Wall Street’s Secret Pet Profiteering
We all love our pets. Two-thirds of families have pets and during the coronavirus pandemic, many families are spending more time with their animal companions, giving us a look into the secret work week lives of our cats and dogs. Along with all the love lavished on these animals, comes a whole lot of money, making pets a big business opportunity for Wall Street investors — one the big-money folks are unwilling to let go, even during a public health crisis.
In fact, while the COVID-19 crisis rages on, the owners of PetSmart, a group led by private equity firm BC Partners, have pressured PetSmart workers to groom dogs despite the risks posed by potentially infected owners and to violate social-distancing recommendations to handle large dogs. The company even coached employees to mislead any authorities that tried to shut down dog grooming as a non-essential service. Petco also has tried to keep its dog grooming operations running
This behavior is entirely in keeping with private equity’s customer playbook, which involves cost-cutting that can reduce quality, threaten vulnerable workers, and even harm animals. Long before the coronavirus came to dominate the national conversation, PetSmart workers saw the impact that private equity had on the company. “As a former employee, I am not surprised” by the company’s efforts to evade public health measures, one person tweeted. “I left this company in early 2015 after being bought by BC Partners. The whole company focus shifted from pets and its employees to making money.”
Americans spent about $115 billion on pets in 2018 (more than we spent on cell phones). And Wall Street private equity firms have been steadily gobbling up all sorts of businesses to capitalize on pet profits. Today, private equity (PE) firms own major pet retailers (PetSmart and Petco), thousands of veterinary clinics, pet insurance companies, and pet product manufacturers.
The PE petcare push is just one more way that these little known, but increasingly powerful, Wall Street firms have wormed their way into everyone’s daily life. The money we spend on dog food and cat toys and trips to the veterinarian goes right to Wall Street. And private equity’s predatory business model sucks value out of companies (by loading them up with debt, charging exorbitant management fees, and taking huge dividends) that can force dire cost cutting (job losses, reduced wages, lower quality and service).
Private equity owns the companies that manufacture and distribute pet supplies. KKR backs Gambol, the biggest Chinese pet food exporter and supplier of Walmart’s store brand pet treats; Whitney Capital Partners owns C.J. Foods Inc., that produces one billion pounds of super premium pet food each year; and Summit Partners owns stakes in two of the biggest pet supply distributors.
And private equity takes a cut when our pets need veterinary care. PE firms have bought thousands of veterinary practices and rolled them up into nationwide chains. Just four of these PE-owned veterinary chains have almost 1,500 locations (National Veterinary Associates, with over 700 locations; VetCor, with 373 practices in 31 states; PetVet Care Centers, with over 200 pet hospitals in 28 states; and Pathway Veterinary Alliance, with over 225 vet practices in 34 states). PE even owns pet insurance companies like Petplan and Embrace Pet Insurance.
The profit-maximizing demands of Wall Street can conflict with offering the best veterinary care. This can lead to pushing unnecessary vaccines and sales targets that can cost animals’ lives, according to Bloomberg. “It’s pet-icide … the systematic destruction of pets by corporations for profit,” said a veterinarian about the industry takeover. The veterinarian was referring to a chain partly owned by PetSmart, which co-locates some veterinary clinics in its pet stores.
PE Pillages Pet Stores, threatening workers and animals
Over the past decade, private equity firms bought the four biggest pet retail companies (PetSmart, Petco, Pet Retail Brands owner of Pet Supermarket and Pet Valu, and Pet Supplies Plus). To acquire the pet stores, the PE firms used leveraged buyouts that imposed huge debts that the retailers (not the PE firms) have to repay and the profits from the chains were siphoned off to Wall Street.
In 2015, BC Partners bought PetSmart and burdened it with $6.2 billion in debt. That debt swelled to over $8 billion after BC Partners borrowed more to buy pet e-tailer Chewy (which subsequently went public, but PetSmart is still carrying that debt). CVC Capital’s 2016 takeover of Petco left the company to repay $3 billion in debt. On top of the debt, the PE firms charged whopping fees and dividends to the pet store chains. PetSmart paid its PE masters over $800 million in management fees and dividends; Petco is still struggling under $1.3 billion in debt used to pay dividends to the previous PE owners, who sold Petco to CVC Capital.
The debt and fees that the PE firms siphoned out of the pet store chains put more pressure on them to cut costs to keep their heads above water, with potentially disastrous results for workers and the animals that are sold and serviced at these stores. A 2018 media investigation into 47 dead dogs at PetSmart uncovered employees that alleged they were poorly trained and overworked to meet sales quotas, the use of nondisclosure agreements to silence owners whose pets died in PetSmart’s care, and groomers who felt they were “either ignored or retaliated against when they spoke up about safety concerns or wrongdoing.” A PETA investigation of PetSmart locations found “systemic neglect and widespread animal suffering” in order to “keep costs down” so that managers could receive bonuses. Another PETA study found both Petco and PetSmart repeatedly sourced animals from wholesalers with histories of systemic, egregious animal abuses like gassing sick animals to death instead of seeking veterinary care. One PetSmart employee said the company continued to buy animals from “terrible” wholesalers because “PetSmart’s cheap.”
Private equity’s pet profiteering is just one way these Wall Street investors have taken over so much of the economy. More and more as we go about our lives, the money we spend is siphoned off to enrich these Wall Street firms. Now, PE firms own fast food restaurants, newspaper chains, fitness and yoga companies, video games like Fortnite, ambulance companies, and tons of retailers, including bankrupting and laying off hundreds of thousands of workers at chains like Toys R Us, Gymboree, Shopko, and many more.
It is time to curb the Wall Street profiteering that lets PE firms turn the real economy inside out. Their predatory behavior harms workers, consumers, communities, and even the dogs and cats that comfort us in this time of crisis. We all deserve better. So do our pets.
Cover photo by Markus Winkler on Unsplash