“Roughly half of our online orders are for click and collect.”

The increase in the pet population in Canada in recent times is having a positive impact on Canada’s leading pet food retailer, Pet Valu. Despite insiders seeing a trend of stabilization in the sector, the company sees an opportunity for growth and increasing its market share. Its system-wide sales were C$998.1 million (€761.5M) in 2021, a rise of 18.6%. And Richard Maltsbarger expects to end this year with in store sales growth of 13-15%.

How has the Canadian pet industry changed in the past 2 years?

The Canadian pet market generally grows at around 6% annually, but over the last couple of years, we’ve grown at just under a double-digit pace. We are now beginning to see the market move back to its long-term rate of growth. But, most importantly, that’s with a near-permanent step-up in total demand as a result of the 3 million pet adoptions that have happened over the past 2 years.

What role is Pet Valu playing in the industry?

We have actually been able to earn market share by growing faster than the market has in the past 3 years. That was a combination of organic plus inorganic growth through the acquisition of our new subsidiary Chico in Quebec earlier this year. We have also grown system-wide sales in our company – 75% since the second quarter of 2019 – and now represent approximately 18% of the Canadian pet retail market.

How is the integration process going with Chico?

It is going very well. As 100% of the Chico operation is franchised, from the start we focused on forming relationships with our new franchisees. We designed 4 steps in the integration process. The first, which has already concluded, was closing the acquisition and linking our financials and reporting. The second started on 1 September and was the launch of Pet Valu proprietary brand products in Chico’s stores.

The third phase of integration is through wholesale, which will take place after mid-2023. Today, Chico is primarily served through outside and regional distributors, as opposed to Pet Valu where 90% of the products are sourced through our own distribution centers. The fourth integration phase will be in the longer term, as we look at integrating other systems and processes to continue to support the efficiency of the Chico business.

Are you planning to acquire more provincial players?

That’s not likely, as we’ve now entered all regions of Canada, but I wouldn’t rule it out if the right opportunity presents itself. We generally use acquisitions to enter new geographic regions where we are not operating yet.

One of your main strategies is opening new stores…

We’re now up to over 715 stores nationwide, across all 10 Canadian provinces, and are within some 5 kilometers of 72% of Canadian pet owning households. We plan to open 35 to 45 new stores in 2022, and the indications are that another 80-120 stores will probably open in the next 2 to 3 years.

Do you want to increase your presence in urban or rural environments?

We have a flexible model that operates well in all types of markets. Roughly 20% of our stores are in metropolitan or urban areas. About 40% are in suburbs, and approximately 40% in rural environments.

According to our optimization algorithm, we have a total market opportunity of more than 1,200 stores in Canada, at least 500 more than we’re operating today. While our stores are sized between 3,000 and 6,000 square feet, the ability to flex the format, the layout and, specifically, the product mix allows us to make good use of local market intelligence to help this process.

It really is to the advantage of our business model if both our franchisees and our corporate store managers have the authority to change some of the product mix in their store to match their local community needs.

You are quite new to e-commerce and omnichannel…

We started with an e-commerce platform in February 2021 and launched our click-and-collect service in September last year. The omnichannel business is growing, and those customers are the best by far. Last year, online accounted for roughly 1% of our total sales. We have not yet announced an updated figure, but we have seen significant and strong growth since then.

Do you expect a double-digit increase in your online operations in 2022?

No, it will be single digits. We are still very early on in our approach to bringing online into our business strategy.

How do you see the weight of online sales in the coming years?

We make no distinction between online and offline, as they are simply different ways in which our customers engage with the brand. As such, we don’t actually have a target, nor do we put the emphasis on driving one type of customer behavior or one channel versus the other. For us, it is simply a matter of meeting the customer where they desire to be.

Canadian pet companies are lagging a bit behind when it comes to e-commerce. Why?

One of the key structural issues is that Canada is a very wide and sparsely populated environment. Doing a quick trip to one of our stores most often outweighs the convenience of a home delivery, as you’d have a waiting time of 3 to 5 days to receive an online order.

How do you organize the logistics for delivering your online orders?

Roughly half of our online orders are for click and collect, which is a real logistic advantage. We do use our regional warehouses in Vancouver, Calgary and Greater Toronto to serve direct-to-customer shipments. But some customers receive their delivery from a local  franchisee. We have a unique and innovative way of sharing the net benefit of that order with our franchisees. So the online channel is actually a supplement, rather than competing with the local store.

You recently launched a new service called AutoShip. How does it work?

This is the first service of its kind in the Canadian pet retailing industry. It gives customers the option of setting up a subscription that can either be shipped to their home or be click and collect – so they don’t have to give up their monthly trip to the store. When we asked our customers, many of them loved the idea of a subscription plan and the idea of having a recurring purchase, but still wanted to come to the store to get it!

What’s next for Pet Valu?

We are continuing to grow our loyalty program and we’ve recently added new products to that program to increase the membership. At the same time, we are updating our website and want to continue to open new stores as well as to make expansions. Our last point of growth is an investment in our proprietary brands. In 2012, they represented about 20% of our system-wide sales and this year they have increased to 30%.