In last week’s Viewpoint, Jeff Santosuosso recognized the level of innovation as presented by emerging companies at the Kansas City Animal Health Corridor Summit meeting last month.  His weekly question then asked what you see as the source of most of the innovation; Corporate R&D, Animal Health Start-ups, Outside our Industry, Universities, or Digital/Data enterprises?

You said the source is:

I went back to the program from the KCAH Corridor Summit to see where the technologies disclosed by the 13 selected emerging companies that presented at the Summit would fit on this scale.

I found, as best as I can tell, that the actual sources are:

* Not a surprise, since the big pharma companies seldom seek investment partners and don’t generally disclose research projects prior to launch.

Most of the “Outside our Industry” sources were in-licenses from human health research projects or technologies.  It seems we have a healthy mix of sources of innovation as evidenced by the program at the KCAH Corridor Summit.  If these 13 companies are an example, our industry pipeline looks promising, with a broad range of offerings to come, and multiple pathways available for good ideas to reach the market.

Jim Kroman

Our industry’s innovation is alive and well! Thanks to the Kansas City Animal Health Corridor for another fine Investment Forum. What a great opportunity to see old friends and colleagues and make new ones. We joke about two degrees of separation in our industry, but it’s a reality. For veterans to see talented and committed new faces along with the energy and fresh perspectives they bring is reassuring and uplifting. It bodes well for our industry.

I saw an array of innovation. From emerging companies ranging in products and services from sea life to pest control, oral hygiene to virus prevention, supply chain to block chain, and oncology to delivery mechanisms, I witnessed a slew of fine ideas finely presented.

I see new products and services that would have been unimaginable just a few years ago. Along with dedicated corporate R&D teams, universities, startups, and clever entrepreneurs are fueling innovation, often assisted by financial and strategic partnerships.

We congratulate the presenters and thank our hosts and look forward to upcoming meetings and the innovation and growth they bring. Whether you seek assistance with development, partnering, or commercialization, or whether you need to find that top talent to supercharge your organization, Brakke Consulting can help.

Jeff Santosuosso

I hope everyone had a nice summer and got to spend time with friends and family!

Last week I was in Vail for a few days and got back home at the end of the week in time to attend a rodeo in Eureka, Kansas. So you go from a place where people like to dress up like cowboys- to a place there are only real cowboys(and Cowgirls)!

What I admired most about the rodeo and its participants was their tenacity and unyielding ethic to perform and have fun.

It seems each year there is a big thunderstorm which they work around to pull off the evening. And this year was no difference.

As the first storm hit, the US flag was presented and we sang the Star Spangled Banner(nobody kneeled of course). Then it was fun time as all the events were held with rain and lightning all around. Now mind you at a  college football game we have to leave the field for 30  minutes every time there is lightning nearby. Not with these folks!

Cowboys and Cowgirls carried on as impervious to the weather because there is no margin for the conducting the event, and of course anyone who willingly gets on a bull or horse who’s one objective is to throw you off- well, they certainly have an inherent high risk tolerance.

The rodeo competitors and the support staff are usually on the road full time, arrived earlier in the day, and as soon as they are finished- hit the road to the next location, sometimes driving all night. With muddy, wet clothes and sore joints, I am sure.

What I believe is the real story in all of this- is about how this group of people demonstrate every week a very positive way of how to deal with risk and combine it with a tremendous work ethic(and adrenaline). This high tolerance of risk, plus a duty to perform no matter what- is really what made America great. And we as a country need to find a way back to this in a big way.

Some examples of high risk and work ethic from our past include buildings structures like the Hoover Dam, or the San Francisco bridge, which in at that time only took 4-5 years to build(along with a cost of worker’s lives). Compare that to today – and we can use the example of the great California High Speed rail project – which began with a successful ballot in 2008. Construction began in 2015 and it is now estimated to be finished (if ever) in 2033. Wow.

In our nation’s workforce, while starting during COVID, the ‘Great Resignation’ and ‘quiet quitting’ are still plaguing today’s workplace environment. Is it any wonder that things just don’t seem to work, but costs continue to go up. Just go fly on any commercial airline to experience firsthand.

In my view, we must help reset our culture in work back to a penchant for high risk tolerance, along with a strong work ethic, to build a strong, growing economy and country.  Each of us individually can reset the scale and help encourage and mentor the younger generations. This will bring innovation, high customer satisfaction, and a good feeling about what you do and what you have accomplished. Maybe then we would stop talking about DEI, man-made climate change, and other such vicissitudes.

How is it in your company? Do you have a strong culture of risk tolerance and willingness to accept the occasional failure? And are you really customer focused and committed to your job? Did you make one more sales call- or call it day at 4pm?

Paul Casady

The pressure on protein integrators continue to escalate from both consumers and the retail and fast-food sectors to provide less expensive, chemical and antibiotic-free, organic choices.  A difficult challenge, indeed.

Savvy consumers continue to demand safe, affordable food.  With a continued rise in the desire for antibiotic-free and organic products, producers have pivoted to fill that market.   However, it has been at a high price as their options to keep animals healthy diminish driving up production costs.

Retail chains have also squeezed protein producers reducing margins as well.  Consolidation among retail grocery chains has given them additional leverage. Large organic sections are now commonplace in almost all grocery stores, no longer can it only be found at Whole Foods.

There is help for producers on the horizon as Animal Health companies have realigned their R&D resources to focus on nutritional health and non-drug options.  Delivering these options is generally quicker and less expensive than animal drug approvals.  The ability to demonstrate efficacy and plausible data has improved significantly too.  A strong focus on the microbiome, vaccines, and natural ingredients has been an emphasis.  The technology in this space is continuing to show glimmers of providing real alternatives to antibiotics.  Any R&D dollars dedicated to drug products are now focused on high margin companion animal products.

Despite the challenges, the demand for protein globally continues to grow as 3rd world countries’ economies improve and develop.   Protein integrators are still poised and ready to feed the world.

Simon Hall

I’ve recently been involved in a project related to feral pets and shelter adoptions. That experience has heightened and renewed my focus on the subject. Hill’s just reported a “State of Pet Shelter Adoption Report.” The news is mixed.

On the positive side, our intentions look favorable. Two-thirds polled expressed interest in adopting a shelter pet. Small dogs are the most attractive, followed by medium dogs, cats, and large dogs. Gen Zs and Millennials expressed above-average intentions.

On the negative side, nearly half say the cost of ownership is a challenge to ownership. 84% say the cost of veterinary care is the most expensive part. When coupled with a recent Brakke report, the picture is concerning. We’ve reported that the number of pet visits in clinics is flat to slightly declining. Other major reports confirm our findings. Veterinarians are using price to drive up revenues. (So are suppliers.)

While we do not expect these trends to clash to calamity, here’s another red flag. However, it’s clear that pet owners, veterinarians, suppliers, and entrepreneurs are addressing these issues. A hallmark of our industry is the ability to adjust and innovate.

Jeff Santosuosso

As most of you know, it’s quarterly earnings reporting time.  I’ll admit I was a little down in the dumps earlier this week after reading a few articles in the Wall Street Journal about companies slow or no growth.  How was the 2nd quarter for animal health companies going to turn out, I wondered.

Two weeks ago, Boehringer Ingelheim reported 1H growth of 1% (CC) but Virbac reported 1H growth of 11.3% (CC).  Last week, Nestle reported organic growth of 3.8% for its Nestle Purina PetCare business.  This week, Merck reported that its animal health business grew 6% (CC) in 2Q (up from 4% in 1Q) with the livestock business growing 11% in the quarter and the companion animal business growing 1%.  Also, Cencora’s MWI animal health business reported 6.7% growth over the last three quarters, but only 4% for the last quarter.  Finally, Colgate-Palmolive’s Hills Pet Nutrition reported organic growth in 2Q of 6.1% and 1H growth of 5.2%.

IDEXX and Zoetis report next week and Elanco after that, so we will have a better idea of industry growth this year very soon.  What is apparent is that there is softness in the companion animal parasiticide segment, which we will comment on after a few more companies report.  Even with this softness, it looks like the animal health industry is on a mid-single digit growth trajectory.  Again.

Bob Jones

Succession – Plan your endgame

In the busy day-to-day running of a business, especially start-ups and partnerships, the thought of a planned endgame rarely demands any priority and is often totally neglected until there is a real need for it.

Very often partial planning is the biggest issue. When a key partner experiences a catastrophic event, like an accident or severe health issues, a short-term plan is usually available, but the longer-term impact of the event is usually never considered.

There is no single successful endgame, and it may even change over time:

• In some businesses, a total sale is the best fit, especially when all partners have the desire to exit at the same time. In this situation, what is your plan to maximize the value of the enterprise? As partners what is your plan to ensure the business is “clean” and does not have private financial considerations? Should one partner fall away, what is the short and long term plan?
• In other businesses there may be a next generation to consider. How do they take over assets, without any major disruption?

Regardless of what the endgame is, it needs be defined and communicated to all stakeholders.  My hope is that this piece, stops you to think about the ultimate outcome of a lifetime’s work and sweat equity, which you have/are putting into your business. Why not plan early and well for a WIN?

How often do you evaluate your succession strategy, to ensure it aligns well with YOUR planned endgame?  We’d be happy to help.

Lourens Havenga

In today’s dynamic marketing landscape, effectively connecting with your target audience is crucial for business success. However, traditional demographic and behavioral segmentation methods often fall short in capturing the nuances of individual consumer preferences and behaviors.

I have been lucky to work in the companion animal, livestock and aquaculture business of several major animal health companies and have personally felt the limitations and challenges of traditional market segmentation studies.  The reliance on static criteria, like demographics, limited data sources and the lack of behavioral insights has probably held us all back from better segmentation and messaging.

But I think this is about to change. With the tools offered through generative artificial intelligence, large datasets and the ability to assess subconscious needs, desires and motivations of audiences, we can now much better segment our customers and develop messages that better hit the targeted audience.  We are working with a couple of partners to bring these new tools to the animal health industry and to our clients and are excited about what we can do with them.

Ready to elevate your marketing efforts to a new level of effectiveness? Contact me today to schedule a personalized demo and discover how Brakke Consulting can transform your marketing strategy.

Mauri Moreira

In business, “blind spots” can significantly undermine value and growth. These are the unseen or unacknowledged areas in operations that increase the chances for strategic errors, missed opportunities, and catastrophic failures. Blind spots can arise from overconfidence, cognitive biases, ignoring consumer trends, insufficient data analysis, ineffective communication, and resistance to digital technology.

Consider PetSmart’s acquisition of Chewy in 2017 for $3.35 billion. Aiming to boost its online presence amid declining brick-and-mortar sales, this strategic move was meant to compete with Amazon and other e-commerce giants. However, the complex integration process between the two companies strained PetSmart financially. This ultimately led to significant restructuring, and in 2019, PetSmart spun off Chewy through an IPO to alleviate debt pressures.

A common blind spot in the pet care industry is ineffective communication. The 2024 Brakke Pet Medicine Home Delivery Study highlighted a couple of examples here: 1) An overwhelming majority of pet owners say home delivery helps them remember to give pet medicines, while more than half of veterinarians remain skeptical about increased compliance; 2)  75% of veterinarians say their staff actively promotes their practice’s online store and home delivery service, yet more than half of pet owners say they don’t know if their vet offers this.

Identifying and addressing these blind spots requires constant market analysis, rigorous risk management, and adaptive leadership. As the pet care industry evolves, businesses must continually refine their vision to avoid unseen challenges and ensure sustained value and growth.

Richard Hayworth

Those of us in the USA celebrate Independence Day tomorrow, July 4th.  Here in our country, as well as in so many countries around the world, we’re surrounded by division and polarization as the political noise level increases.  Independence Day is a perfect day for us to remember that we have the privilege to disagree, to dissent, to protest, to argue; but all the while we are united by so much more than the petty differences that we hear so much about.

We are united in our knowledge that we are a free people; free to practice our beliefs, free to hold opinions that matter to us, free to say what we choose and free to take action on our beliefs and opinions within the framework of laws that we have created in the almost 250 year history of our Republic.

I intend to focus more of my attention on our common good and less of it on political argument.  I am proud of my country, and I will continue to be.  On Independence Day I celebrate every American who has fought to keep America free, and I resolve to help solve our problems, not to seek division and separation.  The citizens of the USA and all free countries around the world deserve nothing less.  Happy Independence Day!

Jim Kroman