THE POWER OF UNITY

TWO GIANTS IN PET SUPPLIES MERGE IN BRAZIL

In our recent newsletter from April 21 ( https://www.dhirubhai.net/pulse/animal-health-news-late-april-bernardo-otero-f4hef/?trackingId=caYoF61%2BS7iuNOlp8ncZEA%3D%3D ), we discussed the merger between Petz and Cobasi, two giants in Brazil's pet sector, which has sparked much discussion. I had the opportunity to visit the facilities of both companies, which are key players in the companion animal market, where all brands strive to be present.

It's important to remember that Brazil is the largest companion animal market in Latin America, and the third largest worldwide, with 4.96% steady growth in pet ownership and medicalization.

Recent figures from the Abinpet (Brazilian Association of the Pet Industry) report show that there are 67.8 million dogs and 33.6 million cats in homes, with a 12.33% growth from 2022 to 2023.

These are mega-distributors with strategically located stores in key regions for the business, and last month they decided to create, through this merger, a super company with combined revenues of about R$ 6.9 billion (about US$ 1.2 billion).

Petz

Petz is one of the largest chains of pet stores in Brazil, with a strong presence across the country. Founded in 2002 by Sergio Zimerman, the company has rapidly grown and expanded to several major cities. Petz specializes in selling pet products and services, offering a wide range of food, toys, accessories, medications, and veterinary services.

One of the unique features of Petz is its focus on customer experience, with stores that include areas for pet socialization, training, and on-site veterinary services. Petz has also innovated in the digital space, providing online platforms for sales and services, contributing to its growth.

Cobasi

Cobasi, founded in 1985, is a pioneer in the pet store market in Brazil. The company has established itself as a key player in the sector, with a network of stores spanning multiple cities. Cobasi also offers a wide range of pet products and services, including food, accessories, medications, and veterinary services.

Cobasi is known for its large stores, which often serve as comprehensive destinations for pet owners. Their stores offer additional services such as grooming, training, and events for pets and their owners, creating a community-oriented experience.

WHY MERGE?

Sometimes it's worse to compete than to ally. The competition between Petz and Cobasi was becoming exhausting, and the merger creates operational synergies that will clearly improve the new entity:

• Logistics efficiency
• Purchasing and negotiation power
• Strengthening the brand image
• Increasing the portfolio
• Optimizing operating costs and management
• Expanding market reach
• Combining strategic capabilities
• Financial and market impact
• Greater diversification of products and services
• Risk reduction

Combining both companies' strengths will maintain national coverage with strategically located stores, benefiting from scale to further expand market presence. This strategic merger paves the way for accelerated growth by leveraging the customer bases of both companies to cross-sell and introduce new products.

THE NEW ENTITY

The resulting new organization will undoubtedly be unique in Latin America's largest market, consolidating as a more solid business model with a stronger market position, making the combined entity more attractive to investors looking to participate in an expanding market. For entrepreneurs and executives, this merger serves as a valuable case study on the importance of well-planned merger and acquisition strategies for business growth. The merger between Petz and Cobasi is an example of an optimal and well-structured integration that demonstrates the strategic vision to create a market leader in an area of considerable growth where competition was impacting the profitability of both competitors.

Indeed, the market is moving.

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