The U.S. Market for Pet Medications: Prescription and Over-the-Counter Remedies as Consumer Products

Chapter 1: Executive Summary: Scope and Methodology

Market Definition

Definition of Ethical Products

Product Regulation

Report Methodology

Market Size Estimates

Consumer Trends; The Market

Animal Health Products a Massive Global Market

Figure 1-1: Share of Global Animal Health Sales: Production Animal vs. Companion Animal, 2003, 2007 and 2012 (percent)

U.S. Pet Medications Market Posting Healthy Retail Sales

Market Drivers

The Aging Pet Population

Pet Market Humanization

Premium Demographics

Pet Overweight, Obesity

Pet Insurance

Economic Factors

Risk and Criticism; Marketing Trends

Marketer Classifications: Pharmaceutical vs. Retail

Top Global Pharmaceutical Marketers Lead U.S. Market

Leading Retail Marketers

Priority No. 1: Building Consumer Brands

Antiparasitics: The Consumer Pet Medication Core

Veterinary Brands Rule the Roost

Top Retail Brands in Mass and Pet Specialty Channels

Developing Market Segments

Retail Pet Medications; Consumer Trends

Half of Households Keep Dogs or Cats

71% of Dog or Cat Owners Use Pet Meds

Figure 1-2: Percent of Dog or Cat Owners Who Purchase Pet Medications, 2008 (U.S. dog- or cat-owning households)

55% Use Spot-On Flea Prevention

Frontline Tops Hartz as Most Popular Flea/Tick Brand Line

Southeast, Southwest Strongest for Spot-On Flea Medications
Chapter 2: The Market: Market Size and Composition

Animal Health Products a Massive Global Market

Figure 2-1: Global Sales of Animal Health Products at the Manufacturers Level: 2003 vs. 2007 (in billions of dollars)

Sales by Classification

Sales by Region

Sales Shifting Toward Companion Animals

Figure 2-2: Share of Global Animal Health Sales: Production Animal vs. Companion Animal, 2003, 2007 and 2012 (percent)

U.S. Pet Medications Market Posting Healthy Retail Sales

Figure 2-3: U.S. Retail Sales of Pet Medications: 2003 vs. 2007 (in billions of dollars) Consumer Usage Rates of Pet Medications

Figure 2-4: Percentage of Dogs and Cats Given Medication and/or Drugs: 2000-2006 (percent)

Usage of Dog Medications by Type

Table 2-1: Types of Medication/Drugs Given to Dogs and Percentage Obtaining from Veterinarian, 2006 (percent of dog owners)

Usage of Cat Medications by Type

Table 2-2: Types of Medication/Drugs Given to Cats and Percentage Obtaining from Veterinarian, 2006 (percent of cat owners)

Percentage of Pet Medication Users Procuring Though Veterinarians

Dog and Cat Health Product Share of Independent Pet Specialty Retailer Sales

Table 2-3: Share of Independent Pet Store Dog Product Sales by Category, 2005-2007 (percent)

Table 2-4: Share of Independent Pet Store Cat Product Sales by Category, 2005-2007 (percent); Market Outlook

Focus on Health a Key Driver Across All Pet Market Segments

Figure 2-5: Distribution of $25.3 Billion U.S. Pet Healthcare Market, 2007 (percent)

Aging Pet Population Underpins Healthcare Boom

Figure 2-6: Percentage of Dogs and Cats Age 6 and Over: 1996 vs. 2006 (percent)

Humanization a Three-Pronged Force Human/Animal Bond a Potent Force

Table 2-5: Mean Number of Veterinary Visits by Human- Animal Bond Among Dog and Cat Households, 2006

Table 2-6: Mean Veterinary Expenditures by Human-Animal Bond Among Dog and Cat Households, 2006 (in dollars)

Human Company Cross-Over, Marketing Muscle

Human Product Cross-Over

Premium Demographics Willing and Able to Spend

Figure 2-7: Share of Total U.S. Pet Market Expenditures: $70K+ vs. Under $70K Income Brackets: 1996, 2001 and 2006 (percent)

Table 2-7: $70K+ Income Bracket Share of U.S Pet Supplies and Veterinary Services Expenditures, 1996-2006 (percent)

Number of Dog and Cat Households on the Ups

Figure 2-8: Household Penetration Rates for Selected Dog- or Cat-Owning Classifications, 2003 vs. 2008 (percent of U.S. dog- or cat-owning households) Rising Rates of Pet Overweight, Obesity

The Veterinary Factor

Table 2-8: Most Important Factor in Dog and Cat Flea/Tick Product Selection, 2006 (percent of dog and cat owners) Pet Owners Visiting Veterinarians More Often

Table 2-9: Caring for a Pet�s Health: Veterinarian Visits, Expenses and Services Received, 2006 (number, percent and dollars)

Table 2-10: Average Annual Consumer Expenditures on Veterinary Services, 1996-2006 (in dollars)

Ethical Product Diversion and Veterinarian Discontent

Pet Insurance Boom a Good Sign for Pet Medications

Competition from Pet Supplements

Supplements on the Ups

Figure 2-9: U.S. Retail Sales of Pet Supplements and

Nutraceutical Treats, 2003, 2007 and 2012 (in millions of dollars)

Veterinary Usage of Supplements Expanding

Natural Pet Products Going Strong

Figure 2-10: U.S. Retail Sales of Natural Pet Products, 2003, 2007 and 2012 (in millions of dollars)

Impact of U.S. Economic Downturn

Table 2-11: Percentage of Adults with Little or No Confidence in Short-Term Prospects for the Economy, April 2003-April 2008 (U.S. adults)

Table 2-12: Percentage of Adults Who Are More Practical or Realistic in Their Purchases, Month Over Month: October 2007-April 2008 (U.S. adults)

Risk and Criticism

Looking Ahead

Illustration 2-1: Nestl� Purina�s Friskies Flea Repellent Drops (France)

Figure 2-11: Projected U.S. Retail Sales of Pet Medications: 2007 vs. 2012 (in billions of dollars)
Chapter 3: Marketing Trends: Competitive Overview

Marketer Classifications: Pharmaceutical vs. Retail

Top Global Pharmaceutical Marketers Lead U.S. Market

Table 3-1: Global Animal Health Sales of Top U.S. Marketers of Pet Medications, 2005-2007 (in millions of dollars)

Pharmaceutical Companies Consolidating

Human Cross-Over Synergies

Summit VetPharm Taps in with Unique Approach

Leading Retail Marketers

Second-Tier Retail Marketers and Specialists

Natural Product Marketers

Retail Market Also Consolidating

Priority No. 1: Building Consumer Brands

Pharmaceutical Companies Also Market to/Through Vets

The Problem of Product Diversion

The Internet Effect

Figure 3-1: Use/Influence of the Internet: Adults Overall vs. Dog or Cat Owners, 2007 (percent of U.S. adults overall vs. dog or cat owners)

Online Pet Pharmacies Competing Directly with Veterinarians

Retail Product Marketers Also Active Online

PetMed Express, Inc.

Overview

Table 3-2: PetMed Express Sales, 2004-2008 (in millions of dollars)

The PetMed Express Product Focus

Table 3-3: Share of PetMed Express Sales by Category, 2006- 2008 (percent)

Marketing and Advertising

Table 3-4a: Selected Leading Pharmaceutical Marketers and

Brands of Pet Medications: Product Type and Generic Drug Name, 2008

Table 3-4b: Selected Leading Pharmaceutical Marketers and

Brands of Pet Medications: Status, Form, Animal Type and Description, 2008

Table 3-5: Selected Leading Retail Marketers and Brands of

Pet Medications, 2008

Table 3-6: Selected Leading Third-Party E-tailers of Pet

Medications, 2008; Focus on Antiparasitics

Overview: The Consumer Pet Medication Core

Veterinary Brands Rule the Roost

Three Drug Companies Enter Market in 2007

Illustration 3-1: Trade Ad for Fort Dodge�s ProMeris(Veterinary Forum, March 2008)

�Prescription� Appeal

Figure 3-2: National Consumer Advertising Spending for Frontline and K9 Advantix, 2006 and 2007 (in millions of dollars)

Illustration 3-2: Online Printable Coupon for Merial�s Frontline

Illustration 3-3: Animal Hospital Coupon Mailer for Merial�s Frontline and Heartgard

New Ethical Products Focus on Anti-Diversion

Bayer Launches Prescription Version of Advantage

Top Retail Brands Inhabit Mass and Pet Specialty Channels

Central Garden & Pet Brands Lead Pet Specialty Channel

Table 3-7: Top Marketers of Flea/Tick Products in Pet Specialty Retailers, 2006 and 2007 (percent)

Hartz and Sergeant�s Brands Lead in Mass-Market Channels

Table 3-8: IRI-Tracked Sales of Pet Medications & Related Pet Healthcare Products, 2007 vs. 2008 (in millions of dollars)

Table 3-9: IRI-Tracked Sales of Pet Medications and Related Pet Healthcare Products, 2003-2007 (in millions of dollars)

Hartz Phases Out Advanced Care Spots-Ons

Hartz and Sergeant�s Launch Pet Specialty Lines

OTC Brands Take on Ethical

Illustration 3-4: Trade Ad for Sergeant�s Gold Flea/Tick Squeeze-Ons (Pet Business, June 2007)

Illustration 3-5: Trade Ad for Hartz�s UltraGuard Flea & Tick Drops (Pet Business, February 2008)

Illustration 3-6: Trade Ad for Central Garden & Pet�s Bio Spot Retail Flea/Tick Line (PET AGE, April 2007)

Illustration 3-7: Trade Ad for Central Garden & Pet�s Adams Plus Retail Flea/Tick Line (Pet Business, March 2007)

Channel Cross-Over and Exclusivity

Consumer Marketing Trends and Themes

Consumer Websites

Product Effectiveness

Illustration 3-8: Consumer Ad for Merial�s Frontline Plus (AKC

Family Dog, July/August 2008)

Proprietary Ingredients

Multifunction/Extra Benefits

Illustration 3-9: Sergeant�s Sentry Pro XFC Flea/Tick Squeeze-

Ons

Convenience, Packaging

Pest-Control �Systems�

Illustration 3-10: Trade Ad for Hartz�s InControl Flea/Tick Line (Pet Business, February 2007) Wide Product Lines

Illustration 3-11: Trade Ad for Central Garden & Pet�s Zodiac Flea/Tick Line (PET AGE, April 2008)

Illustration 3-12: Consumer Ad for Bayer�s Advantage and K9 Advantix Products (AKC Family Dog, July/August 2008)

Value

Spotlight on Safety

Illustration 3-13: Trade Ad for Sergeant�s WormXPlus Wormer

Going Natural; Focus on Developing Market Segments

Pain Management and NSAIDs

Merial�s Previcox Is Newest Market Entrant

Illustration 3-14: Trade Ad for Merial�s Previcox NSAID

(Veterinary Forum, March 2008)

Veterinary Advertising

Illustration 3-15: Trade Ad for Pfizer�s Rimadyl NSAID

(Veterinary Forum, March 2008)

Illustration 3-16: Trade Ad for Vetoquinol�s Vetprofen NSAID

(Veterinary Forum, March 2008)

Building Consumer Awareness, Brands

Mood Disorders

Novartis and Clomicalm

Eli Lilly and Reconcile

Illustration 3-17: Trade Ad for Eli Lilly�s Reconcile (Veterinary

Practice News, July 2008)

Obesity/Overweight and Diabetes

Pfizer Debuts Slentrol

Marketing Appeals

Illustration 3-18: Consumer Ad for Pfizer�s Slentrol (Martha

Stewart Living, Spring 2008)

Illustration 3-19: Trade Ad for Pfizer�s Slentrol (Veterinary

Forum, March 2008)

Slentrol Goes Abroad

Diabetes Support

Illustration 3-20: Trade Ad for Intervet-Schering�s Vetsulin

(Veterinary Practice News, June 2008)

Cognitive Dysfunction

Oral Care

Retail Pet Medications

Illustration 3-21: Doctors Foster & Smith OTC Itch Stop Line
Chapter 4: Company Profiles: Bayer Animal Health

Overview

Advantage Key to Segment Sales

Table 4-1: Bayer Consumer Health Segment Sales by Division: 2006 vs. 2007 (in millions of dollars)

Bayer Launches Animal Health MBA Education Program

Bayer AG Corporate Overview; Central Garden & Pet

A Top Multi-Category Pet Market Player

CG&P Acquires Farnam

Central Life Sciences Fields Important Proprietary Molecules; Elanco Animal Health (Eli Lilly and Company)

Overview

Company Launches New Companion Animal Group

Eli Lilly and Company

Table 4-2: Eli Lilly and Company Sales, 2005-2007 (in millions of dollars); Fort Dodge Animal Health

Overview

Companion Animal Sales Growing

Table 4-3: Fort Dodge Animal Health Sales by Segment, 2004- 2007 (in millions of dollars)

Wyeth Corporate Background

Table 4-4: Wyeth Sales by Division, 2004-2007 (in millions of dollars); Hartz Mountain Corp

A Top U.S. Pet Care Brand

Table 4-5: IRI-Tracked Sales and Market Share of Hartz Mountain Pet Supplies, 2003-2007 (in millions of dollars)

Disappointing Returns

Looking Abroad; Intervet-Schering-Plough Animal Health

Schering-Plough Acquires Intervet

Schering-Plough Corporate Overview

Table 4-6: Schering-Plough Sales by Division, 2005-2008 (in millions of dollars); Merial Limited

Company Structure and Sales

Figure 4-1: Merial Limited Global Sales, 2005-2007 (in millions of dollars)

Companion Animal Product Types and Brands

A Joint Venture; Novartis Animal Health

Overview

Novartis AG Corporate Background

Table 4-7: Novartis Group Sales Growth, 2003-2007 (in millions of dollars); Pfizer Animal Health

Overview

Revolution, Rimadyl Lead Companion Animal Sales

Table 4-8: Pfizer Animal Health Sales by Animal Type, 2005- 2007 (in millions of dollars)

Pfizer Corporate Overview

Table 4-9: Pfizer, Inc. Sales by Division, 2005-2007 (in millions of dollars); Sergeant�s Pet Care, Inc.

Overview

Table 4-10: IRI-Tracked Sales and Market Share of Sergeant�s Pet Care, 2003-2007 (in millions of dollars)

Bulking Up Through Acquisitions

Focusing on Flea and Tick

Sergeant�s Expands �Look at the Label� Educational Campaign
Chapter 5: Consumer Trends: Overview of Pet Owners

Notes on Simmons Data

Half of Households Keep Dogs or Cats

Figure 5-1: Household Ownership Rates for Selected Dog- or Cat- Owning Classifications, 2008 (percent and number of U.S. dog- or cat-owning households) Ownership Rates Edge Up

Figure 5-2: Household Penetration Rates for Selected Dog- or Cat-Owning Classifications, 2003 vs. 2008 (percent of U.S. dog- or cat-owning households)

Retail Shopping Patterns for Pet Products

Figure 5-3: Retail Shopping Patterns for Pet Products, 2008 (percent and number (000) of U.S. dog- or cat-owning households)

Pet Owners on the Web

Shopping Psychographics

Figure 5-4a: Use/Influence of the Internet: Adults Overall vs. Dog or Cat Owners, 2007 (percent of U.S. adults overall vs. dog or cat owners)

Figure 5-4b: Use/Influence of the Internet: Adults Overall vs. Dog or Cat Owners, 2007 (index for U.S. dog or cat owners)

Figure 5-5: Dog or Cat Owners as Consumers: Selected Shopping Psychographics, 2008 (percent and index for U.S. dog or cat owners)

Figure 5-6: Dog or Cat Owners as Consumers: Selected Media & Marketing Psychographics, 2008 (percent and index for U.S. dog or cat owners)

Figure 5-7: Dog or Cat Owners as Consumers: Selected �Green� Psychographics, 2008 (percent and index for U.S. dog or cat owners)

Pet Owner Demographics

Figure 5-8: Dog Ownership Rates by Household Income Bracket, 2008 (percent of U.S. dog-owning households)

Table 5-1: Dog or Cat Ownership Rates by Age Bracket, 2003 vs. 2008 (percent of U.S. dog- or cat-owning households)

Table 5-2: Demographics for Dog or Cat Ownership, 2008 (percent, number, and index among U.S. dog- or cat-owning households)

Table 5-3: Demographics for Dog Ownership, 2008 (percent, number, and index among U.S. dog-owning households)

Table 5-4: Demographics for Cat Ownership, 2008 (percent, number, and index among U.S. cat-owning households); Purchasing Rates for Pet Medications

71% of Dog or Cat Owners Use Pet Meds

Figure 5-9: Percent of Dog or Cat Owners Who Purchase Pet Medications, 2008 (U.S. dog- or cat-owning households)

Figure 5-10: Number of Dog or Cat Owners Who Purchase Pet Medications, 2008 (U.S. dog- or cat-only households in thousands)

Usage Up Across the Board

Figure 5-11: Percent of Dog or Cat Owners Who Purchase Pet Medications, 2003 vs. 2008 (U.S. dog- or cat-owning households)

Figure 5-12: Percent of Dog or Cat Owners Who Purchase Pet Medications, 2003 vs. 2008 (U.S. households owning dogs only or cats only)

55% Use Spot-On Flea Prevention

Figure 5-13: Percent of Dog or Cat Owners Who Purchase Flea/Tick Products by Type, 2008 (U.S. dog- or cat-owning households)

Frontline Tops Hartz as Most Popular Flea/Tick Brand Line

Figure 5-14: Usage Rates for Selected Flea Prevention or Treatment Brand Lines/Marketer (Product Range), 2003 vs. 2008 (percent of U.S. dog- or cat-owning households)

Figure 5-15: Percent of Dog and Cat Owners Obtaining Heartworm and Flea Medications from Veterinarians: Dog vs. Cat Products, 2006 (U.S. dog or cat owners); Pet Med Psychographics

Alternative Streak Among Cat Owners

Store Brands Over $$$ Brands

Figure 5-16: Selected Healthcare Psychographics for Pet Owners and Pet Med Buyers, 2008 (percent for U.S. adults overall, dog or cat owners, and pet medication buyers)

Figure 5-17: Selected Healthcare Psychographics for Pet Owners and Pet Buyers, 2008 (index for U.S. dog or cat owners and pet medication buyers)

Figure 5-18: Levels of Agreement or Disagreement With Statement, OTC Store Brands Work Just Like Advertised Brands: Selected Brand Lines and Product Types, 2008 (percent of U.S. adults overall vs. dog or cat owners and pet medication purchasers)

Figure 5-19: Levels of Agreement or Disagreement With Statement, Most Expensive Medications Are Usually the

Best: Selected Brand Lines and Product Types, 2008 (percent of U.S. adults overall vs. dog or cat owners and pet medication purchasers); Pet Med Demographics

Southeast, Southwest Strongest for Spot-On Flea Medications

Distinct Demographics for Frontline

Figure 5-20: Top Demographic Indicators for Use of Frontline Spot-On Flea Medication, 2008 (percent and index of U.S. dog- or cat-owning households)

Figure 5-21: Top Demographic Indicators for Use of Hartz Flea Products, 2008 (percent and index of U.S. dog- or catowning households)

Demographics for Heartworm Products: Dog vs. Cat Owners

Figure 5-22: Usage Rates for Dog or Cat Heartworm Medications by Age Bracket of Pet Owner, 2008 (percent and index for U.S. dog and cat owners)

Table 5-5: Demographics for Use of Spot-On Flea Medications for Dogs or Cats, 2008 (percent, number, and index among U.S. dog- or cat-owning households)

Table 5-6: Demographics for Use of Heartworm Medications for Dogs, 2008 (percent, number, and index among U.S. dog-owning households)

Table 5-7: Demographics for Use of Heartworm Medications for Cats, 2008 (percent, number, and index among U.S. catowning households)