PE-backed PetSmart pressured to drop supplier accused of abusing animals

  • PETA video shows supplier Holmes allegedly abusing animals
  • Petco and Pet Supplies Plus drop Holmes
  • PetSmart waiting for results of USDA investigation

PetSmart, backed by BC Partners and others, is under pressure to stop doing business with a supplier after an advocacy group released a video showing alleged animal abuse at the vendor.

People for the Ethical Treatment of Animals (PETA) released a video January 19 showing alleged animal abuse at Holmes Chinchilla Ranch and Other Small Animals Inc.

Two other private equity-backed pet stores — Petco Animal Supplies Inc and Pet Supplies Plus — severed ties with Holmes after the video was released.

(The video can be seen here. Warning: Graphic content.)

“As a result of our own recent inspections at Holmes Chinchilla Ranch, which are a regular part of our strict vendor oversight protocol, we identified that they did not meet our animal care standards, and have terminated our relationship,” Petco said in a January 19 statement. “Holmes is no longer a supplier to Petco stores.”

PetSmart, however, is still doing business with Holmes and is waiting for the results of an investigation of the supplier by the U.S. Department of Agriculture. “Nothing is more important to us than the health and safety of pets,” PetSmart said in a statement. “We have reached out to the USDA to learn about its findings. If we find our standards have not been met by this supplier, we will take swift and appropriate action.”

The USDA confirmed January 21 that it is investigating Holmes. The Barto, Pennsylvania-based supplier provides small animals to retailers. Holmes shipped more than 20,000 animals, including guinea pigs, hamsters and gerbils to big-box retailers over a period of less than three months, PETA said.

BC Partners declined comment. The U.K.-based PE firm owns a majority of PetSmart’s stock and could order the retailer to sever ties with Holmes, a placement agent said. The GP might take action because there is a possibility that the PETA allegations could “rebound against PetSmart’s core sales,” the placement source said.

“Customers who are aware of and concerned about the issue might start going to Petco or Pet Supplies Plus [instead of PetSmart],” the placement source said.

At least 20 news stories have been published about PETA’s allegations against Holmes, including by ABC News, the New York Daily News, the New York Post and USA Today, according to Google.

It’s unclear how important Holmes is as a supplier to PetSmart and whether discontinuing business with the company would be more disruptive to the retailer, the source said. “In that case, [waiting for the USDA findings] may be a delaying tactic while they line up alternative suppliers,” the source said.

Rob Frankel, a brand strategist who has advised clients including Burger King, Sea World and Marriott Hotels, said PetSmart is making the right move by waiting for the USDA. Companies sometimes make serious decisions based on terrible information because they react too quickly, Frankel said.

PetSmart is waiting for an objective, disinterested party to return with their decision. In this case, it’s the USDA, which “doesn’t have any skin in the game,” Frankel said.

The USDA could post its findings as early as January 28, PETA spokesman Dan Paden said.

Frankel, who said he hasn’t seen the PETA video, said the animal rights organization typically produces highly biased data. “I’m not saying they are wrong, but that their presentation of data gathering is highly skewed,” Frankel said.

Frankel said he counsels all his clients to wait for the data. By waiting, “[PetSmart] comes across as being more prudent and more mature as opposed to being politically pressured,” he said.

PetSmart was purchased in March 2015 by a consortium led by BC Partners and including La Caisse de dépôt et placement du Québec, StepStone and Longview Asset Management. The consortium paid about $8.7 billion to take PetSmart private.

Action Item: Reach the USDA’s Animal and Plant Health Inspection Service here: www.aphis.usda.gov

Photo of chinchilas courtesy of Shutterstock