like the word pet owners, because I don't think that a life can be owned, because these animals, they are their own souls and their own people. And I don't think that we can really own them. And I'm so happy to tell you that we've seen a massive, massive growth in the adoption of this in India or there's a lot of demand coming around natural products as pet parents. In addition to that, I'm also seeing traveling with pets is becoming a big trend is becoming very popular. So pet friendly hotels, pet friendly travel gear is gaining popularity. And another shift that I've been wanting to see for a long time, which is gaining traction slowly but surely is people moving from collars, which sort of go around the dog's neck to move into harnesses which go around the dog's body, because when a dog walks and they're constantly pulling, it can cause massive damage to the neck, and the muscles and the throat. But the harness, it helps to sort of the pressure around the body versus the neck. Another really fun one is birthday parties for pets. So where pet parents are really making sure that pets feel very special on their big day. So it's been very interesting to observe a lot of these that have come up fairly recently, in the 14 years that I've been watching this face.

Kiran Somwanshi 12:03  

Oh, I clearly remember being impressed attending a lavish lawn party organized to celebrate a pet's first birthday. Interestingly, there are two more trends that are seen in the case of pet ownership in India. First is that it is not just an urban phenomenon.

Salil Murthy 12:18  

When I came into this category, I really expected this to be a very top Metro kind of a phenomenon. Your top cities like a Delhi or a Mumbai or a Bangalore, for example. And it's true those metros are doing extraordinarily well. But one of the things that we are seeing is that the overall market in India has been just growing and the growth is pretty secular. So you're seeing a lot of growth across your metros, but also across your tier two towns or your smaller towns, your Indore and your Trichy and your you know, Madurai, and your Lucknow and so on and so forth, we still have seen a lot of what I would call pent up demand that is really driving the growth of the category as well.

Kiran Somwanshi 12:59  

Secondly, it is no longer just about dogs, they now have competition from the cats too

Rashi Narang 13:04  

cats is a really big growing segment. I think that as far as compared to dogs, cats need very, very little maintenance. They're very clean, you don't need to take them for a walk, they're fairly self sufficient, they can be left home for sort of longer periods of time when you're at work. And they can be okay alone. And I think that for a lot of the millennials, and the younger Gen Z's there's a lot of growth in having cats as pets they make for wonderful pets.

Salil Murthy 13:34  

So we're definitely seeing a lot of growth. From our cat food standpoint, our dog food business continues to grow strongly as well. But the cat food base was lower and therefore we are seeing higher growth on a year on year basis. One of the things that we are doing as a company is bringing in a greater range of products that meet the needs of cats.

Kiran Somwanshi 13:55  

While there are so many positive demographic trends playing out for the industry, there are challenges too as Rashi tells me it has not been an easy journey for her.

Rashi Narang 14:04  

When we started the company where we had to sort of build out products, talk to our customers do a lot of design thinking build prototypes, then take it to vendors and factories where most people shut the door on us and refused to work with us because they considered it a very inferior job. And so but that helped us to build out a supply chain. Then we went out then we went to stores to put the products more than 200 stores said no, this is not going to work. So then we have to build out the front end and build our own stores. And it took a long time where customers also said But wait, why do I need this? For years I've been feeding my dog milk and roti or why do I need to buy a toy my dogs never needed it. So just explaining how our lifestyles have changed how dogs went from being in large big areas to small apartments and so many so many other things was taken so long and I think currently, one of the challenges definitely the size of the market and the number of players. And it's fairly crowded at the moment. A lot of them are just sort of here because the pet industry is fairly hot. They want to try their hand at it. But it's not really an industry like that it needs a lot more time, a lot of EQ a lot of patience.

Kiran Somwanshi 15:22  

Besides being small, the industry is also largely unorganized with its fair share of issues that Mihir points out.

Mihir Shah 15:29  

Staffing is a big problem in terms of hiring right kind of people. Because India doesn't have norms, India doesn't have certification, that the lack of norms is also faced by customers, when a customer wants to go for a trainer, they will just rely on word of mouth. Interestingly, I happen to meet animal officer at a municipal corporation. And I was checking with her why are no funeral places in Thane, for example. And of all the challenges she happened to mention that one of the challenges for her to find a funeral places the land acquisition, so government is facing land acquisition problem for businesses like this. So these are early challenges when industry is new, people are new government is not even aware and people are not aware, the pet industry is slowly getting organized, they're getting in touch with each other, they're helping each other, and creating creating self appointed rule. Government doesn't exist. Most of the places right now, in the pet industry, we have to self govern ourselves in terms of what to do, and how can we serve better? How can we reduce the pain points of the pet parents

Kiran Somwanshi 16:34  

talking about pain? What about the medicines that are given to the pets,

Manuranjith Ranganathan 16:38  

most of the common ailments, human medicine is what is suggested. So there isn't a great challenge in sourcing or anything like that.

Kiran Somwanshi 16:47  

But wouldn't it be better if there are more animal centric medicines coming up?

Manuranjith Ranganathan 16:52  

I think that will happen as the industry grows. So somebody in that aspect of the industry, when they invest and come in, I think it is bound to happen, because the industry is going through a big growth.

Kiran Somwanshi 17:05  

While the pain points are being reduced, there is a mark premiumization happening in the Petcare segment, niche and expensive product offerings are quite common.

Manuranjith Ranganathan 17:14  

When you enter a new industry that is unexplored, the prices will mostly be high, because competition is low. So the margins, the profits will be very high. So once there's somebody like us who's come in and wants to change this industry, in an organized way, prices do tend to drop. So think the prices in this industry have been very high for no reason. And the only reason can be there were only few people providing these services, right? So they were able to charge that premium. I think it's the end consumers are gonna benefit out of all these investments and no big players coming in.

Kiran Somwanshi 17:57  

Investments and big players are all great and welcome. But can the industry sustain the exceptional growth levels seen during the pandemic that has attracted the investors,

Salil Murthy 18:07  

I think for sure, there's going to be some form of normalization, more and more pet parents begin to go back to work, there's going to be a little bit of a decline in terms of pet adoption. And so there there will be I think a leveling off in terms of the number of pets necessarily but we'll still see growth, it may not be at that super accelerated pace that we saw over the last couple of years. That said, though, what the pandemic has done is really significantly increased the level of awareness amongst consumers about the importance of getting the right nutrition to the pets, and that will continue to stay. And there's more and more information available online. Like you said, more brands are coming in, which drives availability, both physical availability as well as mental availability for our consumers. And so and then we've also begun to see some of that pent up demand getting unleashed from some of your smaller cities, whether it's pet specialty stores, or some of the supermarkets and other channels as well. But the reality is the category is still quite small Kiran and pet parent penetration continues to be pretty low 67% of pet parents in India are first time pet parents, the corresponding number for the US is something like 30%. It's about half of that. And so for I think companies which have a truly long term vision are really willing to invest in this category, they should see some good growth.

Kiran Somwanshi 19:29  

And what about the high inflationary times that we are living in as a discretionary consumption? Wouldn't expenditure on pets be impacted due to inflation?

Manuranjith Ranganathan 19:37  

I don't think the medical services that will have an impact. The grooming services might have an impact and the pet feed and accessories but pets are a family member thats how many of our customers see that facrtors so when it comes to that they don't compromise on spending for them. So it'll be interesting to see for the next few months,

Salil Murthy 20:03  

I wouldn't say consumers are behaving differently only for pet. But if you have high levels of inflation, we are a little bit more conscious about how much you spend. And so instead of buying a three kilo pack, you might buy a two kilo pack. And so that definitely becomes one. We're seeing a little bit of downtrading from brands, but not a lot, because I think consumers are very clear about here is the brand that I trust here is a brand that my dog or my cat really loves. And therefore, they're a little bit more reluctant to brand switch, because a lot of that is kind of driven by taste. And so it continues to be a price sensitive market and so proceed with caution will continue to be the watchword

Kiran Somwanshi 20:40  

compared to food, pet service, businesses are likely to see a more pronounced impact of inflation or an economic slowdown.

Mihir Shah 20:47  

For existing pet owners. Definitely the must haves continue must have will be the food and the veterinary expenses, other expenses like experiences, and now businesses like boarding will definitely get affected because it's closely linked to travel of people. So more people travel, the more people board the dog. So does travel get affected by inflation. Of course it does whether a new new customer come in become less Yes, definitely. If income is the factor, which affects positively in acquiring pets does definitely affect when there is inflation. So yes, it is connected, and it will have its own effect. But it will have effects on growth rate rather than natural growth. See that? Many people don't realize that no, pet ownership, the equation cost is very low. And there's a the pet ownership company, pet ownership is higher. Right? So the acquiring pet is always tempting for many of them. So in our business, we always educate people. So we have this peak puppy consultation, where where we educate them about what kind of expenses are there what kind of things that you have to do at home. So because the quotient of the pet is low, people who still go for pets,

Kiran Somwanshi 21:59  

and those who can't afford to maintain their pets, in the worst case, abandon them.

Rashi Narang 22:05  

We've seen a lot of cases of abandonment Kiran, which is really heartbreaking because we have our whole lives, our families, our jobs, but for our pets, they only have us it may be difficult, but there's always a way to work around it they are not things to be owned and things to be given away and things to be brought home at a whim. And it's been it's been very difficult to see a lot of abandonment. But that said, a lot of people are working towards it to finding them alternative homes to make these animals lives better and whatever way they can.

Kiran Somwanshi 22:42  

Being a pet in today's India is a much better proposition than even say 10 years back. They are the new kids and much more. They are loved and pampered have access to better facilities, and above all, enjoy better rights. Pet owners or other pet parents have become more responsible and have higher disposable incomes to take care of their pets. While a lot of services have come in, there are still areas like creation of pet friendly public infrastructure, improvement in the area of pet breeding, and animal medications where more work needs to be done. There are strong systemic growth drivers in place for India's small but fast growing pet care industry. The pet care economy is undergoing transformation, and it is still largely unregulated, with serious players essentially functioning in a self regulatory mode. corporates and startups are playing a key role in organizing the industry and setting up standard operating procedures. They have posted strong growth and have aggressive growth plans. The pandemic did give exceptional growth to the industry, but as a growth normalizes the quarters going ahead may be a bit challenging due to rising inflation, reduction in pet adoption and funding from investors drying up it may also lead to the exit of small and non serious players. On the one hand, the overall increase in the pet pampering culture in the country is a sign of prospering and globalizing India. On the other hand, it serves to be yet another sign of widening socio economic inequality, the widening gap between the haves and the haves not You have been listening to furry nomics the business of pets with me Kiran Somvanshi on the morning brief. Thank you Rashi, Salil, Manuranjith, and Mihir for sharing your insights. 

This episode was produced by Sumit Pande from the economic times and Swati Joshi from Aawaz. Sound Editors Rajas Naik from the economic times and Soundarya Jayachandran from Aawaz executive producers, Anupriya Bahadur and Arijit Barman. We hope you liked this episode. Do share it on your social media networks. Have a great weekend. The morning brief drops ever Tuesday Thursday and Friday do tune into et play our latest platform for all audio content including the morning brief

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