PETCO & PETsMART: Animal Welfare Advocates — or Antagonists

by Denise Kelly, Co-Founder & President, Avian Welfare Coalition

In April 2005, PETCO took a bold first step in promoting a more humane corporate policy by discontinuing the sale of large parrot species and improving the standards of care for small birds, mice and rats that will continue to be sold in the stores — a decision that will go a long way towards the establishment of working relationships with the avian welfare community. PETsMART, however, has yet to indicate their intention to take similar action. Nevertheless, it is time for animal advocates to step back and consider the impact PETCO and PETsMART's policies regarding the sale of live animals has in the bigger picture.

Over the years, the two giant retail chains have made genuine contributions to the cause of animal welfare. By refraining from the sale of dogs and cats, these chains have helped curb pet overpopulation. What's more, PETCO and PETsMART have extended an open door policy to rescue groups by allocating space in their stores for pet adoption programs and providing funding from their charitable arms to support spay/neuter programs. Of course, the two chains have capitalized on these positions, reaping goodwill and publicity among the animal welfare community and the public at large — publicity that has undoubtedly contributed to the growth and financial success of both companies.

Unfortunately, PETCO and PETsMART's sales policies regarding animals other than cats and dogs are far less progressive. These corporate policies have made the situation worse for exotic birds, reptiles, rabbits, and other small mammals by mass marketing them in increasing numbers. For those who are dealing with abandoned or relinquished animals of this sort — many of them originally sold through PETCO or PETsMART — the picture isn't as rosy.

The Issues: A Question of Ethics and Responsibility

The fact is the sale of exotic species through PETCO and PETsMART flies in the face of one of the humane movement's most basic philosophical precepts: wild animals belong in the wild. Moreover, popularizing exotic animals as "pets" inevitably leads to a marked increase in the legal and illegal poaching of these animals in their natural habitats.

Among the questions to be asked are: How can we ever hope to garner support for the preservation of exotic and endangered animals in their native habitats when we allow hundreds of thousands of those same species to be exploited by the two largest pet store chains in the country?

Additionally, the burgeoning exotic pet trade has led to a marked increase in the number of exotic birds, reptiles, and other non-native species being released here in the U.S. The presence of these animals increases the risk of disease transmission to our native species and can have other, more far-reaching effects on the environment.

Released birds, reptiles, rabbits, and other small mammals, while not as visible on the street as other strays, constitute a "hidden crisis." In truth, there are millions of these animals produced annually for the pet trade, and they are subject to the same abandonment and cruelty issues as cats and dogs.

Questions to be asked: What effects will these factors have on the role of shelter and animal control organizations? How will such organizations, already overcrowded with cats and dogs, manage growing numbers of displaced exotics? How will qualified placements be determined? At what point and under what circumstances will animal control organizations consider euthanasia?

What additional facilities and funding will be required to house and care for exotics? Will shelters be prepared to offer the same housing and placement services for these animals as they do for dogs and cats? If not, how will the public perceive these exclusions and how will it affect donor expectations?

Questions to be asked: By the same token, would more dogs and cats be adopted if PETCO and PETsMART were not commercializing and selling other animals? Is it ethical at all to be promoting the sale of exotic animals while we've yet to come to terms with the tragic pet overpopulation problem that sees millions of domesticated animals still being killed at shelters each year for the simple want of a good home?

In short, meeting bottom-line corporate profit goals is often at odds with the costly requirements of providing humane, quality housing and dietary and veterinary care to the animals in their stores. Animals are subjected to stress, neglect, and even instances of cruelty all along the supply chain.

Question to be asked: Can we afford to condone any mass production and distribution system that compromises the health, safety, and welfare of any animal?

How Many Animals Do PETCO and PETsMART Sell?

The answer is we don't know. Despite the fact that Both PETCO and PETsMART are publicly traded companies, they have yet to disclose any information as to the actual numbers of animals sold annually. In addition, both companies have failed to provide figures such as animal death rates, animal illnesses, store closures as a result of illnesses, numbers of unsold and "surplus" animals, or any specific statistics on veterinary expenses or the total cost of maintaining animal sales operations.

What we do know is that even PETCO and PETsMART investors are given vague information about animal sales. Upon close examination of the annual reports of both companies, statistics related to animal sales are buried under categories such as "Pet Supplies and Small Animals" (PETCO) or "Non-Pet Food Sales" (PETsMART). However, PETsMART's 2004 annual report does state that, "Pets comprised approximately 3% of our revenues in 2004, 2003, and 2002."¹ Based on annual revenues of $3.363 billion in 2004, $2.993 billion in 2003, and $2.696 billion in 2002, this would represent more than $271 million in animal sales over the three-year period.

PETsMART proudly promotes the fact that since 1994 more than 2 million pets' lives have been saved through their in-store adoption programs. In stark contrast, they have yet to disclose significant information regarding the number of animals they have sold or the number of animals who have lost their lives in shipping and in stores.

In 2002, PETA sought to get some answers. The organization filed an SEC complaint in which it cited two key items from PETCO's annual report, and subsequently filed a shareholder resolution in order to obtain important information related to the sale of live animals. To date, neither PETCO nor PETsMART have been forthcoming with specific numbers or information regarding the disposition of animals in their stores — important facts that the animal welfare community should know and are entitled to know. PETCO responded that exact figures were "proprietary information."

However, PETCO CEO Brian Devine did admit in official public statements, and in a CNBC "Morning Call" interview on December 20, 2002, that less than 5 percent of the company's revenue comes from animal sales.² Based on total sales of $1.5 billion generated in fiscal year 2002, and assuming that 5 percent is a close approximation, that would put the annual revenue generated from animal sales at approximately $75 million — 37 times the amount the PETCO Foundation donated to animal charities during the same year.

Even considering that the figure may be less than 5 percent, clearly the revenue derived from animals sales in PETCO and PETsMART far exceeds funding by their charitable arms of spay/neuter and adoption programs for dogs and cats. It is also evident that the total number of animals adopted through PETCO and PETsMART to date is a fraction of the combined number of birds, rabbits, reptiles, and other small animals they sell annually.

The Price of Charity

Since its inception in 1999, the PETCO Foundation has raised approximately $21 million for pet adoption and spay/neuter programs. During this period, the company's net sales exceeded $7 billion.

PETsMART Charities, founded in 1994, contributed a total of $35 million to animal welfare organizations through 2004. During the same 11-year period, PETsMART had net sales of approximately $21.4 billion.

The fact that PETCO and PETsMART are associated by name with their charitable foundations may lead one to assume that the corporations are providing all the funds. That is not the case; a large percentage of the monies are raised through in-store promotions and fund-raising drives and are contributed by PETCO and PETsMART customers and employees. Nonetheless, both companies gain much in the way of goodwill and free publicity from humane societies, rescue groups, and animal welfare organizations.

Question to be asked: What portion of PETCO and PETsMART's total sales can be attributed to their connection with the events, publications, and websites of humane organizations — mediums that reach the millions of people who contribute to these groups and who are likely to patronize their stores as a result?

Many grassroots rescue groups have come to depend on PETCO and PETsMART because they receive donations from these merchants, because they have developed good relationships with local managers and staff, and because PETCO and PETsMART locations provide much-needed exposure for their homeless animals. It is understandable that these groups may not be willing to sever ties with these retailers since their first priority is to find as many homes as possible for the animals already in their care.

Large national animal welfare organizations also rely on PETCO and PETsMART to sponsor events, conferences, and adoption and spay/neuter programs and to provide funding for public education campaigns. In turn, this relationship enhances PETCO and PETsMART's image with these groups and with the animal-loving public.

Questions to be asked: But what is the price of that support? By working hand-in-hand with marketers of live animals, aren't humane organizations contradicting their own principles with regard to live animal sales? Wouldn't adherence to one of our most basic humane values — that living creatures should not be treated as "merchandise" — foster the kind of respect for all animals that might help put an end to the cycle of animal homelessness?

One solution might be to encourage dog and cat rescue groups at least to avoid hosting special events and promotions at stores that trade in live animals. Special events in coordination with pet supply stores and other pet-related businesses that do not sell live animals will give much needed exposure to truly responsible and compassionate retailers and may also serve to increase adoption rates, since these groups would not be competing with live animal sales in the same location. At the very least, humane organizations should seriously consider the possibility that, rather than solving a problem by allying themselves with PETCO and PETsMART, they are merely trading one problem for another.

The Financial Picture: Through the Looking Glass

An article that appeared in the July 14, 2003, edition of the business weekly Barron's stated: "PETCO'S chief financial officer, James Myers, adds that plans to convert up to fifty of its existing stores into a new format that will place live animals store center, which should further sales of companion pets, could help those stores see mid-single-digit sales increases, (increases some converted stores already have registered)."

This is a clear indication that PETCO is moving away from being just a pet-supply store to also being a pet store. Placing live animals "store center to further increase sales" is an aggressive strategy that will encourage impulse sales.

The article went on to state that Mr. Myers sees the biggest growth catalyst as the "increasing humanization of the way we view pets." It is unfortunate that Mr. Myers fails to recognize that treating intelligent and active animals as merchandise and shuffling them through a mass distribution system is anything but "humanizing."

Another example of the foray into marketing live animals is PETsMART's Preferred Birds, a partnership owned and operated by PETsMART and Kaytee, a leading bird food manufacturer. This program involves the shipment of unweaned birds from breeders to PETsMART's holding facilities, where they are prophylactically treated with antibiotics, "hand-raised" — a term which can be misleading as birds are fed by tube or "gavage" methods — and then shipped to PETsMART stores. The program has been denounced by respected avian behaviorists, veterinarians, breeders, and trainers because it significantly reduces the time necessary for the normal social, physical, and emotional development of parrot chicks.

The Association of Avian Veterinarians' (AAV) Position Statement Regarding the Sale of Unweaned Birds states, "The AAV opposes the sale or transfer of unweaned birds to individuals known not to possess the necessary level of experience in accordance with accepted avicultural industry practices." Further, "The AAV strongly recommends that birds be of sufficient age and condition before undergoing the rigors of transport, and that said birds be capable of withstanding the complications associated with such transport."

Again, PETsMART has not divulged the actual number of birds produced annually through this program. However, when the Preferred Bird Program first gained public notoriety through The Pet Bird Report in the spring of 2000, PETsMART veterinarian and Director of Quality Assurance for Pet Care, Dr. Nick St. Erne, proudly claimed that each production facility would be capable of holding 3,000 chicks at a time thereby delivering 180,000 a year to PETsMART stores. At that time five such facilities were planned. Considering the potential longevity of species commonly sold, simple arithmetic illustrates a looming crisis.

Both PETCO and PETsMART are pursuing a marketing strategy that aggressively promotes live animal sales as a means to maximize profits and generate more product sales. And the two companies are expanding to new locations (both indicated goals of 1,000+ stores nationwide), creating an even bigger distribution system that will bring more animals to market than ever before. More stores will result in more animals being sold and, inevitably, the potential for more to become displaced.

As publicly traded companies, both PETCO and PETsMART are focused on bottom-line profitability and enhancing shareholder value for their investors.

Question to be asked: Should profits decline, how will this affect policies and operating expenses related to key areas of animal care, including qualified staffing and veterinary services?

Wall Street: The Tail Wagging the Dog

The growth and profitability of PETCO and PETsMART, along with the expansion of the companion animal industry, is leading other players onto the field and sparking the interest of Wall Street investors.

The March 2004 issue of Pet Product News featured an interview with the representative of a Chicago-based investment bank who stated, "The pet industry will remain an attractive target for investors for the foreseeable future." He went on to explain that his firm is "positioning itself as a leading advisor for both pet industry companies and outside investors seeking to break into the sector, with an emphasis on middle-market companies with annual sales between $15 and $500 million."

Pet Supplies Plus, a chain of 200 stores is following in PETsMART and PETCO's footsteps. While President and CEO Harvey Solway stated, ‘We never carry dogs or cats. Dogs or cats that you would see in a Pet Supplies Plus store are there for adoption events we sponsor with various animal rescue organizations," most of their stores carry freshwater fish, small animals, birds, and reptiles. Pet Supplies Plus also plans to carry more livestock in the future.

Keep in mind that there is no federal regulation governing the treatment of animals in retail pet facilities. While each of the fifty states has enacted its own unique animal anti-cruelty statutes, only twenty-four states have enacted laws that establish some form of humane care standards for animals kept at pet shops. Most pet shop laws barely cover minimum standards of care for cats and dogs, let alone provide for the complex care of exotic species.

According to the American Pet Products Manufacturers Association, the amount Americans spend on pets and pet care has doubled in the last ten years, from $17 billion in 1994 to $34.8 in 2004.

The fact that people are spending more on products and services to improve the lives of their animals is certainly good news, especially for the animals.

However, of that figure, more than $1.6 billion is now spent annually on live animal purchases…a sad fact considering that humane societies and animal control organizations are still struggling with the difficult issues of "surplus" animals. An estimated 5 million dogs and cats are still being put to death each year, and this figure does not take into account birds, small mammals, and other exotics.

Questions to be asked: Is the success of the pet industry sector leading to a situation in which the bottom line will end up taking priority over what best serves the welfare of animals? And what will the consequences be for animal welfare, protection, and rescue groups already working with limited funding and resources? Will they ultimately be dealt the job of caring for the casualties of the pet industry's prosperity and lack of restraint?

Consistency and Credibility: That Is the Question

Unfortunately, those dedicated to working for the welfare and protection of animals know all too well the tragic results of having too many animals and not enough good, qualified placement options. "Spay/Neuter" and "Adopt, Don't Buy" have become mantras — constant reminders to engage the public in our battle to curb pet overpopulation.

But our message regarding the policies of all retailers has not been as consistent nor as clear. For instance, when Woof & Co., a chain of upscale pet-lifestyle stores, announced its plans to sell puppies supplied by a Missouri-based puppy broker, the Hunte Corporation, they drew sharp opposition from animal welfare organizations and activists everywhere. Petland has been the target of animal protection groups for years. So why does the roar die down to a hush when it comes to animal sales at PETCO and PETsMART?

In summary, now is precisely the time that PETCO and PETsMART's practices and policies regarding the sale of live animals should take center stage for animal welfare advocates.

True, both companies have supported humane societies and rescue groups by providing funds and by sponsoring the adoption of homeless dogs and cats as opposed to selling them — policies that raised PETCO and PETsMART's status in the animal protection community. They should be commended for their efforts to curb pet overpopulation and provide assistance to animals in need.

But we are sending mixed messages when we tell the public not to support mass breeding and to reduce pet overpopulation by not shopping at stores that sell puppies and kittens, yet continue to advocate for two companies that are building a mass merchandising operation for birds, reptiles, rabbits, and other animals based on the very same conditions we've been opposing for years. Despite the sterling example that PETCO and PETsMART have set for dog and cat welfare, the bottom line is that they are in essence engaged in the very same distasteful retail practices that treat live animals as merchandise and encourage the very conditions that lead to pet overpopulation.

Question to be asked: Where do we draw the line?

Selected Related Articles:

"Animals in the Retail Industry," Monica Engebretson, Senior Program Coordinator, Animal Protection Institute

"How Much Is That Doggie in The Window? (Answer: Not enough to justify appropriate vet care if the doggie should get sick before being sold.)," Francis Battista, Best Friends Animal Society

An Open Letter to Humane Societies

Footnotes:

¹ PETsMART 2004 Annual Report

² Interview with PETCO CEO Brian Devine, Morning Call, CNBC, December 20, 2002. Quote: "Live animal sales actually are less than 5 percent of our business."

Copyright © 2004 & 2005 by Denise Kelly, Avian Welfare Coalition, (Revised August 17, 2005)

All material Copyright © 2002–2010 Avian Welfare Coalition, unless otherwise noted. Contact us to request reprint permission.