Pet Retail Market and Valuation Outlook
Appendix 36
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36. International Approach (A)
To better understand how the Brazilian market will perform, we tried to look at the two countries with the best
development of the megastore model, the US, and the UK. Thus, we made a comparison between the markets
and the dominance of the leading players in this environment:
USA: In the United States, we see one of the largest pet markets in the world. However, the story was not always
like this. In the early 1980s, the US pet market was dominated by local players and food retailers, which were the
big news at the time. This led to the emergence of two large megastore chains, PetSmart and PetCo, fighting for
market dominance by aggressively opening stores across the country (PetSmart currently has 1,278 stores across
the country, while PetCo has approximately 1,200). That said, both companies have achieved a relevant history of
market share, reaching 40.3% for PetSmart and 19.5% for PetCo. However, the scenario for both companies was
once better. With the arrival of the COVID-19 crisis, there was an acceleration of purely online and omnichannel
services, which caused the two industry leaders a considerable lost share to the new entrant Chewy (a company
that PetSmart had already acquired last year). In this aspect, we draw a parallel with the North American market,
given that the consolidation that started to occur 40 years ago is happening in Brazil, with some slight
differences.
We believe that a purely digital player such as Chewy and Amazon have ascended due to a window of
opportunity created by the combination of: (1) underdeveloped Ominichannel by dominant players and (II) well-
developed logistics network in the US (III) high e-commerce penetration in the country. These factors are not
observed both individually and in combination in the Brazilian scenario, supporting our thesis that Petz with its
more Asset heavy model appears well positioned in the online sales channel.
UK: In UK's market, we see a remarkable parallel to be drawn, mainly with the market, which is very similar to
what we believe the Brazilian market will be after consolidation, with a residual share of mom & pop channels
and food retailers in the future due to the high capillarity of these channels. Furthermore, we see a profound
similarity between Pets at Home and Petz, which can be used as a comparison player for future projections.
Thus, the team decided to do authorial field research using our contacts in one of the Pets at Home stores in
Worthing, West Sussex. As a result, we could perceive three points that bring Petz and Pets at Home closer
together: (1) Pets at Home has a much more extensive range of private label products (44% of the company's
total revenue) than Petz; (II) Both companies have grooming, adoptions and veterinary services in their portfolio
as a way to generate cross-sell and increase customer loyalty; (III) Both companies have a very similar business
model with big stores and omnichannel approach, the most significant difference is in the moment of
consolidation of both companies (Pets at Home has opened more small superstore stores, which have 350 sqm).
Top 2 Market Share Evolution (Brazil)
13%
11%
8%
8%
6%
6%
16'
17'
18'
19'
Top 2 Market Share (2020)
49%
40%
31%
20
20'
21E
11%
Source: Team 7View entire presentation