Startup claws way into lucrative pet supply market

Oakland Tribune, Jul 1, 2007 by David MorrillSTAFF

WHEN LANE NEMETH heard about the contaminated pet food scandal that hit her industry in March, an eerie feeling crept over her.

If it's possible to feel sick to your stomach and relieved at the same time, she felt it.

As a pet lover herself, Nemeth felt terrible for the owners who lost their cats and dogs as a result of the food. But as the owner of Petlane, a Concord-based direct-sales company that specializes in pet supplies including food, it gave her a sense of gratification.

"Everything I learned about the importance of nutritious dog and cat food was given instant validation, and it gave meaning to what Petlane is about," shesaid. "But I also felt terrible, because it was one of the worst things that has ever happened, yet we grew on the tragedy."

The pet food crisis involved a wide recall of more than 5,000 pet food products -- likely because of the presence of melamine, a chemical used to make plastics.

While Nemeth was shocked at the numbers, she wasn't surprised that pets were getting sick and dying from what they ate.

"Some people would be shocked by the range of types of dog food that are out there," she said. "It ranges from some that is good enough that people could eat and stay alive on to ones made from processed road kill."

Better quality food

Even before the crisis, Nemeth always knew that one of the most important products she could offer to pet owners was pet food.

Because she knew the regulations in Europe were much stricter than in the U.S., she went overseas to look for food they could sell.

But with the logistics of getting the food back to the states too strict, Nemeth decided to develop her own formula with the same high standards she saw in Europe.

"I learned everything I learned and made it into a food that I would be willing to give my pets," she said.

Manufactured by an undisclosed third-party company in the Midwest, Petlane now sells the dry food under the label "Pure Woof" for dogs and "Pure Purr" for cats. Petlane keeps close tabs on the manufacturing process, and the food contains no byproducts or melamine, she said.

"I used all the knowledge I obtained in my research and put it in the formula," she said. "For pet owners, having products that belong in pet food is the price of gold."

Nemeth believes the attention on good pet food will help to springboard her company to success.

Having recently celebrated her 60th birthday, Nemeth is a master at building a company from the ground up. Not just because she has built her latest company to more than $1 million in revenues in just three years, but because she has done it twice. Nemeth also founded Discovery Toys, which made more than $100 million in revenues before it was sold to Avon.

How Nemeth started both Discovery Toys and Petlane is strangely similar.

Both were started out of the home. Discovery Toys in Martinez and Petlane in Lafayette. And both revolved around an inability to find "just the right products."

"With Discovery Toys, I was frustrated because as a parent I couldn't find educational toys that I liked for my daughter," Nemeth said.

Can't resist a puppy

"The same thing happened with Petlane," she added. "My daughter bought a puppy, and just as I did with her, I went to the store to buy some products and came back with nothing."

Nemeth learned how to become a successful entrepreneur on the fly.

Discovery Toys was built into a juggernaut. In less than 20 years, the company had 40,000 employees. When she sold it to Avon, it was under the assumption that it would help the company expand internationally. It didn't turn out that way, and in 1999 she decided to retire.

Subsequently, Nemeth fell into a funk and knew that she had to get the business itch back.

Second time's a charm

"When I first started Discovery Toys I had no business background, so despite the huge excitement, every year was one logistical nightmare after another," Nemeth said. "This time around I know what I'm doing, so it's pure enjoyment."

Her daughter, Tara, was 2 when Nemeth began Discovery Toys in 1978. Now she works with Petlane as its purchasing director.

Petlane is still in its infant stage compared with what Discovery Toys became. But Nemeth feels the upside potential with Petlane could be huge.

"This year, the pet product is a $42 billion market -- whereas the educational toy sector was about $1 billion," she said. "If you can just hit 10 percent of pet market, that's huge."

Also, where educational toys only target childhood ages, Nemeth points out "pets have to eat, and cats will play till they're 20."

Petlane uses a direct-sales approach to reach customers. The company also sells its products on its Web site, Petlane.com, but the majority of its sales are conducted via "Pawtys" -- similar to a Tupperware party hosted in people's homes.

One of the things Nemeth likes about the direct-sales approach is that it gives people an opportunity to make a potentially unlimited income with no risk.