Brad Banducci’s Woolworths pours more investment into PetCulture

Woolworths boss Brad Banducci is broadening the supermarket’s push into the fast-growing pet sector and has tipped more money into an online pet insurance and products joint venture.

Woolworths has now poured a further $4.9m into its much smaller online start-up PetCulture business after a loan it made to the joint venture was converted into further equity. Picture: John Feder

Woolworths has invested a further $4.9m into its burgeoning pet insurance and veterinary services joint venture, PetCulture, as it looks to build up a new business pillar in the $10bn pet sector that will cater to needs from insurance and medicine to food products.

Under the guidance of chief executive Brad Banducci, Woolworths has laid out a new strategy over the past three years to break into the valuable pet industry, underlined by an announcement in December the supermarket owner had paid $586m for a controlling 55 per cent stake in leading pets business Petspiration.

Complementing that investment, Woolworths has now poured a further $4.9m into its much smaller online start-up PetCulture business after a loan it made to the joint venture was converted into further equity. The equity top-up was matched by its joint venture partner, PetSure, maintaining Woolworths’ stake in the business at 60 per cent.

“Woolworths and PetSure have a longstanding joint venture in PetCulture, an online specialty pet retail start-up. This … involves periodic investment, which in this case was the conversion of shareholder loans into equity,” a Woolworths spokesman said.

“The joint venture parties continue to operate the PetCulture business as a stand-alone business, benefiting from the specialist expertise of the Woolworths and PetSure businesses.”

PetSure is owned by the Enthoven family, with Richard Enthoven the founder of PetSure in Australia and part of the same Enthoven family from South Africa who founded Hollard Insurance and have a large stake in fast-food empire Nando’s. Woolworths uses the family’s insurance arm as an underwriter for its leading Woolworths pet insurance product.

Woolworths CEO Brad Banducci is investing further in the $10bn pet sector.

A deal was first struck with PetSure in late 2020 and soon saw the creation of the PetCulture start-up. At the time, Mr Banducci said there had been strong growth in the pet industry, insurance and pet food during the pandemic, with that also shown in the massive uptake in pet ownership through lockdowns.

“PetCulture is a stand-alone joint venture that is in the process of being launched in partnership with PetSure, which is the biggest pet insurance business in Australia, owned by the Enthoven family,” Mr Banducci told The Australian in 2021.

That further step into the $10bn pet sector was then followed by a much larger leap last year, when Woolworths unveiled a deal to buy a controlling stake in Petspiration – which has the PETstock retail banner, 276 stores, 65 vet clinics and 162 grooming ­salons.

He said at the time the deal was part of his greater plans to build the “Woolworths of the future”.

Woolworths said that over the past five years, Petspiration delivered strong sales growth organically and through regional acquisitions, with sales of $979m for the 12 months to the end of September.

Founders and owners of Petspiration, Shane and David Young, and other existing shareholders have retained a 45 per cent equity investment in the business and the Young brothers will continue as CEO and managing director, respectively.

Petspiration has a number of e-commerce platforms including Pet.co.nz, a 2.4 million-member loyalty program, and a strong own-brand range including brands such as Caribu and Glow.

Morgans analyst Scott Power said the pet sector has plenty of potential for future growth even as the pandemic has waned.

“The pet market has seen considerable growth, boosted by Covid with increased pet ownership between 2019 and 2021. This is also supported by the structural growth tailwinds in the segment … not limited to Covid impacts, such as the humanisation of pets.”

This was a growth driver also commented on by Mr Banducci when he announced the Petspiration deal in December.

“Pets are living longer and leading more rich, enjoyable lives and we don’t see this as a peak (cycle). This trend started many years ago and we expect it to continue for many more years,” Mr Banducci said.