Candy and pet-food-maker Mars Inc., based in McLean, Va., is buying Los Angeles-based animal health care company VCA Inc. for $93 a share or $7.7 billion, or about $9.1 billion including $1.4 billion in debt.
VCA, which operates a network of animal hospitals, veterinary clinics and owns diagnostics businesses in North America, will operate as a distinct and separate business unit within Mars, whose net sales exceed $35 billion across six business segments including Petcare, Chocolate, Wrigley, Food, Drinks and Symbioscience.
The acquisition will help Mars become a bigger player in the global market for animal healthcare, an overall market that is projected to reach $44.4 billion by 2020. It also means that being a CPG/FMCG giant in candy and gum are no longer the biggest business for Mars, as its portfolio shifts to pets and pet-related services.
Already one of the world’s leading pet care providers with a commitment to create ‘A Better World for Pets,’ pet care has been part of the Mars portfolio for more than 80 years, with a portfolio of veterinary services that already includes the Banfield Pet Hospital, Bluepearl and Pet Partners.
The company’s mission is high quality care for pets from wellness and prevention to primary, emergency and specialty care and the 2015 acquisition of pet tech company Whistle, along with Wisdom Panel, has increased Mars Inc.’s acumen in pet DNA testing.
“We are thrilled to welcome VCA to the Mars family and to our portfolio of brands and businesses around the world,” stated Mars CEO Grant F. Reid about the deal.
“VCA is a leader across pet health care and the opportunity we see together—for pets, pet owners, veterinarians and other pet care providers —is tremendous. We have great respect for VCA, with whom we share many common values and a strong commitment to pet care. Together, we will be able to provide even greater value, better service and higher quality care to pets and pet owners.”
— Mars, Incorporated (@MarsGlobal) January 9, 2017
VCA was founded in 1986 and today counts 800 animal hospitals with 60 diagnostic laboratories throughout the US and Canada—and feels it’s found a perfect companion in Mars to continue growing its business. As VCA CEO Bob Antin stated in the press release, “Mars has a long-standing commitment to pet health, wellness and nutrition. We will work together every day to continue to provide the quality care and excellent service VCA is known for to our clients and their pet families.”
— TheStreet (@TheStreet) January 9, 2017
Mars Global Petcare President Poul Weihrauch commented that, “VCA’s philosophy of partnering with the veterinary profession and educational institutions is aligned with our core values and culture. We look forward to together providing the best care possible for pets.”
The future looks bright. Pet ownership in developed and emerging markets is on the rise, as Euromonitor pegs the fast-growing global pet care market at nearly $104 billion and vet services at more than $75 billion. In the US, pet-related spending was $62.8 billion last year, up more than 60 percent from a decade ago according to research by the American Pet Products Association. One quarter of that US spending was on veterinary care.
Euromonitor explains the continuing growth of the pet-related market:
“Pet humanisation continues to deepen, as the companionship provided by pets, particularly cats and dogs, appears to address a fundamental psychological need in many people as society becomes more urbanised and atomized.” In addition, “electronic gadgets for pets that are controlled by smartphones, such as interactive toys, smart feeders and Fitbit-style activity trackers, are growing in popularity, boosting sales in the other pet products segment.”
So as Bloomberg comments, Mars is indeed smart to invest in pet care and wisely hedging its future on a growth industry, pet care, as its historic focus on candy needs to shift:
“Sales growth in the candy market, including chocolate treats, is getting tougher to come by, particularly in the U.S. The $13.7 billion of chocolate candy sold in the year through Dec.4 was up just 1 percent from the year-earlier period, while volume was down 0.6 percent, according to Information Resources data compiled by Bloomberg Intelligence. Pet food, on the other hand, is the food industry’s most-promising category, with Euromonitor International forecasting a 2.5 percent compound annual growth rate for the next five years, compared with 1.3 percent for packaged foods overall.”
The Mars portfolio of brands includes M&M’S, Snickers, Dove, Milky Way, Uncle Ben’s and The Bright Tea Company. And now – as consolidation and an explosive pet care market coalesce – Mars is setting the table for the growing ranks of animal lovers and the businesses that serve them.