Pet retailer founded by brothers attracts $586m investment from Woolworths – Sydney Morning Herald

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By Emma Koehn
Updated

Woolworths chief executive Brad Banducci has expressed confidence that the COVID-19-induced spending surge on animals is not over as the retail giant forked out $586 million for a majority stake in Ballarat pet food supplier PETstock.

The groceries giant confirmed the PETstock investment on Thursday, which was foreshadowed earlier this week and was funded by a sell-down of its stake in Endeavour Group, the owner of a string of alcohol retail chains including Dan Murphy’s and pubs across the country.

Banducci said the animal-care sector now extended well beyond the standard dog food ranges you can find in supermarkets and the retail giant’s market research revealed an opportunity to cater to all kinds of pet owners, including those in regional Australia who have bigger animals with different needs.

Shane Young (L) and brother David Young, founded PETstock more than 30 years ago in Ballarat.

Shane Young (L) and brother David Young, founded PETstock more than 30 years ago in Ballarat.

“I’ve certainly come to understand that as you get out to country Australia, there are many, many other pets that people have a high affiliation [with] and very different needs for those pets, ” he said.

“[For example] I have become pleasantly surprised by just how passionate the horse community is. ”

Banducci noted that PETstock, which was founded by brothers Shane and David Young in the Victorian town of Ballarat just over 30 years ago, connects Woolworths to these additional communities of pet lovers.

Australians spend tens of billions of dollars on their pets each year – close to 70 per cent of Australian households now have a pet, with Animal Medicines Australia forecasting that households spend about $3200 on their dogs and $2100 on their cats each year.

Banducci believes there’s still room for growth across the pet-care sector, which now goes well past food and toys to virtual vet care, doggy daycare, training and grooming services.

“There is an amazing array of services that can be provided… there is certainly more than meets the eye, ” he said.

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The group’s decision to take a 55 per cent stake in Petspiration, the company behind the PETstock brand, is also a big nod to the Young brothers, who have grown their business to a significant scale over the past three decades.

The group has a network of 276 stores as well as online retail channels in Australia and New Zealand. The company reported sales of $979 million in the 12 months in order to September 2022, according to Woolworths. The investment deal puts the enterprise valuation of the business at $1. 7 billion.

While the duo’s previous stakes within the company have not been disclosed, they will retain a 45 per cent stake in the company with existing investors, and continue to lead the brand name as a standalone business for the foreseeable future.

Companies such as PETstock have ridden the wave of rising pet ownership in Australia since the start of lockdowns. The rate of revenue growth in the pet goods sector a lot more than doubled between 2020 plus 2021, according to research firm IBISWorld.

Shane Young said the investment was an unique chance to further expand the business.

“We will operate independently of Woolworths Group but will work closely together through our common values to deliver on all the opportunities we have to jointly create value for our pet families and supplier partners, ” he said.

Australians’ pet ownership has boomed since lockdowns began in 2020.

Australians’ dog ownership has boomed since lockdowns began in 2020. Credit: Fairfax Media

As speculation built about Woolworths’ investment within the company this week, the retail giant said the deal made sense in the context from the long-term strategy.

Banducci said the retailer, which has been watching PETstock for 18 months, was inspired by the duo’s entrepreneurial spirit as well as the culture they had built at their stores.

“People love working with this business… it’s a very authentic culture, ” he stated.

The deal was funded with proceeds from Woolworths’ sell-down of a 5. 5 per cent stake in drinks operator Endeavour Group earlier this week.

It is subject to ACCC and New Zealand Commerce Commission approvals, with an expected completion date of mid-2023.

Woolworths shares opened 0. 8 % stronger to $34. 55, and was 0. 2 per cent stronger to $34. 36 at 2 . 45pm.

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