October 27, 2008
Pet food prices squeeze owners, veterinarians
Prescription diets costs skyrocket, setting off consumers
By: Jennifer Fiala
For The VIN News Service
Dr. Sharon Harris considers carrying prescription diets a medical necessity in her Wilmington, N.C. practice. The sales make up just 3.5 percent of her total revenue, but now instead appreciating the convenience of in-house products, clients are yelling at staff about the high costs attached.
“The prices have increased so much, I have to sell a bag of z/d ultra canine for $83. My staff is getting complaints almost every day,” Harris says. “I don’t know if I could even justify that expense.”
When it comes to feeling pet-food inflation, Harris and her clients aren’t alone. According to the U.S. Bureau of Labor Statistics, American consumers are paying more than ever to feed their animals, from bargain diets to prescription brands. In June, the bureau released numbers showing that the consumer price index for pet food rose 23 percent during the past decade, starting in 1998. Since last year, prices for some brands have jumped nearly 10 percent.
What’s to blame? Industry insiders point to high-energy costs and growing competition between pet food manufacturers and producers of human products for ingredients. Recalls, inflation, rising gas prices and the dwindling U.S. dollar also have contributed to eroding manufacturer profit margins, experts say. And when key agricultural commodities like corn skyrocket, the result is across-the-board inflation.
“Rice and soybean meal, for example, have increased 146 percent and 160 percent respectively, since July 2006. In order to continue to provide the highest quality nutritional products, we found it necessary to raise our prices.” explains Luce Rubio, spokeswoman for Hill’s Pet Nutrition.
Such increases, while lagging behind price surges in milk and gasoline, represent the largest pet food hike in years, experts contend. While Nestle Purina declined VIN News Service’s interview requests, P&G Pet Care, manufacturer of Iams products, reiterates claims that rising costs for raw materials are impacting the pet food trade.
“We refuse to lower the quality of our diets, so price increases are unavoidable in the face of the current volatile commodities market,” company spokesman Jason Taylor says. “While retail prices are determined solely by the retailer or clinic, we take increases on costs incurred rather than on speculation, and maintain our assurance of pricing for best consumer value. This uncompromising commitment to quality has made us a trusted partner for retailers, veterinarians and pet owners for over 60 years.”
That might sound good, but the reality is that veterinarians like Harris are feeling a backlash from consumers in need of prescription diets, especially those who already pay a high price for veterinary medical care. Harris also suspects that corporate practices like Banfield, The Pet Hospital and VCA clinics buy the same products for less, reflecting their strong buying power and company contracts.
Banfield and VCA representatives did not respond to VIN News Service’s repeated interview requests. Yet Hills’ spokeswoman Rubio refutes the allegation.
“We have a single list price for all of our veterinary customers,” she says. “Hill’s commercial selling principles ensure that all veterinary customers have access to the same efficiency discounts and purchasing terms and conditions.”
To test that claim, the VIN News Service price shopped corporate practices within seven miles of Harris’ North Carolina veterinary hospital (see related chart, below). The result: While there were cost variations, no one practice appeared to receive special pricing treatment.
That might seem like good news for private owners, but Veterinary Information Network consultant Jon Dittrich questions why practitioners care. His advice is to forgo pet food and focus on what really matters — medicine.
“Did you go to undergraduate school and four years of veterinary school to compete with grocery stores on dog food?” Dittrich asks. “When you look at prescription diets, carrying the inventory, the likelihood of employee theft and a profit margin that’s only about 23 percent should be enough to deter any veterinarian from selling this stuff. From a business standpoint, it makes no sense.”
In fact, by carrying the products in practice, veterinarians do manufacturers a huge service by validating them, and that status will help company sales when prescription diets eventually land on grocery store shelves, Dittrich predicts.
“These companies are looking to maximize their profits, so they’ll keep raising the price until demand drops, and then they’ll take it off prescription,” he predicts. “The same thing happened with Rogain. Doctors validated the product by prescribing it, and when it got to store shelves, I think its market share quintupled. You might think pet food companies are screwing veterinarians and screwing clients, but they’re simply making marketing decisions.”
Harris says she’s weighing the option of discontinuing prescription diet sales, but for now, selling food remains part of her medical practice.
“When we diagnose a dog with kidney disease or a cat with lower urinary tract disease, changing the diet is sometimes the first and only thing we try,” she explains. “Many times, these pets have been in our hospital for several days and are discharged with a bag of food as part of their initial treatment. If we didn't carry the food needed to treat the disease we've just diagnosed, we wouldn't be offering full service to the client.”
VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email email@example.com.
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