Hands up those who remember the 1975 film, Dog Day Afternoon?
The film stars Al Pacino and John Cazale, and the title refers to the "dog days of summer”. These dog days or ‘dies caniculares’ are the hottest, most sultry days of summer but the actual dates vary greatly from region to region, depending on latitude and climate. Dog days can also define a time period or event that is stagnant, or marked by dull lack of progress and that certainly describes the plot of the film where a bungled bank robbery turns into a prolonged standoff between the robbers and the police. The film was inspired by a true story of the robbery of a Brooklyn bank on August 22, 1972and throughout the plot, it was clear that things could have turned out so differently both in real life and in the film.
I suspect that we are now in a period of veterinary ‘dies caniculares’ – not experiencing any particularly sultry moments of oppressive heat but in a stagnant period with little or no growth to be seen in veterinary procedures and professional transactions and with mounting competition within and without the profession. Perhaps, not unlike the events in Brooklyn, much will depend on the decisions we take as the story unfolds.
In January this year, the GfK NOP social Research survey found a huge fall in consumer confidence – the biggest in two decades – between December 2010 and January 2011. It seems that all their measures of confidence fell in this period but the largest drop was seen in the score representing consumers’ willingness to commit to major purchases. This has particular relevance for the nation’s economy as, with more government austerity measures in the pipeline and prices certain to rise, the full force of the cut back in consumer spending may not yet have been experienced. Looking at the figures dispassionately, it is hardly surprising that a rise in VAT, worries about job security and a continuing squeeze on lending will have had a negative effect on consumer spending but we have yet to see the detail in the forthcoming budget and the spiralling cost of fuel and of transport generally will continue to push prices, and inflation higher. We’ve experienced an almost unparalleled period of benign calm in our interest rates over the last few months but no-one expects the Bank to be able to resist increasing the base rate for very much longer if it is to control the rapid increase in inflation.
On the face of it, much of this macroeconomics stuff is little more than applied best-guess theory but there are clear signs that things are changing and we cannot, as a profession, sit like Canute expecting the waves to obey our command. However, if we take a step back, that is exactly what we are doing in the face of a roiling, incoming tide. The amazing events which have taken place in Egypt and a series of other Arab nations were but a peaceful run up to the distress of Libya and the markets are already unsettled by the threat of disruption in oil supply from Libya and the wider destabilisation of the Arab world. Already, the sharp spike in oil prices that has resulted has already been recognised by the International Energy Agency as threatening to derail the global recovery. Recent events in Libya have caused a further argument between the US and the OPEC states at a time when US foreign policy is clearly adrift and there is no doubt that future diplomacy will have control of oil supply and pricing as its main driver.
Closer to home, our coalition government is caught between a sharp rock and a very hard place as a run on oil prices would threaten to derail our own economic recovery unless the Treasury were able to substantially reduce taxation on fuel yet we all know that it needs more tax revenue and not less if we are to continue our very shaky progress towards economic daylight. Better than expected figures in January will encourage the Exchequer but even with the cutbacks, public expenditure will continue to rise in real terms, down from 10.5% to 4.4% year on year. Moreover, public sector net debt will continue to rise from £932 billion to £1.3 trillion by 2014-15 as we rack up more borrowing to fund this continued spending.
The net result is that the debt mountain of the 1990s will be with us for a generation at least and that this will have a defined effect on public and personal spending for at least a decade.
So, what should we do about it? In veterinary practice business terms, we should expect consumer uncertainty to continue and, in some regions, to develop further as local economic factors apply. Consumer uncertainty will continue to have a knock-on effect for elective purchases within practice and, if it does continue for a decade, practitioners will have no choice but to find creative ways to encourage loyalty, such as deferred payment and the promotion of certain, cheaper but possibly less desirable treatments. We should be able to count on pet owners doing the right thing for their animals when the conditions are serious but we shouldn’t necessarily count on them doing the right thing with our practice. If times are hard, veterinary treatment will become a commodity too, just as the supply of certain products and services previously exclusive to veterinary practice has already become commoditised with many brands of products from flea and worm treatments, food and even microchipping being widely available outside the veterinary channel and also through widened professional competition too.
It is in this area of elective purchases that the problem will hit the profession hardest. The pet trade journal PBW News published a fascinating article in January showing that in 2009, the UK dog food market was worth almost £1.4bn and is expected to achieve additional value growth of 2.4% and 2.3% in 2010/2011. However, in volume terms, sales have decreased year on year since 2005, declining from 797,000 tonnes to a forecast 746,000 tonnes in 2011 (Euromonitor 2011). Much of this apparent paradox results from pet owners trading up from economy to mid priced and premium products but volume demand has also been slowed by a decline in the UK dog population; between 2005 – 2009, the dog population fell by almost half a million to 8.3million with the greatest attrition in numbers occurring in 2009 as the rate of unemployment surged to almost 8% and consumer confidence plummeted. Overall, the percentage of UK dog owning households fell from 21.5% to 20.1% over the period.
Add in the other socioeconomic changes which we see all around us and we should be preparing ourselves for an acceleration in these trends over the next decade as consumers find themselves squeezed between rising prices and lower disposable incomes.
We can take heart that the health and wellness sector in dog food sales is still buoyant but we fool ourselves if we think that the rest of the retail sector will give us these sales on a plate. Additionally, consumers are being driven towards two distinct market sectors within the premium branded product range; anthropomorphic market offerings which more closely resemble human food and holistic/organic products.
It may not be foolproof, but the dynamics of dog food sales in the UK are an excellent indicator of trends which will affect the profession as a whole, so it really is time that we chose to find different ways to drive our own business sales regardless of what the practice next door is doing.
There’s very little demand for a used, wet, mediaeval throne nowadays.