There are a lot of ways to capture opportunity in the pet industry, and one of those is with pet medications. 

In this episode of Upgrade or Topgrade recorded on Oct. 15, Fool.com contributors Jeremy Bowman and Parkev Tatevosian and Millionacres editor Deidre Woollard discuss the potential in pet meds and which stocks have the best opportunities.

Deidre Woollard: What are you thinking about the medicine aspect and the pharmacy aspect? Because this is the part that I think is really, really interesting. Do you feel like because with Petco (NASDAQ:WOOF), you're going in person, with Chewy (NYSE:CHWY), you may be going in person but then you're going to an affiliated clinic versus direct clinic. Do you think that that makes a difference in terms of customer retention and things like that?

Parkev Tatevosian: For veterinary care, I know Chewy management has often said that it's a substantially underserved market. They say that pets need more veterinary care than they're actually getting. The reason for that is people are not taking their pets to the vet as often as they would because maybe it's too expensive or they don't think their condition is bad enough to take them there. What Chewy has launched with the telehealth service is a nice bridge between that. They talk about how they're going to help veterinarians increase their business because if you speak to the vet over the phone and they tell you, this may be something that you need to go into the vet for, that may convince you to actually go in whereas before, you were not going to take your pet.

Woollard: Interesting. Well that makes me think between Petco and Chewy. That's one question I don't know yet is what they're doing on signage as far as in the physical offices to get people to be interested in their program. I think that part hasn't been figured out. They talked about it a little bit in the earnings, they talked about the practice hub. But I'm wondering if some of that practice hub growth would have to come up with some form of physical branding, because I do think that there is so much value in the physical space, in the omnichannel. That's the place where I think Chewy is just now starting to figure out. You mentioned Amazon earlier. That's what Amazon has done too is Amazon, of course, e-commerce, but also, they're experimenting with like Amazon Fresh or Amazon Four Star stores. I think that for Chewy, part of their growth for the future is actually going to come from figuring out what their role is in the physical world.

Tatevosian: Absolutely. We mentioned earlier that they're rolling out telehealth is free for Autoship customers, and then the pharmacy hub is free for veterinarians. They're offering these services for free, and I'm assuming they're doing this to start it out and learn from it, collect the data, see where they can go from it, and how they can position themselves to monetize these services.

Woollard: Well, that is an interesting point too. Which of these companies do you think, right now, is the best at using their data?

Tatevosian: Good question. Since I mostly follow Chewy, I'm going to be a little biased here and say [laughs] Chewy is, and partly because of the growth they've been achieving. Listen, from 2016 to 2021, revenue has almost went up eight times, from 900 million to nearly 7.2 billion. They're doing that with increasing gross profit margins as well. They're on a nice path here.

Woollard: Yeah, I would tend to agree with you, although I think that there's so much potential for Petco to connect their e-commerce and their stores that they're doing but they need to do more off.

Jeremy Bowman: Yeah, this is a pretty new thing for Petco, so I think maybe as far as data, they don't have as much as Chewy does at this point but I think there's a lot of potential, like you said, just to connect those dots and with the loyalty, the membership program and the insurance and doing all those things and being a hub for pet owners.



This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.