Brakke ViewpointsWe are the experts in animal health
When it comes to timely hiring of top talent, we are not alone. We reported last year hiring time worsened for 59% of our industry colleagues, with less than 10% improving. And turnover increased vs. pre-pandemic and acceptance rates declining slightly.
On the clinical side, vet tech positions were averaging 9 months to fill, with veterinary roles averaging 16!
SHRM reports that hiring time is up 40% vs pre-pandemic times. As our industry innovates into non-traditional areas such as insurance, data, wearables, consumer packaged goods, and more, we’re competing for talent there. And our competition is among the most attractive and most agile in the world. One recruiting expert offers, “One reason is that the unemployment rate is very low, so people can be very discriminating in the jobs they take. Another reason is that the hiring process in many companies is a bureaucratic mess.”
Make sure your process is accessible and convenient. Follow up promptly with applicants. A good recruiter can help improve and streamline your process thereby securing that top talent you need.
Recent announcements about some key leadership positions in animal health caused me to reflect on how well our industry is doing developing new leaders.
When talent is brought in from ‘outside the shop’, or even outside the industry, it raises the question: Do companies today have strong developmental programs for developing talent that leads to a strong succession capabilities?
Many careers in the past were successful more by ‘default than design’ and maybe we as an industry could do a better job in this area. When leadership roles are filled from ‘non-industry’ persons, the reasons can vary, but generally are reflecting a need of change or a perceived lack of talent for the role. But the message to some may be: ‘that there are limited career paths for me at this company.’
It is critical to understand the process of career development which is a combination of formal training and well thought out career development steps. Another way of thinking is the ‘horizontal’ development of a person, through thoughtful application and attendance to formal education programs to augment the professional portfolio of skills and knowledge. And the ‘vertical’ development of a person, providing the individual with professional challenges through time that push the person both from a scope of responsibility(sales volume, direct reports, etc.) and even a cultural challenge, working in different cultures and possibly living abroad while taking on the professional role.
All of this, however, requires a two way commitment: both the company and the employee. And my advice is to take charge of your own career!
My colleague, Jim Kroman, recently wrote about the confusing messages we receive regarding the state of the economy and inflation rates. While we hear inflation, which is the rate of price growth, is moderating, prices are now at a much higher level than they were just 2 years ago. We are seeing a slowing of food price growth but are not seeing actual price decreases with the exception of the price of eggs which has declined due to increased supply, bouncing back after the decimation that avian influenza had on layer flocks.
One of the biggest costs of pet ownership is the cost of pet food. Pet food inflation continues to be stubbornly high with prices growing +13.8% in May 2023 vs. May 2022, a rate that is three times the rate of the Consumer Price Index growth of +4% and price increases for human food of +5.8% for the same period. The good news (?) is that the rate of growth is down from +14.6% in April.
Per the St. Louis Fed economic data, the Producer Price Index for dog and cat food manufacturing has grown +14.3% May 2023 vs. May 2022. Part of the rationale for the hefty increases centers around the average producer price increases for key inputs such as rendered meats and meat by-products, which has grown +22% during the same period of time. Some of these inflation trends have plateaued. Will prices actually decline, or will they be stuck at the higher levels for a while? As you can see, having a four-legged family member is now an even more significant financial commitment – will this impact future pet ownership?
What is the fastest growing pet product in the US? A case can be made for pet health insurance. The industry has been growing at more than 20% per year for more than 5 years. Revenues in 2022 were $3.5 billion, 23.5% higher than 2021, according to NAPHIA, the North American Pet Health Insurance Association. There are now nearly 5 million pets – mostly dogs – covered by pet health insurance.
What’s driving the growth? There are several likely factors. Veterinarians – the number one influencer – have embraced pet health insurance more enthusiastically thanks to educational efforts by NAPHIA and its members. Veterinary costs are rising due to inflation and more advanced, more expensive medical treatments. And pets owners are more emotionally attached to their animals than ever before, willing to protect their health.
Even with this rapid growth in the US market, we get asked frequently why pet insurance here isn’t as common as in many European countries. There are several reasons, but the most important is that the industries are not comparable. The US is a much more regulated insurance market; policies are sold by licensed insurance agents. Veterinarians for example, can’t sell it. In many European countries pet insurance is much more of an OTC product, similar to travel insurance here.
Am I the only person reading current economic news that feels perpetually confused? I read that inflation is coming down (albeit slowly), interest rates are poised to rise slightly (but not too much) higher, employment levels continue to grow, and we are facing a recession in 2023 / 24 (or maybe not!). My guess is that at least a few of your share this confusion, which of course brings apprehension as well. Are we doing the right things, and do we even know what the right things are?
Times of uncertainty often call for us to go “back to basics,” to be sure that we are managing the small things. This could mean a careful focus on cost control, aggressive marketing efforts to develop new customers and clients, renewed efforts to simplify our purchasing and inventory management so that the right products are available at the right time, etc. These are generally the building blocks that successful businesses are built on; and they are effective actions at almost any point in your business’ life cycle.
Whether you manufacture goods or operate a veterinary practice, think about the basics that keep your business going. Now is the time to be sure that you have control of the issues that you CAN control. None of us can control the overall economy, but we can make sure that our life – and our business – is in the best possible shape to withstand the pressures of the unknown.
On a recent visit to suppliers of animal health products, which had significant store front, I had the opportunity to interact with both the suppliers and some of their clients. I posed a question to both, regarding control of the purchasing decisions.
It was very clear that even though a massive evolution has been and is actively taking place, at least on the cattle side of things one factor remained the number one controlling factor!
Some older clients remembered the days of store credit. Well, credit cards have now replaced that to a major degree. Pricing was obviously expected to be a key decision factor, but most clients felt that due to web-based transparency it is easy to ensure/check parity these days. Reliable information on product choice is becoming a bit more difficult due to oversupply of choice and information, especially via social media. Ease of ordering online has removed some of the time spent in the store, but all clients agreed they still regularly spoke to the folks at the supplier.
I was surprised to see several of the regional suppliers actively in expansion mode, either adding people or floor space. A second observation was that several organizations were truly transforming into family businesses, where the next generation was becoming more actively involved in management and interacting with the client base.
So, what was the number one consideration for suppliers, to ensure that clients would remain loyal; and what was the number one client pre-requisite for motivating them to remain a loyal client?
Both were 100% aligned – simply: TRUST!
It should really not have come as any surprise, as the decision of many folks on how and where they buy their food has shifted to people or organizations they trust; and they are building long term relationships. So, why not animal health supplies? This was not new, just confirmed.
As suppliers or manufacturers, what are you doing to build and/or ensure trust with your client?
I very recently joined Brakke Consulting to help the company expand into Latin America – and this is my first Viewpoint. I know most of you are based in the US, but I would think that many of you have traveled to Brazil and perhaps know a little about Latin America’s largest animal health market.
While The Brazilian animal health market has always been recognized for its dynamism in the farm animal segment, the pet market continues to emerge as one of the most significant ones in the world. According to Emilio Carlos Salani, EVP of Sindan, Brazil’s animal health industry association, even with the economic difficulties caused by a pandemic, the country saw a 30% increase in companion animal ownership in 2021. He feels that this expansion in pet ownership is very much related to the commitment of pet owners to offer the best in terms of food and health for their pets.
The growth in ownership of pets has directly impacted the veterinary industry and Sindan’s Market Information Commission forecasts growth in the companion animal veterinary segment by 16% for 2023 and 15% for 2024. So, there is no crisis in the Brazilian pet market! Always known for being an important market for parasiticide products, the Brazilian market is now open to innovations from around the world. The veterinary profession is rapidly developing in terms of veterinary specialties and sophistication and if you’d like to know more about the opportunities Brazil offers to animal health companies, we can help.
Mauri Ronan Moreira, DVM, MBA
H.G. Wells famously wrote, “Adapt or perish, now as ever, is nature’s inexorable imperative.”
Ironically, as humans, we tend to be creatures of habit, which means we’re oftentimes reluctant to changes that must occur to best adapt and adjust to our changing environment.
Essentially, change is inevitable, and the ones who don’t adapt will be left behind. And, now with rapid advancements in computing technology – think AI, autonomous driving, Google Maps — the “evolution of the ever-changing” is happening much faster than previous generations.
Managing this change dynamic is especially important in today’s business world. For example, COVID-19 pushed many consumers away from retail stores and into online shopping platforms with home delivery options and/or online shopping with curbside pick-up. Businesses from Amazon to pet product manufacturers and veterinary hospitals to Apple stores have all made significant changes in day-to-day operations in effort to meet different customer needs.
Once popular retailers like Bed, Bath & Beyond, Party City and David Bridal have all recently filed for bankruptcy. However, people haven’t stopped sleeping in beds, having parties or getting married.
In reality, the key driver behind these downfalls is inexplicably linked, in one critical way or another, to the failure to adapt to the changing environment in which it finds itself.
It’s becoming hard to avoid hearing about artificial intelligence (AI) and how every company has or will have a generative AI engine, which will cut costs and eliminate thousands and thousands of jobs. Well, to quote Yogi Berra, “It’s like déjà vu all over again.”
Back in 1982, John Naisbitt authored a book called “Megatrends” in which he chronicled ten new directions that were transforming our lives. This was a time when we were transforming from an industrial era to an information era. Apple, Tandy (Radio Shack) and Commodore all launched PCs in 1977 and IBM launched it’s more muscular PC in 1981. I have always remembered this megatrend: “High Tech/High Touch” – the more we become surrounded by high technology (or the more it is forced upon us), the more we value the human touch in our lives.
I feel like this is where we are with Chat GPT and its cousins: the more AI is forced upon us, the more we will value “High Touch” in our lives. The animal health companies, including veterinary clinics, that will use AI to make their employees and customer experiences better – more personal, warmer – will be the winners in the long run. The goal of this technology should be to make our lives richer, not so companies can reduce payrolls. Remember, it’s all about people.
The Society for Human Resource Management, SHRM, just posted two warnings. For the first time, productivity dropped for five consecutive quarters . Meanwhile, compensation rates reached their highest level since the 2008 financial crisis .
Together, these factors might send finance managers and stockholders swooning. While SHRM makes no connection between them and recent stock market stagnation, they send reassurance.
For inefficiency, SHRM points not to hybrid work itself, but to its poor implementation. They also point to high turnover and adoption of technology.
For compensation, they point to tight labor markets. They add that life sciences has increased compensation at the highest rates. However, they note that 2023 projections look to slow from 2022’s peaks.
For suppliers to our industry, the effect of these trends is not yet clear. We continue to enjoy a robust industry which finds ways to overcome many obstacles. Yet while it’s unclear if veterinary hospitals are less efficient, we’ve seen spikes in compensation. These rising cost are offset by rate increases. Will those efficiency losses and wage pressures catch up with us?