AAHA - Close Up Look at 2010 Purchasing Behavior

AAHA State of the IndustryClose-Up Look at

2010 Purchasing Behavior

Copyright © AAHA 2011

MEDIMEDIA CONFIDENTIAL INFORMATIONMEDIMEDIA CONFIDENTIAL INFORMATION

Summary

• Veterinary Industry has been impacted by the Recession

• Avg. revenue decreased in 2009 vs. 2008

• Most hospitals experienced a decline in revenue for 2009

• Hospitals that experienced revenue increases were due to avg. increase per invoice, not increased

patient visits

• Revenues decreased across many categories

• Elective surgeries

• Flea/tick and HW sales

• Client visits

• Dentistry

Page 2

Summary

Industry results for 2010

• Unique patient visits declined by -1%

• Overall revenue increased 3%

• 42% of practices experienced a decline in overall revenue,

while 58% of practices experienced an increase in revenue

• Key categories Flea/tick and Heartworm experienced

declines

2

MEDIMEDIA ANIMAL HEALTH CONFIDENTIAL INFORMATION

Market Research

3

Research results provided by VetInsite Analytics

• 2261 Veterinary hospitals

•10+ Million pet records

•Sample population throughout the US

Market Research

• 3800+ U.S.Veterinary Practices (30 Canadian)

• 19+ Million pet records

• Sample population throughout North America

3

MEDIMEDIA CONFIDENTIAL INFORMATION

Economic Results: Average visit Charge

Source: VetInsite Analytics Page 4

• Average increase in average invoice

charge was 1.1%

• Changes in average invoices ranged

from -21% to +28% in 2009.

Commentary: Practices increased prices to compensate for reduction in patient visits in 2009.

Economic Results: Gross Revenue


• Average decrease in gross revenue

was -3.8%

• 61% of all clinics experienced a

decrease in revenue.

• Practice revenue change ranged

from -34% to +57%.

Commentary: In 2009 a majority of clinics experienced a decline in overall sales revenues.

US Unemployment & Retail Sales

Source: Blytec.com

The US economic recession is exhibiting evidence of improving:

• Unemployment has stabilized from it’s peak at 10% in December 2009 and

has been reduced to 9.4% in December, 2010.

• MAT retail sales dollars trends have been improving during 2010 and are

positive (+1.4%) over the latest MAT (12/2010).

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

Oct-

08

Nov-0

8

Dec-0

8

Jan-0

9

Feb-0

9

Mar-

09

Apr-

09

May-

09

Jun-0

9

Jul-09

Aug-0

9

Sep-0

9

Oct-

09

Nov-0

9

Dec-0

9

Jan-1

0

Feb-1

0

Mar-

10

Apr-

10

May-

10

Jun-1

0

Jul-10

Aug-1

0

Sep-1

0

Oct-

10

Nov-1

0

Dec-1

0

%Civilian Unemployment Rate (%)

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

MAT % Change vs YAGO

Real Discretionary Retail Sales ($)

4

MEDIMEDIA CONFIDENTIAL INFORMATIONMEDIMEDIA CONFIDENTIAL INFORMATION5

Industry Economic OverviewIndustry Economic Overview

5

Practice Patients & Revenue % Dog vs. Cat

Source: VetInsite Analytics, MAT December, 20106

70.4%

79.1%

29.6%

20.9%

# Pets Revenue

Dogs Cats




was -3.8%




from -34% to +57%.



• 58% of all practices experienced an increase in revenue.

• 42% of all practices experienced a decrease in revenue

7 Source: VetInsite Analytics

% Revenue Growth in Practices

2010 vs. 2009

8.6%5.8% 5.7% 7.5%

8.9%10.9% 11.4%

14.4%

3.1% 5.2%7.9%

10.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

< -5% -5% to 0% 0% to 5% > 5%

Small <$1M Medium $1M-$2M Large >$2M

32.5%

20.6%21.9%

25.0%





was -3.8%




from -34% to +57%.



• 58% of the AAHA clinics increased revenue during 2010


19.5%

22.5%

26.8%

31.3%

21.2% 21.4%23.7%

33.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

< -5% -5% to 0% 0% to 5% > 5%

AAHA All Other

Patient MAT Trend vs. Year Ago


-0.9%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Total Patient MAT Trend

% Change vs. YAGO

December 2010 MAT patient change vs. 2009 is -0.9%

Revenue MAT Trend vs. Year Ago


3.1%

-5.0%

-2.5%

0.0%

2.5%

5.0%

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Total Revenue MAT Trend

% Change vs. YAGO

December 2010 MAT revenue change vs. 2009 is +3.1%

MAT Trend vs. Year Ago


3.1%

1.4%

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

Jan-10 Feb-10 Mar-10 Apr-10 May-10Jun-10 Jul-10 Aug-10Sep-10 Oct-10 Nov-10Dec-10

Vet Channel Revenue Total US Real Disc. Retail $

MAT Trend

% Change vs. YAGO


Economic Results: Average visit Charge


• Average increase in average invoice

charge was 1.1%

• Changes in average invoices ranged

from -21% to +28% in 2009.

Commentary: Practices increased prices to compensate for reduction in patient visits in 2009.




was -3.8%




from -34% to +57%.


Economic Results: Average Transaction Charge

Average transaction charge is 20% greater for Dogs compared to Cats in 2010

12 Source: VetInsite Analytics, MAT December, 2010

$109.26$90.73

Dog Cat

2010 Avg. Transaction Charge

% Dogs Purchasing HW from Veterinarians 2010

Total US % Dogs purchasing HW during 2010 is 37%

Mountain

20%

West

18%

Texas

47%

Mid Atlantic-SE

41%

Northeast

39%

Great Lakes

43%

Midwest

37%

FL

42%

13

% Dogs Purchasing Flea/Tick from Veterinarians

Total US % Dogs purchasing FT during 2010 is 33%

Mountain

6%

West

23%

Texas

40%

Mid Atlantic-SE

41%

Northeast

33%

Great Lakes

33%

Midwest

35%

FL

44%

14

% Cats Purchasing Heartworm from Veterinarians

Total US % Cats purchasing HW during 2010 is 13%

Mountain

3%

West

9%

Texas

20%

Mid Atlantic-SE

17%

Northeast

8%

Great Lakes

13%

Midwest

11%

FL

20%

15

% Cat Purchasing Flea/Tick from Veterinarians

Total US % Cats purchasing FT during 2010 is 24%

Mountain

4%

West

22%

Texas

29%

Mid Atlantic-SE

30%

Northeast

21%

Great Lakes

23%

Midwest

24%

FL

31%

16

17

-4.3%-6.8%-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Flea & Tick Heartworm

Category Dose % Change2010 vs. 2009

Flea/Tick and Heartworm Doses Trend

Average Annual Doses (2010)

18 Source: VetInsite Analytics, MAT December, 2010

• About 30% of both dog and cat patients are dispensed 6 doses of

FT and HW on an annual basis

• For cats only 6% of FT and 9% of HW patients are dispensed 12

doses/year

Annual Doses % PatientsFT Dog FT Cat

1 19.9% 28.6%

3 14.0% 14.0%

6 29.9% 26.0%

12 10.3% 5.6%

Other 25.9% 25.8%HW Dog HW Cat

1 8.5% 27.5%

3 5.5% 9.9%

6 32.0% 29.7%

12 36.8% 8.8%

Other 17.3% 24.1%

Puppy MAT Doses by Month

19

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

FT HW(M)


• Both FT and HW categories are experiencing a decline in MAT

puppy doses

Kitten MAT Doses by Month

20

-

1.0

2.0

3.0

4.0

5.0

6.0

FT HW(M)


21

• A study yielded 2234 total complete responses

• 1272 dog owner respondents

• 962 cat owner respondents

• The study was fielded December 2010.

• Margin of Error:

• Dog owners +/- 2.8%

• Cat owners +/- 3.2%

21

Alternative Channel Shopping Behavior

Veterinary Channel

32%

Alternative Channel

39%

Both Alternative

and Traditional Channels

29%

Veterinary Channel

44%

Alternative Channel

28%

Both Alternative


28%

Veterinary Channel

39%

Alternative Channel

32%

Both Alternative


29%

Dog Owners

Cat Owners

Base: All Respondents (dogs n=1272) (cats n=962)22

Flea/Tick, HW, NSAID purchases

―Veterinary Channel‖—purchased exclusively from their veterinarian during the P12M.

―Alternative Channel‖-- purchased products from locations other than a veterinarian during the P12M.

―Both Alternative and Veterinary‖-- made at least one purchase from a veterinarian and an alternative

channel during the past 12 months.

Alternative Channel Shopping Behavior

Expected Purchase of F/T, HW in the next 12M

93% B

2%

2%

1%

0%

1%

0%

Veterinary Clinic

Pet Specialty Store (Such as PETCO or PetSmart)

Online Pet Store or Pharmacy (Such as 1-800 PetMeds)

Mass Merchandiser or Discount Store (Such as Walmart or Target)

Grocery Store

Club Store (Such as Sam's Club or CostCo)

Pharmacy

Traditional Channel(n=392) (A)

Q4. Still thinking about the coming year, from which location do you expect you will purchase the majority of your flea/tick medication(s)?

Base: Purchased Flea and/or tick medication for Dog (n=1053)

Base: Purchased Flea and/or tick medication for Cat (n=888)

91% B

6%

1%

1%

0%

0%

0%

Veterinary Clinic

Online Pet Store or Pharmacy (Such as 1-800 PetMeds)

Pet Specialty Store (Such as PETCO or PetSmart)

Mass Merchandiser or Discount Store (Such as Walmart or Target)

Grocery Store

Club Store (Such as Sam's Club or CostCo)

Pharmacy


Dog Owners Cat Owners

23

9-in-10 Veterinary Channel buyers indicated they expect to continue to purchase from the

veterinarian. Among those who have made at least one purchase through an alternative

channel, relatively few indicate intention to purchase from a veterinarian.

Source Ever Consulted for Flea and/or Tick

Medication

84% B

36% B

10%

6%

7%

0%

1%

0%

2%

54%

25%

27% A

22% A

18% A

5% A

2%

1%

17% A

74%

39%

20%

16%

15%

0%

2%

1%

12%

Veterinarian

Veterinary Technician

Friend or Colleague

Pet Store Employee

Web site

Mass Merchandiser/Discount

Store Employee

Pharmacy Employee

Grocery Store Employee

Other/None-of-the-above


Alternative Channel(n=316) (B)

Both Alternative and Traditional Channels(n=345) (C)

Q8. Which of the following sources have you ever consulted with or used to help determine which specific brand of flea/tick medication you should purchase?

Base: Purchased Flea and/or tick medication for Dog (n=1053)

Base: Purchased Flea and/or tick medication for Cat (n=888)

87% B

45% B

9%

3%

8%

0%

0%

0%

0%

54%

27%

29% A

23% A

19% A

3% A

2% A

3%

16% A

78%

51%

27%

27%

23%

8%

8%

5%

4%

Veterinarian

Veterinary Technician

Friend or Colleague

Pet Store Employee

Web site

Mass Merchandiser/Discount

Store Employee

Pharmacy Employee

Grocery Store Employee

Other/None-of-the-above


Alternative Channel(n=356) (B)

Both Alternative and Traditional Channels(n=268) (C)

Dog Owners Cat Owners

24

Regardless of segment, veterinarians and veterinary technicians are the most frequently

consulted source on flea/tick medication. Among those who purchase from alternative

channels, friends/colleagues are a leading source, followed by pet store staff and/or websites.

Degree of Influence of Source for Flea and/or

Tick Medication – Dog Owners

88% BCD

67% CD

25%

32%

40%

12%

32% A

70% AB

62% AB

57%

1%

1%

5% AB

6% AB

3%

Veterinarian(n=760) (A)

Veterinary Technician(n=358) (B)

Pet Store Employee

(n=143) (C)

Web site(n=137) (D)

Friend or Colleague

(n=190) (E)

A high degree of influence A moderate degree of influence Very little or no influence

Q9. [GRID SUMMARY] Please indicate the degree of influence each of the following sources have on the brand of flea/tick medication you purchased?

Base: Consulted with a source

In terms of influence over brand purchased, veterinarians and veterinary technicians are by far

the most impactful when it comes to flea/tick purchases.

Associations with Purchasing Pet Health

Products from your Veterinarian (Dog Owners)

26

TOTALTraditional

Channel

Alternative

Channel

Both Alternative

and Traditional

Channels

Positive (Net) 68% 80% 44% 72%

Experts/ they know what's best for my pet 27% 32% 19% 27%

Trustworthy 11% 13% 6% 12%

Good/ quality products 8% 9% 6% 10%

Receive good/ helpful advice 6% 6% 4% 6%

Comforting/ I have confidence in them 5% 8% 2% 3%

The vet knows my pet/ my pet's history 5% 8% 2% 3%

Safety/ security 5% 6% 2% 5%

Negative (Net) 32% 15% 50% 40%

Costs more than other places 15% 8% 23% 18%

Expensive 14% 5% 25% 19%

Q20. What, if anything, do you associate with purchasing pet health products from your veterinarian?

Base: All Respondents (dogs n=1272)

When asked open-ended for specific associations with purchasing pet health products from

veterinarians, dog owners were more likely to have positive mentions (68%) than negative

mentions (32%)

27

Conclusion

• Overall revenues increased slightly while unique

patient visits declined slightly

• Cats represent an opportunity for growth

• Your clients are very aware of alternative channels

for purchasing products and this trend will continue

• Veterinarians and staff are viewed as a trusted

source and have a significant degree of influence

• Veterinarians must actively communicate and

educate their clients to strengthen this relationship

and continue to add value

27

Documents

AAHA - Close Up Look at 2010 Purchasing Behavior