THE

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Americans nowspend i[ l;

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pets.And a lot of humans .D

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are getting rich. (PAGE
44) i
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BYDIANEBRADY , & ; r,,

,#.............
& CHRISTOPHER
PALMERI Ir
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t"4

SUBPRIME
WOES:
Who'sto Blame?

BARTIROMO:
Redstone
Talks
BEST
GLOBAT
BRANDS
THE

ECONOMY
AMERICANS SPEND
AN ASTONISHING
$+TBILLIONAYEAR ON
THEIR FURRY FRIENDS
81DianeBra$tandCltristoplter
Palmeri
PHOTOGRAPHYBY MARK HOOPER

IF THERE'SSTILLANY DoUBT WHETHERTHE PAMPERINGoF PETS

is getting out ofhand, the debate should be setded once and for all by
Neuticles, a patented testicular implant that sells for up to $919 a pair.
The idea, says inventor Gregg A Miller, is to "let people restore their
pets to anatomical preciseness" after neutering, thereby allowing them
to retain their natural look and self-esteem."Peoplethought I was crazy
when I started 13 years ago," saysthe Oak Grove (Mo.) enffepreneur.
But he has since sold more than 24O,OOO pairs (a few of which went on
prairie dogs, water buffalo, and monkeys). "Neutering is creepy. But
with Neuticles, it's like nothing has changed." Nothing, exceptthere's a
fake body part where a real one used to be.
Americans now spend $+r billion a yeEr on their pets-more than the
gross domestic product of all but 64 countries in the world. That's double
the amount shelled out on pets a decade ago, with annual spending
erpected to hit $52 billion in the next two years, according to Packaged
Facts,a consumerresearclrcompanybasedin Rockville,Md. Thatputs the
yearly cost ofbuying, feeding, and caring forpets in excessofwhatAmeri-
cansspendon the movies($10.8billion), playing video games($11.6bil-
lion), and listening to recordedmusic ($10.6billion) combined."People
are no longer satisfiedto reward their pet in pet terms," arguesBob Vetere,

August6,2007 | BusinessWeek
I 45
GoverStory

I
/f

Y
hotels,dong wittr servicessuchas sionsof Oscar-nightgowns.It's
groo1mlg,-trainlg, - -AsARE OFTEN SEEN
a1d^in;store PETS popularwith celebritydog own-
ers such as Paris Hilton, who
5l;ilffi"'lJ:,1"f.*J#ffi rHENEW BABIES.
essentiallynothingin 2000 to $450
often dressesup her Chihuahua,
Tinkerbell. *We're catering to
millior5 or 7Oo/oof overall sales, SOWE CLOTHE the owner'ssenseof sryler"says
this year. Pet owners are now less THE LITTLE ONES Alameddine. 'There are no
driven byprice than "emotion and boneson our clothes."
passion" saysFbancisrwhoshares Pet products now aim to make
abed with his wife and their mutg Bit o'Honey. people feel they're being extra good to their litde ones-much
Those are the same primal urges that drive the fashion as toymakershave long encouragedparents to spoil kids. Along
world. Mario DiFante, who staged NewYorlCs first Pet Fash- with doggie spas,there are mobile pet-grooming vans, pedicure
ion Week last August, has an elevated view of the place of services, professional dog walkers, and massage therapy for
dogs and cats in the family hierarchy. As he puts it: "Many animals. Tbainerslike Cesar Millan-better known to millions
of us consider pets as the new babies." That means cloth- as the Dog Whisperer-frrd that their expertise is suddenly
ing furry little ones in an ever-expanding range of sweaters, in greater demand. Along with having the No.1 series on the
raincoats,leatherjackets, and dresses.For Lara Alameddine, National GeographicChannel,Millan boastsbest-sellingboola,
co-founder of Little Lily, a better word might be "babes." Her DvDs, aline ofproducts, andhis famous Dog PsydrologyCenter
four-year-old company clears $1 million a year selling prod- of Los Angelesthat's a favorite with Hollywood clientele.
ucts including doggie slippers, bikinis, and even canine ver- The growing willingness of owners to spare no expense

50 I BusinessWeek
I August6,2007
for their animals has also made the outsourcing of the debate about human health care. Americans now spend
yucky aspectsa burgeoningbusiness,More than 350 service $9.8 billion a year on vet services.That doesn't include
agencieswith namessuch as Doody Duty, Scoopy-Poo,and the over-the-counter drugs and other supplies, which add
PooperTrooper have sprung up solely to relieve owners of $9.9 billion in costs.
the need evento pick up a pet'swastein their yard by doing The annual compound growth rate for coreveterinary ser-
it for them. With annual growth nearing 5o%o,"thepooper vices alone has been about 10%over the past decade,and the
scooper industry is now experiencing a lot of consolida- menu of servicesis becoming more elaborateby the month.
tion," says Jacob D'Aniello of DoodyCalls,which has 2o Much of the inflation in pet care is due to medical advances
locationsnationwide. that havepeopledigging deepfor everything from root canals
But few parts of the business have seen as much diver- for aging cats to cancer surgery for rabbits. "There has been
sification and expansion as the pet food business.As with an evolution ofthe entire profession," saysTom Carpenter,
humans, there's a growing concern about the nutrition, taste, president of the American Animal Hospital Assn. "Pocket
and even ethical standards of what goes into a pet's stom- pets and animals who wouldn't even have been taken to vets
ach. Owners increasingly mirror their own preferences-for now go for regular visits."
vegetarian cuisine, kosher meals, and even locally sourced Suzanne Kramer of Chicago spent close to $ggO on vet
food-in feeding their pets. And visits and drugs to treat a tumor
when things go wrong, the reaction in her hamster, Biffy, before he
is as explosiveas if the victims were FOR SEPARATION diedlastyear."somemightsay:
children. Consumerswere outraged
by a massive recall of melamine- ANXIETYIN DOGS, il:Tf'f,JH,,"#il:I:g"I#J,J
contaminated pet food that killed or Miers of Rochester,N.Y., also took
sickenedthousandsofU.S. catsand ELI LILLY MAKES her son's hamster, Henry to a vet
dogs. Becausepets are now such
valued members of the family, says
RECONCILE,BASED and bought antibiotics for a tumor,
even though the animal was near-
Duane Ekedahl,president ofthe Pet ON THE ACTIVE ing the end of his life span and died
Food Institute, o'it had a higher im- INGREDIENTS shortly after the final treatment.
pact than maybe it would have had For Miers, the issue had parallels
10 yearsago." INPROZAC to human health. As she puts it:
As food becomesa more emotion- "Do you not give old peoplehealth
ally chargedissuefor people,owners carebecausethey're old?"
are more inclined to get emotional about what's on their pets' No wonder "it's a good time to be in our profession," as
menu.Witressthegrowthofwhatoneindustryexecutivecallsthe Carpenter says.A vet's job has become more wide-ranging
"Godiva-ization" of food, with a demand for meats fit for hu- and thus more lucrative. There are even animal grief coun-
man consumption,visible vegetables,and nutritional supple- selors to help families cope with the demise of beloved pets.
ments. It has become common to reach for a canine or cat Not only is state-of-the-art technology such as magnetic
equivalent of ketchup, such as Iams Co.'s popular "savory resonance imaging, with costs that range around $1,500
sauce"for dogsthat comesin Country Chicken,SavoryBacon, a scan, now available in small-town labs, but consumers'
andRoastedBeefflavor-descriptionsthatare,needlesstosay, expectationsof medical care have been transformed.They
lost on the actual consumer. want the same best-in-classcare for their pets that they
want for themselves.
That's creating a market for new products like Pfizer Inc.'s
THOROUGHLY VETTED dog-obesitydrug Slentrol,which will cost $1 to $2 a day.Rec-
FANCY FOOD PRODUCTSARE EASY TARGETSfor critics oncile, a new drug from Eli Lilly & Co. for "canine separation
of indulgent pet owners.But a far more controversialissue anxiety," is based on the active ingredients in Prozac.Lilly
is animal medicine, especiallyat a time of urgent national has not suggesteda retail price for Reconcile, and vets have a

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lot of latitude in deciding how much to chargefor it. Overall, Much of the attention is going to the growing problem of
sales of pet health products have grown at a compound an- pet obesity.As many as 4Oo/o of dogsare estimatedto be over-
nual growth rate of 8.8% in recent years, more than double weight or obese,with similarlyhigh rates among cats,thanks
the rate in the late 1.990s. to the indulgent habits of their owners. Being plied with
There's little doubt that human-quality care has helped to carob bonbons all day while getting rolled around in an all-
extend radically the life span of pets. Dogs routinely live 12 to terrain stroller (retail price: about 9210) is not an ideal life-
14 years now, a big jump from the averagea few decadesago. style for any animal. Peoplewho overeator don't get enough
John Payne,acting cEo of Banfield,the Pet Hospital, likes to exercisetend to draw their pets into the same behavior,vets
boast that his cat, Gizmo, stayedperlcyuntil he died last No- say, and the growing inclination to regale pets with treats
vember at the advanced has come at a cost to their
age of 23T2. More than waistline. Along with cre-
60% of new customers ating interest in new anti-
of his chain, which has obesitydrugs,it's prompt-
more than 6OOlocations ing interest in diet pet
nationwide, enroll their food. It has also created
pets in wellness plans. a market for procedures
One reason is that stan- including pet liposuction,
dard pet insurance often which is becoming more
doesn't cover preventive common in cities like Los
care. While pet insur- Angeleswhere owners are
ance is still in its infancy, used to getting nips and
with Io/o of owners hav- tucks for themselves.
ing coverage,the number And for some pet lov-
of clients is growing by ers, no medical procedure
double digits each year. is too extreme. Plastic
Jamie Ward invested in a surgeonsoffer rhinoplas-
$25.2-a-month plan with ty, eyelifts, and other cos-
Veterinary Pet Insurance metic proceduresto help
(wt) for her American tone down certain doggy
Staffordshireterrier, Loki, features, from droopy
only to discover that it eyes to puggish noses.
didn't cover any of the Root canals, braces,and
$21000 in expensesfor a even crowns for chipped
kneecap injury. (wt says teeth are also becoming
it abided by the terms of more popular.
the contract.) Some might question
The ever-expanding whether all this primp-
roster of drugs and treat- ing and pampering of
ment can run into tens of pets has the makings of
thousandsofdollars in ex- a bubble that could have
penses,creating a dilem- owners telling Fido to get
ma for owners.SteveZane his own damn bone once
of Hoboken, NJ., choked the economytakes a turn.
slightly when a veterinarian presentedhim and his wife, Lily, After all, PaolaFrecceroadmits ttrat when shegrew up in Mas-
an estimate of $3,700 to help cure liver failure in their cat, sachusetts,"Pets were pets.You didn't dressthem, you didn't
Koogle, over Christrnas."We looked at each other and said: feed them special food, you didn't take them to play dates."
Well, he's family,'" recallsZane,a graphic designerwho's still But thanks to the advice ofher vet and what she read on the
payrng offthe final bill for the recoveredcat. "Ifit had been Internet, she wouldn't seryeup anything but the best for her
$15,000,I thinkwe would almost havehad to sayno." puggle (pug/beagle mix), Lucy, including treats at g2 apiece.
The anthropomorphization of pets has also created the And from the moment Eric Olander paid 9500 for a plane
perception that they have human problems such as separation ticket to get a stray chow chow mix from Adanta to his home
anxiety and depression.While a number ofvets say such issues in Los Angeles,the dog has been a focal point of his life. "I call
are real, especiallyjust after the death of a dog's four-footed him my 401(k) with paws," he says,"becausethads where all
chum or the removal ofpuppies, otlers say it simply createsyet my moneygoes," I
more opportunities for new products.Americans are expectedto -With Paula Lehman, Chrbtopher Megeian,
spend 52% more on medicines to treat their pets this year than and Arlene Weintraub in Nau York
they spent fiveyearsago.Drugmakers love the categorybecause,
compared with human drugs, there's less risk of liability, less
competition, and less pressureto switch to genericsbecauseso businessweek.com/extras
few consumerscarry pet insurance. Even so, Dawn M. Boothe, FORTHELOVEOFPETS
a professor of clinical physiology and pharmacology in the Au- OilUNe A narratedslideshow,tables,andmoreon consumers'obsession
burn University CollegeofVeterinary Medicine, arguesthat "the withtheirpets.
recovely of costs" for drug companies may take a long time as PODCAST: BWOnlineEditor-in-Chief
JohnA. Byrnegetsthe storybehindthe
peoplemay scoffat priceytreatrnentsfor pets. storyfromSeniorWriterDianeBrady.

54 | BusinessWeek
I August6,2007