Money-Growing: Pet Industry Booming

In Moscow, like elsewhere in the civilized world, a variety of specialized hotels, beauty parlors, clothes shops, restaurants and cemeteries cater to pets and their owns. It all began about a decade ago when some businessman simply added to his arsenal a quote by Antoine de Saint-Exupery: “You are responsible, forever, for what you have tamed.” It turned out that such approach is helpful in business.

Nothing is Impossible

The Web is full of exciting ads. In France, well-off pet owners can find luxury Louis Vuitton leads and collars for their pets, for 1,300 a piece, or buy a leather rug for a lap-dog for 900 euros. Rich Americans procure clothing for their canine friends in Gucci, Coach and Louis Vuitton shops. Dog breeders may buy a Burberry dog coat for $400, a Kate Spate collar for $45 or a satin lead by Juicy Couture, for $225.

Over 62% of households in the U.S. keep dogs or cats. In 2002, pet owners spent over $30 billion on their pets, the American Pet Products Manufacturers Association reports. A survey held by the American Veterinary Medical Association has revealed that 73% of U.S. dog owners and 65% of cat owners treat their pets as family members. 55% call themselves mummies and daddies to their four-legged pals.

Almost half of all dog and cat owners asked for at least two-day leave to take care of their ailing pets. 4% take their cats and dogs to a psychologist, 1% to acupuncture sessions, 4% to a manual therapist. 10% of owners bury their pets at special cemeteries, 19% regularly visit the grave. Approximately 18% of pet owners mention them in their will. 36% of dog owners allow their canine pals to share their bed at night. 32% leave TV or radio on when they leave home for their pets not to feel lonely. 33% of respondents talk with their pets on the phone. 17% carry a picture of a pet in their wallets.

Dogs and cats take active part in family celebrations. 86% of pet owners polled have their pets involved in the process of celebration of main family holidays, such as Christmas. 64% shower their pets with gifts on Christmas, whereas 25% mark their pet’s birthday. 73% of respondents admit that they mention their four-legged pals in greeting cards to their family members.

Russian pet owners do not fall behind Americans or Europeans. Pet shops operating in this country offer a variety of brand clothes and accessories for pets, Russian designers create luxury items and exquisite accessories for cats and dogs. The industry of vet supplies and medicines grows rapidly. The Extravaganza luxury trade show held in Moscow annually for many years traditionally features a fashion show for cats and puppies.

The Price of Beauty

Beauty studios and hairdressers for pets are no longer rare in Moscow. Grooming salons offer a complete make-over for pets, including combing and brushing, bathing, nail trimming and pedicure. Even hair dye is available.

Denis Vassiliev, executive director of the Milord chain of grooming salons for dogs, says that the sector experiences stable growth, which he puts down to improving standards of pet treatment, as well as growing incomes of Russians. The year 2005 witnessed a turning-point, he says. Earlier, the business paid for itself. Nowadays, the pet goods industry brings stable income.

Milord rents two properties for its stores and is now deciding on securing a title to a third shop. Vassiliev has reported that the units are rented at $600 per 1sqm per year, which is nearly 50% of the chain’s profits. The first shop was launched in 2001. In those days companies offering pet grooming services were still rare while acquisition of real property was fraught with risk.

Milord offers a wide range of grooming services, from ordinary bathing to spa treatment. Most often pet owners order washing and brushing. The procedure costs 1,200 rubles and takes an experienced groomer approximately 40 minutes. Milord was one of the first grooming salons to offer VIP services to dog owners.

The pet salon Chyornaya Sobaka (Black Dog) rents a property. Olga Mazur, the salon owner, says a freehold would be too expensive. Besides, such properties have to meet too many requirements. Mazur says her salon, launched in 1993, was the first-ever pet salon to open in the capital. She started her career offering domestic grooming services, but as soon as she had a chance she opened a hairdresser’s for dogs. Mazur agrees that the pet goods industry is booming. The competition is not strong as specialized companies are still few and the niche is only being formed.

Most often Black Dog’s clients bring their pets in for a hair cut, but other services are in demand, too. For example, as part of a holiday make-over some order highlights for their canine friends, especially popular with owners of small dog breeds, nail polish and fancy hair-dos. The rent devours nearly 50% of the company’s takings, Olga Mazur says. Much has to be spent on advertising. Mazur estimates the returns at approximately 20%. Prices for her services vary. A haircut for a relative small breed, such as a poodle, for example, costs approximately 1,000 rubles, for a black Russian terrier - 1,800 rubles and over, but at any rate the price will depend on how well the dog is groomed. The hairdresser receives 50% of the cost of a haircut.

Real estate consultants agree with salon owners. Freeholds and tenancies in Moscow are expensive. Ivan Lyasnikov, public relations director at Vesco Realty adds, that everything depends on location and specifics of an applicant’s establishment. Applicants planning a chain of salons usually seek freeholds. An applicant planning a single store usually is looking for a lease, given the high cost of suitable space. For example, a freehold to a property in the city center, on Tverskaya, Kutuzovsky Prospekt or Leninsky Prospekt streets may cost $4,000 to $5,000 per 1sqm, or at least $0.5 million for a store measuring 100 to 120sqm. The size of rent depends on location, Lyasnikov adds. Centrally located properties are let at $1,500 to $2,000 per 1sqm per year, $700 to $800 per 1sqm in commuter areas.

Yulia Nikulicheva, deputy head of strategic consulting at Jones Lang LaSalle, says that the company hardly receives any applications for freeholds. “Nowadays, leaseholds are more sought-after than acquisitions as they are less risky,” she adds. “Even retailers prefer tenancies, as their core business is retail, not real estate investment, besides withdrawing large sums of cash from operations is fraught with huge risk.” The cost of 1sqm on Kutuzovsky Prospekt, according to JLL estimates, may run up to $8,000 whereas the rent is below $1,500 per 1sqm. Outside the Third Ring Road and in the suburbs, rental rates are as low as $800 per 1sqm.

Another segment of that market is pet goods stores, including luxury goods stores. Kira Kedrova, who owns Gracie Salon for Dogs and Their Owners and the Dog Fashion and Style salon, says she rents properties for her shops. Acquiring a freehold title to a property of such quality, she says, would cost $0.5 million and over. Kedrova pays $1,200 per 1sqm for one of her stores and only $400 for another. Rental payments take up approximately 40% of her earnings. Kedrova launched her business a decade ago. “In those days we were among the first operators in the upmarket pet goods sector,” she says. “The competition was nonexistent, the niche vacant.” It was possible to shape the market without having to pay attention to rivals, which cannot be said of the present-day situation, she adds.

People have grown used to good quality quickly, and this is what ensures stable growth for pet goods luxury stores. According to Kedrova’s estimates, a pet goods boutique may bring in up to $100,000 annually. Her salons sell goods of leading international brands Lady Churchwell’s, Max’s Closet LLC, PetLondon, Pucci Petwear, Russian fashion designers Yelena Suprun and Igor Chapurin. The prices vary immensely. Collars cost 600 to 3,500 rubles, a dog cloth – 1,800 rubles and over, a Suprun pullover 4,500 rubles, a cashmere pullover 9,000 rubles, dog rugs by Chapurin 9,000 to 14,000 rubles, dog carriers 2,700 to 17,000 rubles. The shop also offers crocodile leather leads, Swarovski crystal collars and Venetian pearl necklaces…

A source of additional income and means of attracting clients for Kedrova is a hairdresser’s for dogs she runs on Plyushchikha Street. This does not require huge investments, she says. “You buy equipment once and you are through with huge spending. Consumables, such as shampoos, etc., are not so expensive,” she adds. A client who brings his or her dog in for a haircut may buy something for the pet while it is being treated.

The sector also has several pet goods manufacturers. Executive director of the factory Tuzik, Nadezhda Chebykina, says that the enterprise runs several tailoring workshops making clothes for pets. In terms of prices, the brand targets middle class pet owners. Last year, the factory presented two mink coats for Yorkshire terriers. The coats were displayed at the Zoo Sphere international show of goods and services for pets.

The factory produces 400 to 500 pieces of clothing per day. Nadezhda Chebykina says, in Moscow the company rents a basement property for $250 per 1sqm per year. Meanwhile, in Rostov Tuzik has already secured title to 2 properties, one of which, measuring 129sqm was purchased in 2005, another, measuring 527sqm, was bought at an auction earlier this year. The factory has already spent 5 million rubles on re-equipment of those properties, but that figure is not final. Chebykina says the number of orders grows stably, yet it is hard to make any forecasts.

Retired colonel, Andrei Chebykin, general director at Tuzik, began his business in 1996. His first workshop had three sewing-machines and first orders were made by friends. Nowadays, the factory offers a comparatively wide range of goods, from ordinary capes to sports costumes and fur-coats for dogs. Tuzik’s clothes are available for sale at shops nationwide, in Surgut, Novy Urengoi, Samara, Tyumen, Vladivostok, Kazan, Nizhny Novgorod, Tula, Tolyatti and other cities. All products are sold wholesale to pet shops and distributors, who push up the price by 25% - 35%. Prices range from 260 to 2,000 rubles per item. The highest demand is for raincoats, light overcoats and sports suits.

“The level of goods’ quality nears Europeans standards for children’s clothes. Clothes are designed for 70 dog breeds. Given top quality of fabrics and accessories used all clothes are so durable they may be worn for years and passed on to successors. The firm’s workshops also produce attire for cats, and even for such VIPs as guinea-pigs and polecats,” a company representative has reported.

Can You Expect a Tip From a Cat?

If a pet owner has to leave on vacation or a business trip he or she no longer needs to leave their four-legged pals with the neighbors. Temporary accommodation for a pet is only a matter of money, as lodging facilities for cats, dogs and their like are mushrooming across the city. Maxim Kivva, director of Cat’s Dream Hotel, anticipates an increase in demand for such services by 50 to 60% per year.

Located in the Moscow countryside, near the town of Zheleznodorozhny, Cat’s Dream Hotel is comprised of three buildings, all of which have been purchased by the owner. The project brings good returns, Kivva says. Today, he pours extra cash into development of new properties for the complex to be able to provide lodging to all potential clients. Maxim Kivva says that the project requires an initial investment of $150,000 to $200,000, for construction of a top class hotel. The cost of land is not included in the amount.

The idea of launching a hotel for cats occurred to him two years ago. “I simply wanted to run my own business operating on my own property, which would pay back and bring profit,” Kivva says, adding that his company’s annual earnings stand at approximately $60,000, with a rate of return of approximately 40%. Kivva’s hotel provides three groups of rooms – standard rooms, professional and luxury rooms, differing in size of enclosures and interior design. Luxury rooms feature heated floors. Room rates vary from 250 rubles per day for a standard room to 580 rubles for a luxury room. Additionally, feline guests are offered regular meals, cleaning services and walks. The highest demand is for luxury rooms, Kivva says.

Mikhail Ilchenko, who owns Zookhutor Hotel (also a freehold), has reported that maintenance of his project, which comprises three building, is not as expensive as construction. The cost of construction of each of the building is $10,000 and over. As to the rate of returns, Ilchenko said, it depends on the season. Occupancy grows during summer months and New Year Holidays.

The cynology center Ordyntsy is the founder of a hotel of the same name, providing boarding for dogs, cats and rodents. Ordyntsy also is a founder of a veterinary hospital on Kaluzhskoye Shosse, 12 kilometers from the Moscow outer ring road, MKAD. All rooms at Ordyntsy Hotel are of the same grade. The rate is 690 rubles per day. The rate covers strolls with a guide twice a day 45 minutes each, meals twice a day and daily veterinary checks. The pet may receive foods ordered by its owner from a special menu offered at the check-in. Such meals cost extra. Yelena Palagotina, director of the hotel, recalls that one of the clients insisted his dog should be given bananas. So the management had to procure bananas for the guest. The customer’s wish is the law. Ordyntsy also runs a veterinary hospital offering professional medical treatment to pets. A regular check-up costs 400 rubles and over. The cost of services depends of the nature of ailment and cost of medicines.

When Paws Ache

Veterinary clinics are as common today as usual clinics for humans. Viktoria Naumenko, public relations manager at the International Veterinary Clinic, has reported that the building of the clinic on Rublyovskoye Shosse is rented. Buying it would be too expensive, she says. The owner of IVC, Simon Goldman, refused to elaborate on the size of rent, saying only that rental charges constitute the main item of expenditure, or 30% of turnover. Viktoria Naumenko says it is too early to speak of returns. The clinic was launched in February 2006, but it is receiving a stable income already. Four months after it opened the clinic stopped making losses, all expenses are offset by takings.

The highest demand is for tooth brushing and plaque removal. Pets receive medical care in case of poisoning, bone fractures, etc. Other services include vaccination, castration, internal surgery, tumor removal and laboratory research. During an operation a pet is placed on a heated surgery table, with special readers monitoring its heart operation, pressure, pulse, blood oxygen level and body temperature. The X-ray machine has supersensitive sensors. Ultrasound equipment helps diagnose the patient. The height of the inspection table is adjusted automatically, so that the owner does not have to raise the heavy animal himself and thus worsen the stress it is going through. Operating rooms are also equipped with blood biochemistry analysis equipment.

Rest in Peace

Alas, our pets do not only fall ill, sometimes they die. The Web contains ads by plenty of agencies offering burial services for pets. Admittedly, for the time being Moscow has only one pet cemetery, officially sanctioned by the authorities. Vedomosti has learned that the project of the pet memorial complex in Kurkino, a suburban area outside Moscow, was financed by private investors. The city hall allocated the plot of land.

Larisa Korzhneva, deputy head of the Moscow consumer market and services department, assured Vedomosti that the first-ever pet cemetery in Moscow would be launched in the near future. The city hall’s share in the project is 40%, she said. The leasehold was secured by the Rarov and Co., at a tender held by the prefecture of the Northwest Administrative Okrug of Moscow. Rarov and Co. comprises JSC Ekologicheski Chistaya Priroda (Ecologically Clean Nature).

The number of bidders was non-existent, Korzhneva says. She puts that down to the not-for-profit nature of the project: “Private businesses seek quick returns, nobody is interested in long money. Under the terms and conditions set by the Moscow government even the underprivileged will be allowed to have their pets buried here. Rates will be set by the investor but he has to honor the obligations he has assumed upon being declared a winner,” she says. The official adds that the Ekolog plant operates unique cremation equipment.

Nikolai Rarov, general director at Rarov and Co and JSC Ekologicheski Chistaya Priroda, has reported that the company secured a lease to the plot beneath the complex three years ago. Rents are set by the city hall. The project was to be launched by early September. The cemetery measures 2 hectares and offers 18,000 units for burial urns in walls and 7,000 spots in vaults. Rarov said the cemetery would also feature a memorial ally for pets whose owners cannot afford burial. They will have a chance to scatter the ashes of their loved ones.

The second cemetery -- to be launched in Kosino-Ukhtomskoye – also occupies a leased plot of land. The city hall holds a 40% stake in the project. The company plans to open that cemetery in late 2007. Pet burials outside those two cemeteries will be declared illegal, according to a city hall decree. Pet owners will be charged 6,500 rubles and over for placing an urn in a niche in the columbarium wall or 15,000 rubles if an urn is buried into the ground. The rate covers collection of the body, cremation, burial and a 12-month lease of a burial spot.

Prolonging the lease will cost 2,500 rubles for a niche in the columbarium wall or 3,000 rubles for a burial spot. The total cost will depend on the size of the plot and a distance from the cemetery entrance.