December 18, 2020

Central Garden & Pet CEO on pet trends & products amid pandemic

By haziqbinarif

Central Garden & Pet CEO Tim Cofer joins Yahoo Finance Live to highlight the latest trends in the garden & pet industry as well as break down how the pandemic has accelerated pet adoptions.

Video Transcript

BRIAN SOZZI: Our next guest leads a company playing at perhaps two of the biggest investing themes that have emerged during the pandemic– rampant pet adoption and people investing more in their homes. Let’s welcome in Central Garden & Pet CEO Tim Cofer. Tim, good to speak with you this morning here.

I feel as though a lot of people know your brands. You’ve made 50 acquisitions over the past 25 years. Just take us through the business, where it stands today. You operate in two segments– a pet segment and a garden segment. During quarantine, where are you seeing some of the biggest growth?

TIM COFER: Yeah, absolutely. Thanks, Brian.

Indeed, our company is a market leader in both pet and garden. We’ve got sales of about $2.7 billion. We had a record performance year this year, both on the top line and the bottom line. And in pet– really, pet supplies– we are the second-largest player in the country.

That’s all supplies, excluding dog and cat food and litter. Those are categories we’ve purposely chosen not to play in. But everything else, from dog beds, dog bones, aquatics, you know, reptiles, small animal, bird– we play in all of that.

And then, on the garden side, we’re also the number-two player here in the United States, with lawn and garden consumable and supplies, everything from grass seed to fertilizer to things like wild bird feed.

BRIAN SOZZI: You know, Tim, I want to stay with the pet business. We were talking, earlier on the program, about how everyone guesses what trends stick around after the pandemic. And I made the point– and I think everyone thought it’s an obvious point– you buy a pet, you still have a pet in two years. Right? They don’t just go away.

And so, what kind of demand shift does that do for you guys? As you look at the business, five years down the line, OK, there have been x number of dogs adopted this year and, you know, there will be increasing demand. So on and so forth. How does that change that side of the business for you?

TIM COFER: Absolutely. I’m really bullish on the pet industry overall. This year alone, we have seen one of the most dramatic increases in pet adoption and pet ownership. Overall, we’re seeing north of 4% growth in pet adoption.

And that’s across all classes of animals, certainly dog and cat. We’re seeing even stronger growth in places like reptile and small animal, bird and fish. These are all categories that we play in, and are a leader in those supplies.

I think one of the encouraging things is that we’re seeing that growth really driven by the next generation. So 57%, so far this year, of millennials and Gen Z have brought a pet into their home. They’re either first-time owners or they’re adding more to their family.

And I think, as we look at the underlying trends of the pet industry, it’s one of the reasons we’re really bullish on it. Maybe three trends to highlight. First is humanisation. I don’t know about you, but I’m a proud dog owner. I have a Malshi dog, and he’s the fifth member of our family.

And that whole humanisation trend provides really interesting growth opportunities to drive pet long term.

The second is around health and wellness. And it’s not just physical health. We’re seeing a real spike in emotional health products for your pets. And that a huge growth opportunity for us in the industry.

And the third, clearly, is e-commerce. E-commerce is an explosive channel across all industries, but, in particular, in pet. This year, we’ve seen a massive acceleration in our e-commerce business. E-commerce now represents over 20% of our branded pet consumer sales. We’re seeing explosive growth on that, and I think that’s a trend that’s here to stay.

So all these indications, including youth adoption, suggest pets a category to bet on for years to come.

BRIAN SOZZI: Tim, before I let you go, why does it still make sense to operate a pet business and a garden business? Do you think the market would assign higher valuations if these companies were split off and were separate companies?

TIM COFER: Look, both these industries are growth industries. They’re resilient industries. They both have fundamental, strong consumer trends supporting that growth for years to come. They’re both– for us, we’ve got a purpose as a company around nurturing happy and healthy homes. And I think, whether it’s caring for your pets, beautifying your lawn and gardens, that all connects.

And I think, from a retail distribution standpoint, our retail partners, whether it’s the big-box players like Walmart or Depot or Lowe’s, whether it’s online players like Amazon and Chewy, that scale that we bring with our retail partners allows us to be an important partner to them across both garden and pet. And we see synergies, and we see economies of scale across these. So we do see value in these two businesses together, and we’re bullish on both industries.

BRIAN SOZZI: All right. Let’s leave it there. Tim Cofer, Central Garden & Pet CEO. Good luck the rest of this holiday season.

TIM COFER: Hey, thanks a lot. Happy holidays.

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