Mercanti Group Report Says Pet Owners Spend Heavily, Making the Industry One of the...

Mercanti Group Report Says Pet Owners Spend Heavily, Making the Industry One of the Nation's Fastest Growing Consumer Retail Sectors

MINNEAPOLIS--(Business Wire)--
The economy may be in sluggish shape, but investment banking firm
The Mercanti Group is bullish on the multi-billion dollar pet
industry. In its current monthly issue of its newsletter, the Mercanti
Chronicle, the report shows that pet industry sales, including
products and services, dipped fractionally in 2006, compared to 2005,
the first decrease in 10 years, and then bounced back almost 4% last
year, to over $39 billion.

Jim D'Aquila, managing director of Mercanti and author of the
report, isn't counting out some impact from a recession on pet
industry volume in 2008, but he expects that any dip would be slight,
as growth in various sectors - herbal supplements and grooming aids -
more than take up the slack.

Moreover, the report points out, not only will affinity by owners
of their pets win out, with over half of pet expenditures made by
higher income households of $70,000 or more, the outlook remains very
bright. "We're still incredibly optimistic about the pet sector," says
D'Aquila.

While pets remain very dear to their owners - more American
households (two-thirds) have a pet, while only one-third have a child
- Mercanti notes that the driver in the industry's steady, basic
growth remains high wage earners. That group, in addition to the
basics of food and supplies, is increasing its spending on
sophisticated veterinary care and pet services, including grooming and
elaborate high-end pet hotels that continue to proliferate.

"Veterinary care is becoming high tech and people are increasingly
willing to spend money on both preventive pet healthcare and
rehabilitative care, such as joint replacement and cancer treatments.
The pet services sector is growing dramatically as upper income owners
send their pets for grooming more frequently and four-star pet hotels
spring up around the country," comments D'Aquila.

The Chronicle report also says that the industry is benefiting
from merchandisers actively converting what were "food-only" shoppers
into customers for supplies, including fancier pet beds.
"Over-the-counter pet nutritional supplement aisles are beginning to
look a bit like the center aisles of Whole Foods Market," the report
comments.

Along with more active pet product sales by mass merchandisers
like Wal-Mart and Target, specialty pet retailers, such as Petco and
PetSmart, are creating their own dynamics in the field. "Petco and
PetSmart's grooming services now comprise a meaningful portion of the
business," says D'Aquila, "while Petsmart and VCA Antech (Veterinary
Centers of America) are major players on a national basis directly or
through attrition in veterinary care."

Spending on veterinary care services has been especially
pronounced among pet owners with household incomes of over $100,000
annually, who in 2006 accounted for 35%, or $3.9 billion of this
segment, up from 27%, or $2.3 billion, in 2003. And, veterinary
service spending increased more than 6% between 2005 and 2006, versus
the 0.7% decline in overall pet expenditures. "As willing as owners
are to adopt advanced screening, diagnostics and treatment options for
their pets, they also have been embracing more esoteric veterinary
services such as chemotherapy, linear accelerators, artificial joints
and organ transplants," the Mercanti report says.

The fastest-growing segment of this industry in terms of
percentile growth is expected to remain pet services, particularly
grooming and boarding, the Chronicle adds. Spending in this segment
totaled $1.74 billion, or 43% percent of the category, up from $1.05
billion, or 37%, in 2005. The report notes that Aussie Pet Mobile,
founded in California in 1996, now has locations in 17 states. And
boarding companies like Camp Bow Wow, a franchisor that started in
2000 in Denver, today has 52 locations in the U.S. and Canada,
offering "doggy day care" and "overnight camps," representing a $500
million business. An additional 150 sites are in the planning stage.
Other pet service providers include Best Friends Pet Care with 44
locations in 18 states and Pet Paradise, currently operating at the
Jacksonville International Airport and opening soon in New Orleans and
Houston. Airports in San Diego, Portland and Seattle have opened pet
hotels and one is underway in Minneapolis.

"The pet industry remains a demographically strong market with
good growth trends," says D'Aquila. Mercanti expects it to remain the
fastest growing retail sector after electronics.

About The Mercanti Group

The Mercanti Group is a results-oriented boutique financial
advisory firm that embraces a fierce commitment to client service and
provides creative Merger & Acquisition, Capital Raising and Strategic
Advisory solutions to small and middle market companies, private
equity firms and individual business owners in the consumer, health
care, technology, business services and manufacturing industries.
Mercanti offers companies the expertise and capabilities of a large
investment bank with the focus, attention and energy of a small
entrepreneurial firm. Mercanti has offices in Minneapolis, Los Angeles
and New York. Mercanti also is strategically affiliated with Marquette
Financial Companies, a diversified financial services company which is
a part of the Pohlad family holdings. If you would like more
information on The Mercanti Group, please visit the Web at
www.mercantigroup.com, or contact a Mercanti professional at
612.333.0130 (Minneapolis); 310.444.0130 (Los Angeles); or
212.883.0130 (New York).

The Mercanti Group
Sara Schmidt, 612-333-0130 x234
or
Anreder & Company
Steven Anreder, 212-532-3232

Copyright Business Wire 2008