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Upstarts: Pet Luxuries

What is it about people and their pets? That magical bond between human and beast has yielded pounds of start-up opportunity for such ventures as a discount buying club and a pet hotel.
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Discount club throws bone to pet owners

Eyeing a growing market for veterinary care and pet products, a former bank officer creates a network of providers

Lucky, Jay Bloom's golden retriever, was a dog with many talents. He could give his paw on command. He could sit, fetch, and roll over. And, according to his master, he even inspired a catchy start-up plan.

Bloom, cofounder of Pet Assure Inc., a fast-growing discount club for pet owners, often summons up the late Lucky's memory to recount how the company, based in Dover, N.J., got its start. Lucky, he recalls, had the bad fortune to require a hip replacement. But Bloom claims that when he asked his pet insurer to cover the $3,000 procedure, the answer was no.

As Bloom, a 31-year-old former financial officer at the Chase Manhattan Bank, tells the story, he didn't just howl, he got even. Almost three years ago, he and his wife, Carolyn, started Pet Assure, which gives club members a 25% across-the-board discount on veterinary care, plus price breaks on a variety of pet-related services and products purchased within the company's network. Since then the 20-employee company has signed up some 30,000 pet owners, posting revenues last year of roughly $1 million. And Bloom sees plenty of room for growth.

These are boom times for pet-care entrepreneurs like Bloom. With the U.S. economy surging, pet owners are lavishing more luxury goods and services on their cats and dogs than ever before. Total annual spending on household pets has been climbing steadily during the 1990s and is expected to reach $28.5 billion by the year 2001, according to the American Pet Products Manufacturers Association, based in Greenwich, Conn. Much of the money is going to veterinary care, including advanced procedures like chemotherapy and CAT scans, according to experts.

When Bloom began researching the pet-care market, in 1994, he says, he found only one well-known pet-insurance carrier, Veterinary Pet Insurance (VPI), founded in 1980 and based in Anaheim, Calif. VPI, though, didn't offer coverage for basic shots and checkups, not to mention surgery for dogs like Lucky that belong to a breed with a genetic predisposition to a particular ailment (in Lucky's case, hip dysplasia). Bloom became convinced that a discount club like Pet Assure could succeed by offering a pet owner savings of hundreds, if not thousands, of dollars a year for veterinary care alone.

Drawing on $200,000 in personal savings, plus another $600,000 raised from friends and family, Bloom and his wife began a campaign to recruit vets to the Pet Assure provider network. As might be expected, many veterinarians weren't clamoring to offer 25% reductions in their fees.

Pet Assure's pitch? The increase in office visits by new customers would more than compensate for the discounts. What's more, Bloom promised participating vets a 50% share of the club's annual membership fees ($99 for one pet). "As soon as I heard about it, I realized the potential," says Phillip Raclyn, a New York City veterinarian who signed on in 1996. Today, according to Bloom, Pet Assure's provider network includes roughly 1,700 vets in 43 states, or more than 5% of the 30,000 vets nationwide who treat household pets.

Pet Assure has also signed up a network of about 1,000 groomers, dog day-care centers, and other pet services as providers. Meanwhile, it's been pushing to grow its membership rolls with new partnerships. A recent venture with Associated Card Services Bank, based in Stevens Point, Wis., gives a free club membership to pet owners who sign up for a special-issue Pet Assure MasterCard.

A new alliance with Cigna's property and casualty division is expected to bring in still more revenues. As part of the plan, Cigna pet-policy holders will be able to use Pet Assure's network of veterinarians and pay a modest fee per visit. Pet Assure earns a fixed sum as a network access fee for each policy sold, although Bloom declines to disclose the amount.

There's no guarantee that the partnerships will pay off. Both VPI, the industry leader, and Petshealth, a new pet insurer based in Canton, Ohio, have been stepping up their marketing efforts. And both point out that they offer the kind of old-fashioned, fee-for-service coverage that consumers and vets prefer. "We've seen a lot of competitors start up and drop out," says Jack Stephens, the CEO of VPI and a veterinarian.

Bloom insists that Pet Assure has proved it can more than hold its own. "We have some pretty potent distribution channels in place," he says, noting that the pet-food and pet-supply retail chain Petco began selling club membership at some of its stores last spring. "Our growth will be exponential."


Dog-mad New York

She may be partial to dachshunds, but archaeologist Iris Love prides herself on being a democratic hostess. All her canine guests, not just snooty purebreds or highfalutin show dogs, are special honorees at her gala dog fete at New York City's posh Tavern on the Green. "Essentially, I invite the dogs," says Love, "and the dogs can bring their masters if they choose."

Love, who breeds dachshunds, and New York gossip columnist Liz Smith have been hosting the party every year for the past decade, to coincide with the Westminster Kennel Club's annual dog show at Madison Square Garden. And if the party's ever-expanding guest list is any indication, unbridled spending on dogs is definitely "in" in the go-go 1990s.

At this year's invitation-only bash on February 7, well over 100 dogs and their New York-celebrity owners (including Henry Kissinger and designer Geoffrey Beene) showed up. Many of the dogs sported laurel wreaths and "togas," in keeping with the party's classical theme. The guests wolfed down chicken-liver canapÉs (cut in the shape of dog biscuits) and lapped up imported bottled waters. "Dogs were everywhere," recalls Love. "Some were even sitting at tables, either on laps or chairs."

If a few of the diners forgot their manners, well, it wasn't an occasion for scolding. "The rules are broken that night," says Love. "How many parties are there in honor of the dogs?"


Bark for room service

Trisha Reed, owner of the Barkington Inn & Pet Resort, in Webster, Tex., is part of a new breed of entrepreneur that's catering to doting pet owners. Since her 20-employee pet hotel opened, in November 1998, Reed estimates that she has put up some 3,000 dogs and cats, all of which receive a daily change of fresh linens, room service, and a nightly bedtime snack. And Reed, a former pet-hospital manager, claims the Barkington has already surpassed its projected revenues of $26,000 a month. In-season rates for dogs run from $12 a night for a standard room to $25 nightly for luxury suites appointed in Victorian, country, Oriental, or nautical decor. As an added service, lovelorn owners can watch their pets from afar through an Internet hookup.

In another bet on dog owners' spending propensity, Joyce Shulman, cofounder of Rover Group Inc., based in Water Mill, N.Y., is offering natural "performance snacks." Since the company's launch, in August 1998, Shulman, a former commercial litigator, says she has sold about 250,000 Rover Bars at pet and health-food stores in more than 40 states. The bars, made with such ingredients as flaxseed and brewer's yeast, retail for $1.79. The product line includes not only the original peanut-butter-flavored Rover Bar but also a new wheat-free bar.

A third newcomer to the pet-luxury market is Sherri Morrelli, who claims that she uses the finest in essential oils and fragrances to create her aromatherapy products for dogs. Morrelli, who started Good Dogma Co., based in Portland, Oreg., two years ago, offers three splashy spritzers (in citrus, spice, and floral scents), an Aroma-Remedy candle, and a "pupsicle" blend Aromabath Bar that smells like a Creamsicle. Morrelli, the company's sole employee, has shipped to customers throughout the United States and as far away as Spain and Japan. Last year the company's revenues totaled only $45,000, but Morrelli says that she's considering diversifying with a line of aromatherapy products for cats.


DOLLARS RAINING DOWN LIKE CATS AND DOGS

The figures show the projected growth in U.S. spending on pet-related goods and services, including veterinary care, over an eight-year period.

1994: $17 billion

1996: $21 billion

*2001: $28.5 billion

Source: American Pet Products Manufacturers Association.
*estimate

Last updated: Sep 1, 1999




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