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Thursday, August 19, 2004 - Page updated at 12:00 A.M.
Premium pet-food store unleashes growth
By Joanna Horowitz
Customers wander in to chat with other pet owners, share stories with employees and let their dogs and cats sniff around and pick their own toys.
With products ranging from doggie fleece jackets to $42 cat bowls, it's clear Mud Bay is for the serious pet owner. But Mud Bay Chief Executive Lars Wulff also hopes customers will walk away with some solid knowledge about proper pet nutrition.
That focus, along with some unique and risky business strategies, has built the Olympia-based company into perhaps the leading independent retailer of premium pet food in the Pacific Northwest.
"I have yet to find another pet-store chain like them in the West," said Linda Harer, Western regional sales manager for Royal Canin USA, a division of one of the world's largest premium pet-food producers. "Their whole focus is on teaching their consumers about good nutrition for their pets, not just selling a bag of food.
"They are, to me, the Whole Foods of the pet industry."
Sales last year grew 23 percent from the previous year, to $10 million, said Wulff.
In this region, Harer said, Mud Bay ranks right behind national chains Petco and Petsmart in premium pet-food sales and it is first in selling natural pet food for dogs and cats.
Wulff, 42, doesn't look like the average CEO with his shaved head, T-shirt and shorts. But then, he explains, he and his sister, Executive Vice President Marisa Wulff, have always done things a little differently.
Mud Bay was originally a feed store/general store in Olympia, in which Marisa invested their mother's money when their father died in 1986. The Wulffs jettisoned the "really bad local artwork, gardening supplies and cigarettes" and decided their goal would be to find the most healthful pet food and to educate customers about it.
They brought a strong and varied base to that task: Marisa's business background (she was an investment officer for Washington state's pension funds), Lars' experience as a political consultant on more than 20 congressional and U.S. Senate campaigns, and their mother Elsa's knowledge of all kinds of animals. "When we were growing up we had something like half a circus. We grew up with donkeys, mules, chickens, dogs, cats you name it, we had had it," said Lars Wulff.
In 2000, Mud Bay pulled together $220,000 from family, friends and employees, along with $860,000 in a Small Business Administration-backed loan from Columbia Bank, to buy out the local outlets of the failing chain Bosley's Pet Food Mart. The eight stores, from Redmond to Tacoma, came with about 50 worried employees and plenty of confused customers, Wulff said.
Rowland Thompson, executive director of Allied Daily Newspapers of Washington, invested $30,000 in Mud Bay for the initial Bosley's purchase. He said he never believed the oversized acquisition was a risky move.
"They didn't run (the first single store) like a mom-and-pop business," Thompson said, who has known Marisa Wulff since they both attended Whitman College 20 years ago. "They had a philosophy behind what they were doing, and they had a set of rules they adhered to. They were driving a tremendous amount of volume out of a tiny, ramshackle building. It made perfect sense that it would work on a larger scale."
Revenues of Bosley's had sunk far below the level needed to cover overhead, and Mud Bay had to invest time and money to educate the staff. It also needed to gradually replace lower-quality pet food with Mud Bay's standard inventory: organic products; raw, frozen meat; other food alternatives; and high-quality pet supplies.
In 2002, the company took another unusual plunge: The Wulffs decided to open Mud Bay's books and teach employees how to read financial statements.
"We've always had a democratic outlook on the world," Lars Wulff said. "This was originally a family company, and we're really honest, we're not good at lying."
By the end of this month, Wulff will have had finished a store-by-store series of annual dinners with all 95 employees to go over the company's finances.
"It allows the employees to see that there's a certain fairness about it," Thompson said. "It breeds a certain loyalty on the part of the employees."
And employees respond with such dedication that Thompson refers to them as "the pet cult."
"That's really what has made it work," he said. "They have the fervor from the top down."
Those employees that invested in 2000 have a share in the company, and Mud Bay is trying to work out a plan for the others, said Wulff. By giving the staff a stake, customers get better-quality service, he said.
Wulff said Mud Bay attracts two kinds of customers: those who eat well themselves and want their pets to do the same, and those with pets that have some kind of ailment.
The food generally is more expensive than that found in supermarkets. The most expensive dog food at Fred Meyer, for example, is $1.04 a pound; Mud Bay's dry dog food ranges from 85 cents to $2 a pound, while cat food runs $1.40 to $ 3.50.
But Wulff said animals eat less of the natural stuff and also need less vet attention. "It's not expensive like going out to eat," Wulff said. "It's more like buying a latte once a day."
Statistics on natural pet food are limited because it's a relatively new niche, at one time just centered on the West Coast and Northeast.
However, the amount of money pet owners are spending has nearly doubled in the last seven years, going from $17 billion to over $30 billion, though there hasn't been a similar increase in pet ownership, Harer said. This indicates people are simply spending more money on their pets
The American Pet Products Manufacturers Association reports that overall spending on pet food is expected to rise 4.3 percent to $14.3 billion this year.
Mud Bay is one of a handful of area stores that specialize in natural pet products: Other large retailers include Seattle-based All the Best Pet Care and Next to Nature, which has locations in Seattle, Edmonds and Tacoma.
Mud Bay will branch out to the Web next month and is finalizing a deal with a large Internet retailer Wulff declined to identify. Mainly pet supplies will be sold because food doesn't move well in cyberspace, he said.
Wulff said he wants to hit a an annual growth rate of 30 percent. He has no idea when the company will stop growing and said he wouldn't rule out a nationwide expansion financed by a combination of profits and debt.
"Our goal in general is to grow as quickly as we can grow well," he said. "Getting bigger, in general we get better at what we do."
Joanna Horowitz: 206-464-3312 or email@example.com
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