Woolworths has splashed out $586 million to acquire a 55 per cent stake in an Australian pet food and accessories retailer called Petspiration after 18 months of negotiations.
The company owns the retail brand Petstock and has a network of 276 stores, alongside a loyalty program with 2.4 million members and its own brand range including Caribu and Glow.
It also has 65 vet clinics and 162 grooming salons and reached $979 million in annual sales.
Australians have enjoyed record levels of pet ownership after a puppy boom during the pandemic, while the speciality pet sector is worth a whopping $10 billion a year.
In fact, dog ownership rose 25 per cent between 2019 and 2022 and owning pet cats skyrocketed by 43 per cent, with 70 per cent of Australian households now owning a furry friend.
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The supermarket giant recently offloaded its stake in pubs and drink business Endeavour Group and is using the funds to enter the new category.
Woolworths CEO Brad Banducci said the specialty pet space was a large and growing retail segment in which the retailer had a limited presence.
“Specialty pet is a logical adjacency given the high penetration of pet ownership across Australia and New Zealand,” he said.
“The partnership will allow us to meet more of our customers’ pet family needs with a complementary range of specialty pet products and services, strengthen the Everyday Rewards loyalty program and unlock opportunities for material value creation across both businesses.”
Everyday Rewards loyalty program had 13.7 million members as of June 30.
However Mr Banducci has been forced to defend the huge amount forked out for Petspiration, with the transaction valuing the business at $1 billion, insisting it is a strong investment.
“We don’t see this as a peak. This trend has been around for some time. Pet ownership is not going down. It may have been pulled forward somewhat in Covid,” he said.
He pointed to many areas of growth including food, nutrition, toys and pet services such as puppy training and grooming, while doggy daycare still had a long way to go.
Petspiration founders Shane and David Young started the business more than 30 years ago in Ballarat, Victoria and have grown it to the second biggest pet retailer in Australia, with the duo retaining a 45 per cent stake in the business.
“This isn’t a turnaround story. This is a growth story and a value generation story,” Mr Banducci noted.
“Dave and Shane have great plans. They’ve delivered amazing things considering their very modest start in Ballarat in 1991. And we really want to support and accelerate that growth.”
Petstock generated almost $700 million in sales and $54 million in profit before tax in the 2021/22 financial year, records from ASIC show.
Mr Banducci, who owns a dog called Juno, added Woolworths was Australia’s second-biggest pet insurer and said in the last 10 years the average life of a pet has doubled as owners focus on nutrition and health.
He can see the sale of goods for pets hitting the shelves of both Woolworths and Big W.
The deal is subject to ACCC approval as well as in New Zealand with completion expected mid next year.