It was visiting a Cobasi store that businessman Sergio Zimerman decided, in 2002, to invest in the pet market. At the time, the businessman was facing the bankruptcy of a business – a food and beverage distributor. And he saw in the mega pet products store, in the Vila Leopoldina neighborhood, a good model to be applied to his family’s property, located in the East zone of São Paulo.
This is how it was done: Zimerman opened Pet Center Marginal, a store that gave rise to what is now the Petz chain. And, 22 years later, it is about to merge with Cobasi, a business that should give rise to a giant with R$7 billion in revenue.
The merger, signed by the two companies in August this year, is still awaiting approval by Cade: according to Zimerman, together, Petz and Cobasi will have approximately 11% of the market. He believes that the operation will bring benefits to companies and also to consumers. Today, he explains, strong competition, including from smaller pet shops, has driven prices down. And for those with large and expensive structures like Petz and Cobasi, it becomes much more difficult to compete.
“The combination will cause price competitiveness in the physical world. When costs are more rational, there is room to improve the margin, but also become more competitive”, he states.
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At Petz, around 95% of revenue comes from products and 5% from services – a share that also includes the 15 hospitals in the Seres network. “It is completely strategic and there will be a clear objective of expanding the service offering, which ends up creating customer loyalty for the consumption of products”, he explains.
The pet market has shown strong growth rates in recent years. Today, Brazil has the third largest pet population in the world – 149 million –, second only to China and the United States, according to data from the Quaest institute. In every 10 homes in the country, seven have an animal.
According to Zimerman, three factors explain this growth: the increase in the pet population at a higher rate than the human population; the phenomenon of pet humanization; and access to information about the animal’s needs.
“We are a Latin country, which has the characteristic of conditional love. The more stressed life is, the more the dollar rises, the more the pet becomes an escape point. After all, the pet doesn’t read the newspaper, it doesn’t know what the war is like in the Middle East,” he says.
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Trajectory
The businessman has always been an animal lover. But he ended up getting into this business almost by accident. A brother-in-law, who made dog shampoo in his backyard, talked about Cobasi and convinced Zimerman to visit one of the stores. And it was there that the businessman saw the possibility of starting a business that replicated the model of the megastore located in the West Zone of São Paulo, in a location that served the public in the East Zone and North Zone of the city.
“After bankruptcy and with four children, I had a single objective: to support my family”, he says. The choice of name – Pet Center Marginal – was a solution to the low budget of the opening. “When you don’t have money to invest in marketing, you have to have a simple name. I just didn’t put the phone number in my name because they didn’t let me”, he jokes.
Nine months later, the store had already reached breakevenwhich is the moment when revenue starts to cover expenses in full. With the company profitable, the businessman decided to start an expansion process – which was initially seen as a bad idea by the family, who felt the entire process of the previous bankruptcy firsthand. In the first ten years, the company opened 27 stores. Today, there are 257 units in Brazil.
Today, Petz is facing challenges to maintain its growth rate. Which is why the merger with Cobasi is so relevant. In the second quarter, the company recorded adjusted net profit of R$4.968 million, 79.8% lower than that reported in the same period in 2023, of R$24.548 million. The company’s net revenue was R$817.5 million, an annual increase of 3.3%.
The high interest rate scenario is one of the factors that explains the weaker performance recorded in the last quarter. “Brazil has been specializing in producing additional problems to those that are inevitable”, he states. “The Central Bank is talking about raising interest rates, as if we were in a scenario of super demand, which only exists in its hypothetical scenario, because here in retail we are not seeing that”, he states.
The betting phenomenon, which ends up draining resources that could be dedicated to retail, and competition with products from Asia reinforce this challenging environment.
Zimerman is a member of the Institute for Retail Development (IDV) and the government’s Economic Development Council, the Council. And he has taken his vision on the effect of public policies on retail to the government. “I see a bit of business myopia when people think we have nothing to do with public policies,” he says.
