New innovation will mainly come from existing players. This is a technology-driven industry - but we see less and less basic discovery R&D in animal health. Most "innovation" has actually been product development - of existing products - to make them more convenient, longer acting - to extend product life cycles.

– Bob Fountain, President & CEO, FOUNTAIN AGRICOUNSEL, LLC

New technology drives innovation or some may say innovation drives new technology. Technology can mean new and inventive ways to efficiently produce products or it can fall under the realm of information and education exchange such as the trends, statistics, and distribution of information regarding pet health via the internet. All of this will help perpetuate industry innovation. Information is much more accessible, and as pet owners' knowledge of their own health care needs increases, they may seek to continue to provide the best health practices for their pets, too.

– Darlene Frudakis, President & COO, PETAG, INC

Innovation comes in many forms. Game changers that create product categories and change the way people think have most often come from larger existing players who can capitalize on an idea, even if they didn't come up with it. The large dollars, marketing, and logistics investments required dictate that existing players change the industry. That being said, the constant innovation that moves the industry, or a category along in small, but never ending steps often comes about because of new entrants.

A new version of an old idea, a packaging improvement, products from toys or cosmetics that are transformed into pet products are all ways that new players push the established companies and transform a market segment.

Technology has changed the industry in more subtle ways than products have but may have been as significant in changing cost structures and consumer expectations. A majority of small animal owners research pets and products before going to the store. Brands that aren't visible on the web find it harder getting traction in the store. One west coast distributor has put an electronic order book in a handheld device for retailers and expanded the range of products available to the consumer while reducing costs and without adding warehouse space. E-mail, websites and social networking have given retailers more cost effective and targeted marketing tools and provided consumers a voice in product selection, functionality and price.

-- Shawn Dooley, Vice President, Absorption Corp

I do not think that the industry will grow 2x in 5 years. I'd say more like 33%. The main driver will be mass merchandisers. Watch Wal-Mart. Super Pet Stores (PetSmart, Petco) will also be drivers. Another key opportunity is international markets. I see the biggest growth coming from diagnostics and vaccines - and geriatric products.

– Bob Fountain

1. Pet Population Growth, 2. New need-based products and services, that include the growing 'non-traditional' small pet category, 3. A longer-living population that will demand better and more quality products for their much-loved pets.

– Darlene Frudakis

I don't believe that in the current economic environment the industry will double in five years. The forces that may drive the revenues higher would be inflationary pressures from commodity price increases and the humanization of pets, which results in indulgent, discretionary spending by those who have money to spend. The pressures working against industry growth would be lack of pet acquisition at the entry pet level and among certain economic classes, and an anti pet regulatory environment.

-- Shawn Dooley

USA animal health companies will grow in international markets - gradually taking market share from local companies - many of which just sell generics.

– Bob Fountain

Exports can present great opportunities to the pet industry as a whole as trade restrictions and the new product registration process are simplified. Cheap overseas manufacturing sources are not the key to growth and not as trusted a source for quality health and wellness products for pets.

– Darlene Frudakis

Manufactured products like molded plastic housing units and puppy wee wee pads are already imported almost exclusively. The globalization of the supply chain will continue in those labor intensive segments of the pet business. The upside of trade is that as other countries increase in affluence, even on a relative scale, they want to own pets and are willing to by US products. On a percentage basis, the fastest growing markets for pet products are Brazil, Russia, India, China and Vietnam, according to Euromonitor. Companies that can show new pet owners how to enjoy the interaction with their pets, before domestic suppliers emerge, will benefit from a growing global economy and a new customer base in emerging and established international markets.

-- Shawn Dooley

Yes it will continue. All of the new pet geriatric products mirror human health - and many of the same drugs are used. Unfortunately, there are less and less new chemical entities (NCE's) coming from animal health origins.

– Bob Fountain

Yes, as we learn more about caring for ourselves we want to impart this wisdom on to caring for our pet. As people age they become more health conscious in order to prolong their life span and they will also pay more attention to their pets good health.

– Darlene Frudakis

The trend towards projecting human wants and needs onto pets is driven by consumers with discretionary income, smaller family networks, more leisure time, and a distance from an agrarian relationship with animals. Lacking specific information about the nutritional needs of pets, people assume what's good for them must be good for pets. As pets take on the role of family members, people will spend on health care, entertainment, and day care to extend life and enhance the quality of life for their pets.

Economic down turns will temper these indulgences as we have seen over the past 18 months. However, as employment and incomes rebound the trend will most likely resume. While this is good for some segments of the business that sell high end products, the unintended consequence of humanizing pets may be regulation that limits the supply of animals and regulates behaviors to the point that it restricts the ability to have a pet because of cost or limitations.

-- Shawn Dooley

New entrants will play little role in growth - and if they are successful, they will be acquired. The market is consolidating and will become more and more dominated by the majors. These companies consolidate because growth is easier via external initiatives (M&A) rather than internal initiatives (R&D). M&A has been challenged recently by lack of debt capital. The Private Equity guys are challenged.

– Bob Fountain

This solely depends on the sub-category of products, If it is already a busy category and the market for these items is stable or declining, cannibalization will most definitely occur. If they are truly innovative products and create a new sub-need-based category then growth will occur.

– Darlene Frudakis

Innovation in the form of new products and categories, and segmentation that exploits niches and the premium end of the product range increases the size of the market when measured in dollars, but not necessarily in units. Innovations or new entrants that change the rate of animal acquisition increase the size of the market on a unit basis, allowing all price ranges in a category to grow.

Each new entrant effects its category differently. More mature markets tend to get cut into smaller pieces while "new" subcategories will expand the size of the pie. For example, a new entrants that make keeping salt water fish easier will grow that business to the benefit of all companies that supply salt water hobbyists. A fresh set of eyes and a new checkbook may help Del Monte grow the Milk Bone dog snack business. It may do so by taking share from other snack producers, or it may increase total snack spending so that Del Monte benefits and competitors suffer less loss than if the size of the market was static, or perhaps competitors grow as well as more dollars are spent on treats for dogs.

-- Shawn Dooley