Wine and Dine This Pet Supplies Company

Getting a dog drunk by giving it beer might be a popular college prank, but apparently cats, with their more refined tastes, prefer to drink something a little more cultured.


Which is probably why the folks at B&H Lifes, a Japanese pet supply company, just introduced Nyan Nyan Nouveau, a nice Cabernet Sauvignon with a touch of catnip and some vitamin C added.

Actually, the beverage doesn't contain any alcohol -- the animal rights activists can stand down now -- though it is made from the wine grapes. It was created, the makers say, because their customers wanted to include kitty in their celebrations for birthdays and holidays. (I've since learned there's now near-beer for dogs too, called Dawg Grog.)

What it shows, though, is what PetSmart (NASDAQ: PETM.DL  ) has been saying all along: There's a still huge ramp to ride in the pet supplies industry as owners continue to humanize their pets.

Analysts have become wary somewhat that the meteoric growth the pet supply leader has enjoyed is starting to cool off. As mass retailers like Wal-Mart (NYSE: WMT  ) and Target increasingly target the segment, not to mention the growth of rivals like privately held Petco, same-store sales at PetSmart have slid in recent quarters, falling to around 3.5% for the past two quarters from 7% or more in the year-ago periods.

Yet the company has been able to maintain growth far longer than Wall Street anticipated because of the strength of the premium and super-premium food category, a niche for which these specialized wines and beers would seem to be tailor-made. A number of high-profile pet-food recalls has pet owners deciding they need better, higher-quality foods for their charges. Wal-Mart, for example, introduced an ultra-premium dry dog food, Pure Balance, that contains no soy, wheat or corn additives, no artificial colors, no preservatives, and no chicken by-products.

The opportunity is also causing competitors to eye the space again. Fruit company Del Monte is actually one of the largest pet food makers alongside Nestle's Purina, candy company Mars' Pedigree line, Colgate-Palmolive and its Hill's Pet Nutrition, and Procter & Gamble's Eukanuba and Iams brands. Analysts anticipate Del Monte will actually shed its fruit business in favor of becoming a pure pet food play.

While DuPont is also eyeing the pet food market, being perhaps better known as a provider of animal feed, the backlash against lab-engineered products ended up causing Colgate to change the name of its Hill's brand from Hill's Science Diet because of the white-lab-coat image that sprung to mind. DuPont's association with genetically modified foods might not sit well with pet parents.

I've noted previously that PetSmart says cat owners lag dog owners in upcycling trends by about three years, which still has me thinking the pet supplies leader is the cat's meow. And that's something investors can now toast while having kitty celebrate right alongside them.

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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