KEEPING THE INDUSTRY INFORMED SINCE 1999

About this time last year, we wondered if the US economy would enter into a recession in 2024.  And here we are looking ahead to 2025, not wondering too much about a recession but more about what effects new policies from a new administration in our nation’s Capitol might do to the economy in 2025.   Increases in tariffs, changes in immigration and tax cuts are policy changes that will affect the economy, but many view that with these policy changes, consumers will still be spending and will drive growth.

This last edition of News & Notes summarizes the things that happened in 2024 that we covered each week throughout the year.  From acquisitions, mergers, company news, launches, approvals and deals, you’ll be reminded of what happened.  You can find all the newsletters here if you’d like more detail on a noteworthy item.

Thanks should go to two members of our team.  Dr. Lynn Fondon has been the editor of the News & Notes for 25 years and succinctly curates the news items for our readers every week.  And Amanda McDavid pulls it all together and gets it out to you every Friday.  Thanks to both of you for publishing a terrific newsletter.

More thanks are due.  First, thanks to all our clients and customers and we hope that we have made your business better, more profitable, and more competitive.  Second, thanks to all the Brakke Consultants for another great year.  It is a pleasure to work with a team of industry professionals with the depth and breadth of experience and knowledge they have.

Finally, thanks to you, our News & Notes readers and we hope our weekly newsletter has helped you do what you do better.

Bob Jones

A little over two years ago, Covetrus, one of the US’s big three animal health distributors, became a private company after the acquisition by funds Clayton, Dubilier & Rice and TPG Capital and we learned this week that another of the big three is also going private.

There was a hint of something strategic happening at Patterson Companies during the company’s 2nd quarter earnings call last week.  The company announced this week that it will be taken private by Patient Square Capital in a $4.1B deal.  Through the 2Q, which ended in October, Patterson had YTD revenue of $3.2 billion (83% in the US) with $2.0 billion coming from its animal health business and $1.2 billion from its dental distribution business.  The animal health distribution business is almost twice as large as the dental business and was performing better than it too.

We also note that the biggest competitor to the big three, Midwest Veterinary Supply, closed last month on its acquisition of Victor Medical, which provided Midwest greater access to veterinary clinics in the western US.

Publicly-traded companies turn into private companies for lots of reasons: freedom from public market scrutiny, strategic and operational flexibility, valuation and market discrepancies, and several others.  We will have to wait until next year to see what changes are ahead for Patterson but we hope they are all positive.

 Bob Jones

I hope that most of our readers recall that I am one of the newest consultants to join the Brakke Consulting team and that I am in Brazil.  So, sometimes I see things from a different hemisphere.

I am also an individual who frequently engages in sports, which benefits both my body and mind. One morning this week, I went for a run in a nearby park and listened to a morning news radio program. An interview with an agribusiness opinion leader caught my attention. He shared his outlook for the coming years, considering the recent surge in exchange rates in Brazil, with a 3% currency depreciation last week and around 20% in 2024.

Brazilian agribusiness will once again benefit from growing international demand for proteins produced here. With increasing protectionism in the U.S. starting in January under the new administration and potential tariffs on Chinese imports, a possible Chinese reaction to U.S. food imports may occur. This dynamic reinforces the positive effect on Brazilian agribusiness: both from a stronger dollar, as Brazil’s exports are sold in local currency, and new demand for Brazil’s proteins from the Chinese market.

Brazil’s agribusiness will continue to be the growth engine of the country’s economy. Changes in the northern hemisphere will likely benefit Brazil from this new market dynamic.  If you see an opportunity for growth in your business here in the southern hemisphere, we can help.

Mauri Ronan Moreira

Home Delivery as a Drop-Ship Business: A Growing Opportunity for Veterinary Practices

Home delivery is much more than a convenient service for pet owners—it’s an opportunity for veterinary practices to drive in-house pharmacy revenue while streamlining operations. Adopting a drop-ship model (and mindset) for pet medications, diets, and wellness products provides several immediate benefits including better compliance, reduced inventory management burdens and improved staff efficiency.

The drop-ship model allows practices better manage valuable pharmacy and clinic space, reduces the risk of expired or overstocked items and helps prevent theft. Products shipped directly from suppliers to clients simplifies the logistics and allows staff to focus more on patient care.

From a business standpoint, analysts suggest aiming for profit margins between 20-30% to ensure a healthy return. While these margins may seem considerably lower than those from in-clinic sales, the reduced labor and operational costs associated with drop-shipping make it an attractive option.

As with nearly all personal interactions in life, clear communication with clients is key to making this successful. Promote auto-ship option to lock-in repeat purchases, offer bundled wellness packages, and implement loyalty incentives to encourage repeat replenishment purchases.

For practices looking to stay competitive and meet client expectations, managing home delivery through a drop-ship model is a smart move. It combines convenience for pet owners with profitability for the practice—offering benefits for everyone involved.

For some reason this month seems to be a time of recollection for me.  Perhaps it is because I recently heard about the untimely death of a gentleman that I hired into the animal health industry back in the 80’s who passed away suddenly.

In any event, I keep recalling different men and women that I have worked with over the years.  I have been blessed with the opportunity to get to know some remarkable people at the places that I worked.  I have always heard people in our industry say that “… no one ever leaves animal health, they just change companies!”  Now that I have the benefit of looking back over so many years, I see the truth in that statement.

As we prepare for our American Thanksgiving holiday in two weeks, I plan to remember to give thanks for all of you in this industry who have been a part of my business life.  Some of you are lifelong friends; others are those with whom I may have shared some brief interaction.  No matter, I have truly enjoyed sharing opportunities with wonderful people.  And best of all, I continue to have the experience of getting to know more and more people in this great industry.

Jim Kroman

“Marcia, Marcia, Marcia!” If you’re a Baby Boomer, you know exactly what that means. “That’s sketch, that’s sus, that’s skibidi.” If you’re a Gen Z, you know exactly what that means. No cap.

What’s the fuss? Gen Z is now 20% of the US population, continuing to grow – continuing to demand your attention. Consider these three points about Gen Z:

• Covid reduced their personal socialization
• They’re hooked on Amazon
• They’re fluent in technology

These strike us all, whether we’re recruiting and hiring them or marketing to them. Gen Z’s need more attention and socialization than you might anticipate. Those who join your team, will require more coaching.

They expect instant results and are using AI, etc. constantly. Deliver. That’s what they expect. Your message must break through instantly. They don’t wait around for results. In fact, they’re huge consumers of “Buy now, pay later” plans.

EMarketer claims ads aimed at Gen Z’s have 1.3 seconds to win their attention. Instagram and TikTok dominate.

This brief article barely skims the surface of this demographic. We encourage our readers to pursue this topic. To ignore this Megatrend may make your actions look downright skibidi.

Jeff Santosuosso

In September I attended the World One Health Congress- followed by the United Against Rabies Forum in Cape Town, South Africa.

At the WOHC, there were 1,400 participants from 87 countries, and over 70 sessions containing 400 speakers and 600 scientific posters. Certainly one of the most important forums in the discipline of One Health with a full discourse on the intersectionality of human health, animal health, and environmental health.

The impact of Animal Health in the One Health challenge cannot be underestimated and certainly we(in Animal Health) have an important role in being part of the solution in controlling diseases that could eventually affect mankind.

High Pathogenic Avian Influenza received much attention during the event as we see the virus jumping species and as of September, according to the CDC, 14 cases in humans have been identified.  Plus reports of sea lions, pelicans, and other species having high mortality in the face of exposure.

At one of the panels on HPAI, the question was raised: why are we not vaccinating poultry, outside of a few countries? Certainly by doing so we could reduce significantly the amount of virus in the environment.  Responses pointed primarily to the complexity of the export restrictions of countries do vaccinate. However, many feel that eventually the social pressure will be too much to allow the virus to continue as is. And there is a real  fear if there is a mutation that it could become the next ‘Covid in humans’.

It is clear that HPAI is a One Health issue and my view needs to be addressed in a proper pragmatic scientific and economic approach. However, we need all the stakeholders to come together with a proper solution that involves the poultry industry, Animal Health companies, WOAH, WTO, and Governments to agree on a pathway forward to reduce the threat of HPAI.

Paul Casady

Finally, election season is upon us.  But for finance nerds like myself, earning season is here as well with 3Q24 corporate earnings reports beginning in early November.  It will be very interesting to see not only what the companies have to say about third quarter results but what signals they send for the rest of 2024 and 2025.

I recently saw some data from Vetsource that indicates that through the end of September, foot traffic through the vet clinic is down by -1.8% vs. 2023.  However, at the clinic level, revenues have increased by +3.1% indicating a continuation of solid price contribution.

In the companion animal space, innovation is the most critical driver of growth.  Elanco for example, is about to enter a wave of new product introductions in some of the largest market segments including flea/tick/heartworm (F/T/HW) and dermatology.  BI recently launched NexGard Plus in the US.  Zoetis’ growth in F/T/HW, dermatology and osteoarthritis is unmatched and Merck has received approval in Europe/Australia on the next wave of F/T innovation with a long-acting injectable product.  All of these therapies come with higher price tags.

Will this innovation be enough to continue to drive growth?  Will these products, especially the injectables and monoclonal antibody products, drive pet owners back to the clinic or will the increased prices finally create a breaking point for consumers?  We should get a glimpse of this as 3Q earnings and 2024/2025 projections are communicated.

Randy Freides

As we reported earlier in the newsletter, this month Mars released its Global Pet Parent Study. This survey of 20,000 dog/cat owners and non-owners covered 20 global markets including North America. Their survey found that 47% of dog and cat owners were first-time owners, which was higher than I would have expected.

The Mars study also looked at generational differences in pet ownership. The study found that the younger the pet owner, the more pet-centric they are: Generation Z owners (18-27 years old) were 50% more likely than Baby Boomers (60+) to say their pets are “the most important thing in their life.”  Gen Z owners also placed more importance on products that are sustainable and ethically produced. The AVMA’s 2022 Pet Ownership and Demographics Sourcebook also identified different preferences in veterinary care: younger pet owners (in this case, Gen Z and Millennials) were three times more likely to value telemedicine and curbside service, compared to older pet owners.

A pet owner’s age impacts their approach to their pets’ healthcare, and understanding the nuances of generational approaches to pet ownership can help make your marketing programs more successful.  Let us know if we can help you investigate these trends.

Lynn Fondon

Congratulations to AVMA for another outstanding Veterinary Business and Economic Forum!   This virtual event attracted more than 400 attendees, the most ever.  Keynote speakers included Dr. Adam Grant, organizational psychologist and best-selling author at the Wharton School, and Anders Sörman-Nilsson, global futurist and founder of Thinque.  Sörman-Nilsson is an expert on use of AI.  The AVMA also released a wealth of new data on pets, pet owners, veterinarians, veterinary practices and best practices.  The research shows that while client satisfaction with veterinary services is extremely high, the profession is experiencing a pull-back in patients, visits and revenue since the pandemic peak.

During the Forum I announced results of a new Workforce Study we just completed on behalf of AVMA.  We had the opportunity to collaborate with Dr. Matthew MacLachlan, an economist and expert in forecast modeling at Cornell’s Center for Veterinary Business and Entrepreneurship. Contrary to what you might have read elsewhere, we could find no evidence of the likelihood of a dire shortage of veterinarians in the next few years.  On the contrary, if 13 proposed new schools come onstream, it will take a significant uptick in pet ownership and/or demand for veterinary services to avoid a negative economic impact on the profession.  Over the last 15 years, the profession has experienced both soft and tight labor markets, and will again in the future.  But they’re episodic, not permanent.  The study has been submitted for publication and should be available in the next few weeks.

John Volk