21 May 2019
Ahead of the pack: the story of a successful succession
Pet Family is a rare beast in the world of retail – a company that has managed to grow through the post-financial-crash recession.
Pet Family, a second generation family business, has expanded over the past couple of decades, now operating seven businesses that include vets, dog grooming, and premium pet food and other pet supplies from 151 stores.
The premium pet food is what Dean Richmond, CEO and son of the founders, sees as the key to the company’s success. “The reason we are bucking the trend is because we are a product business rather than a retailer,” he explains. “About 70% of our sales are of brands that we own or have exclusivity over, and which we develop to ensure excellent quality. Our customers buy our products and quickly see that they are better than anything they can find elsewhere. And we ensure that quality extends to everything else we do.”
Consolidation in the pet product market has led to a weakening in wholesalers’ positions, something which Richmond wanted to guard against.
Late in 2017, Pet Family came up with plans to build a new distribution centre for its pet supplies. Consolidation in the pet product market has led to a weakening in wholesalers’ positions, something which Richmond wanted to guard against. “We wanted to do our own distribution to make sure we are not vulnerable to a wholesaler going bust,” he explains. “That’s why we decided a new distribution centre was vital to our future.”
Richmond approached his bank at the time, assuming that it would lend the funds needed. “We bought a competitor in 2016 and at that time they seemed keen on us and the business. The business has powered on – but since 2017 sentiment had gone cold on the whole retail sector.”
Some banks aren’t interested in lending to retail during a recession, but this is often when the best prospects reveal themselves.
Pulling at the leash
Undeterred, Richmond started talking to Investec. "The team quickly understood us and why we were different." The distribution centre project is not a typical development, and its financing reflects this. The team came up with a cash facility that Pet Family can draw down as and when the money is needed.
The new distribution centre will ensure greater certainty of supply while also simplifying the company’s storage needs. At the moment it supplements its own warehouse facility with rented storage in other locations. “We’re moving from a 28,000 rented square foot warehouse to the 43,000 square foot distribution centre, to a taller and more efficient building, and we’ll be able to get everything in one place,” says Richmond.
“Plus we’ll save what we’re currently spending each year on external storage. Margins will be better as we won’t be using the wholesalers; rent and rates will be cheaper; and we’ll own all our facilities. It’s a no-brainer.”
“Having all the finance in one place makes life a lot easier for the finance team,” he says. “It’s much more efficient than having to deal with a number of private investors.”
Pet Family has expanded over the past couple of decades, now operating seven businesses that include vets, dog grooming, and
premium pet food and other pet supplies from 151 stores.
Ahead of the pack
Pet Family plans to open four to five new stores a year over the coming few years. It has recently started a dog grooming salon called Dogwood which operates from its branch network and intends to add another 60 salons to the six currently in operation.
And while Richmond does not currently have any strategic acquisitions in mind, he feels that if they do arise he will be in the right position to act on them. “What excites me is that as other opportunities present themselves, I’m confident that Investec will look at them on their own merits and support us if we provide a sensible proposition. Some banks aren’t interested in lending to retail during a recession, but this is often when the best prospects reveal themselves. It’s really exciting to have a finance team that is properly commercial and that understands this.”
‘By looking beyond the headlines and understanding the Pet Family premium led model we are delighted to be working with an ambitious business as it grows.’
This confidence is fuelled by what he has seen of the Investec approach. “What I like most is that I can talk openly, mainly because they understand entrepreneurs – I sense that there is an understanding of what I am thinking and doing, and that’s a great feeling.
“The team accept that we know how to run the business and are good custodians of their money. That means we can focus on running the business rather than worrying about finance and notes and so on. And running the business, after all, is what it’s all about.”
Investec’s Stephen White added: “The retail sector is heavily in the media with a lot of bad news and negativity around the sector. However, within the space there are pockets which buck the trend and pet spend is certainly one of these.
“More important though, was the strength of the management team in Pet Family and their strategy of owning and controlling the brands that they sell which gives them real relevance in their sector and strong defensibility against the online channels. By looking beyond the headlines and understanding the Pet Family premium led model enables a great partnership with an ambitious business.”