Petco’s transformation begins with purpose

Retail Gets Real Episode 298: Petco’s Ron Coughlin on the brand’s transformation into a health and wellness company
Sheryll Poe
NRF Contributor
February 15, 2023

Petco has helped find homes for more than 6.5 million animals and saves approximately 400,000 pet lives a year, but it’s still not enough, according to CEO Ron Coughlin.

“My final mission is to eliminate unnecessary euthanasia,” Coughlin says on this week’s episode of Retail Gets Real, recorded on-site at NRF 2023: Retail’s Big Show in New York City. “One million pets get unnecessarily euthanized every year and it just doesn’t have to be.”

Coughlin is clearly a pet lover. He brought a dog available for adoption to his fireside chat onstage at NRF 2023 and his 15-year-old yellow lab Yummy was Petco’s Chief Dog Officer until he passed away in October.

NRF 2023

Did you miss us in NYC? Take a look at our NRF 2023: Retail's Big Show event recap.

Coughlin is also an experienced leader, having served in senior positions at HP and PepsiCo. When Coughlin took the Petco position in 2018, he was tasked with transforming the company. He began by simplifying metrics, creating accountability and authority for employees and managers, bringing in world-class talent and focusing on customer needs that the company could fulfill better than its competitors.

Pet owners want all their pet needs under one roof, Coughlin says: “Around 54% of pet parents want a one-stop shop.” For Petco, that now includes an in-house veterinarian, pet pharmacy and grooming facilities as well as food and supplies. “We can then move that data around the franchise and that’s powerful,” Coughlin says, giving Petco the opportunity to personalize service and recommendations.

Coughlin also “turned the company upside down … and what that means is I’m at the bottom and the team members are at the top.” He says he wants to empower employees to ask for whatever they need to better serve the customer — whether it’s fixing a broken register or putting a parental leave policy in place.

“If they think they’re at the bottom, then they’re afraid to ruffle feathers and get loud,” Coughlin says. “My point is … call me, call a store leader. It needs to be fixed. You need to take care of customers.”

Listen to the full podcast to hear about Coughlin’s career journey, Petco’s strong culture and mission, the growth of rural communities as a pet market and how pets helped Americans get through the pandemic.

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Episode transcript, edited for clarity

Bill Thorne:    Welcome to Retail Gets Real, where we hear from retail's most fascinating leaders about the industry that impacts everyone everywhere, every day. I'm Bill Thorne from the National Retail Federation recording on-site from NRF 2023: Retail's Big Show right here in New York City, where we have a huge crowd of more than 35,000 industry professionals. Our guest today is Ron Coughlin. He's the chief executive officer at Petco. We'll talk to Ron about his career, Petco's transformative journey appealing to pet lovers and what the future holds for retail. Ron, welcome to the Big Show.

Ron Coughlin:    It's great to be here. Thanks for having me.

Bill Thorne:    And thanks for being a part of Retail Gets Real. Now, tell us briefly about your career background. How did you get to be CEO of Petco?

Ron Coughlin:    Well, it started, about 20 blocks away <laugh>. We're in New York City at the Javits Center. 

Bill Thorne:    Right.

Ron Coughlin:    And I grew up on 20th Street, First Avenue, but I spent 13 years at PepsiCo. I was chief marketing officer of Tropicana, chief marketing officer of the international division. I looked around and I was really intrigued by tech. I liked the speed of tech and the constant changing and having to look around the corner. So, I got an offer from HP to go join them. I was a CMO there, chief marketing officer there for a bit. Then I ended up running the LaserJet business, which is a $14 billion business, and then the PC business, which was a $35 billion business.

Bill Thorne:    Wow. 

Ron Coughlin:    Then I was having a conversation about going on the board of Petco, and that conversation morphed into, ‘Well, would you want to be the CEO?’ And it worked for me for a variety of reasons that I can get into. If you want.

Bill Thorne:    I'd like for you to tell the variety of reasons. 

Ron Coughlin:     Yes. So first, I'm a pet lover. We were just talking about pets offline. The love of my life at the time was a guy named Yummy, a yellow lab, and my family's life as well. So, I love the industry. I love pets. They're a grounding and a positive force in our world. 

Bill Thorne:    Absolutely.

Ron Coughlin:    Number two, I love hard. I've done six turnarounds and I don't like the easy stuff. I love the hard stuff. I even had a friend who said Petco wasn't going to continue and we were going to go out of business. 

Bill Thorne:    Nice. 

Ron Coughlin:    And lenders. I liked leaning into a challenge like that, particularly after I met the people and how much they cared about what they're doing. Then third, I was commuting up to Palo Alto from San Diego and being able to work in San Diego and be around my kids, who I think were 11 at the time. 

Bill Thorne:    Right. 

Ron Coughlin:    Was really appealing to me. I will tell you that there's not a day that I say it's a mistake. It's been a wonderful, wonderful experience, both from a professional standpoint and a personal standpoint.

Bill Thorne:    So, you took a risk.

Ron Coughlin:    Absolutely.

Bill Thorne:    Yep. Well, we talk a lot on the show about risk. 

Ron Coughlin:    Mm-hmm <affirmative>. 

Bill Thorne:    And if you want to advance in your career, you've got to be willing to take risks. Sometimes it seems daunting, but if you think it through and you do it the right way, there's a lot of reward if you do it right. So, San Diego, I have to tell you, as we talked about earlier, I'm from Savannah, Georgia, and I always said if I could find a place to live where the average temperature was around 75, low humidity, near the ocean, I would move. But I love San Diego. It's a great place. And by the way, your ballpark. Oh, dear Lord, that thing is unbelievable. I love baseball and I would have to say that one of the best parks in America is Petco Park.

Ron Coughlin:    Petco Park is gorgeous. The team there does a great job. We love the team. You know, Tatis, Machado. 

Bill Thorne:    Yeah. 

Ron Coughlin:    We're very fortunate. It's awesome. The only thing we don't have is the Masters.

Bill Thorne:    <laugh> True that. You don't have that.

Ron Coughlin:    But we do have Torrey Pines. 

Bill Thorne:    Yes, you do. Yes, I've been there. So, help us understand the pet market right now. Can you share how the last few years of the pandemic has impacted your business in the pet market?

Ron Coughlin:    I like to say that pets helped America get through COVID.

Bill Thorne:    I agree with that.

Ron Coughlin:    You look at all the adoptions, sure it was because people were at home, but it is also because they needed some reassurance and some positivity in their lives. 11 million new pets in 2020 and continued elevation to this day. 

Bill Thorne:    Yes. 

Ron Coughlin:    Adoptions are above pre-pandemic. And then that misconstrued notion that returns — returns are actually below pre-pandemic. Which is great— 

Bill Thorne:    Great. That's awesome. 

Ron Coughlin:    Great news. When that happened we had to adjust our business, in the short term from a COVID standpoint obviously, we need to keep people safe. We had to get nimble in terms of delivery. We launched curbside pickup, we launched same-day delivery in matters of weeks. We won more than our fair share of those new pet parents. We were really ready. Subsequent to that, we've done a lot of exciting things. Things like launching vet, we're doing the fastest vet buildout in history. We've announced some exciting partnerships, whether that's with Marriott, whether that's with Lowe's, whether that is with Nationwide. 

Bill Thorne:    That's fantastic. I will tell you, we went down to our farm and we were there — we left on March the 12th. I think that if you see any of the pictures from that time, it is the dog at my feet, the dog on the couch, the dog — it was a presence that was just critically important during that time. 

Ron Coughlin:    That's right. 

Bill Thorne:    When you're really trying to get your head around what's happening in the world, what's happening to your community, what's happening to your family, but you've got a guy there that just looks at you and says, ‘Don’t worry about it. We got it.’

Ron Coughlin:    That’s right. Well, one of the interesting things that's happening geographically to that point is the growth of rural communities, de-urbanization. So, you look in our industry, there's $7 billion of pet spend in rural communities. 

Bill Thorne:    Wow.

Ron Coughlin:    People think of them as rural communities. We opened a store in Floresville, Texas. It's two hours outside of San Antonio. It's not rural like you would, the summary of what rural should be. There's Starbucks there and there's Paneras there. 

Bill Thorne:    Right. Yep. 

Ron Coughlin:    Because folks like you are now working from these communities. 

Bill Thorne:    Yep. 

Ron Coughlin:    For large companies. That's a big opportunity for our business. We launched 10 farm and feed locations. 

Bill Thorne:    Oh, that's awesome. 

Ron Coughlin:    Actually 10 by the end of the year, which is in two, three weeks. They're doing exceedingly well. That's an underserved market right now, which is growing. 

Bill Thorne:    That's great to hear. Now you've approached transformational journeys and Petco’s is probably one of the biggest transformational journeys that you've had to make. How has that developed over the last couple of years since you've been there? 

Ron Coughlin:    Mm-hmm <affirmative>. The first two legs are common. First you get the operational house in order. My first meeting, I remember being aghast because we had 30 metrics that we were asking people to focus on. We simplified it down to five key metrics. 

Bill Thorne:    Beautiful. 

Ron Coughlin:    Then we said to the store leaders and e-com leaders, you are now a general manager, you own your business. We pushed data down to them. Right? The data was up in San Diego, we weren't pushing it down. How is Brand X doing? They didn't know. 

Bill Thorne:    Oh wow.

Ron Coughlin:    So we pushed the data down to them. We created accountability and that worked, and it helped stabilize the business. We were negative four, negative five in 2018. Second thing was to get the right folks on the bus. We're a $6 billion company, but our talent is fortune 10, fortune 20 and fortune 30. We have folks from Walmart, folks from Target, folks from PepsiCo, HP, et cetera. 

Bill Thorne:    Yep.

Ron Coughlin:    We've brought world-class talent and what world-class talent knows is what it looks like, the A-game looks like.

Bill Thorne:    Right. 

Ron Coughlin:    They helped get you towards that A-game.

Bill Thorne:    Right. 

Ron Coughlin:    That's what we've enjoyed. Then third is really focusing on a customer insight or a customer need that you can fulfill better than anyone else in the world. We're in a competitive world. 

Bill Thorne:    Sure.

Ron Coughlin:    There's the Walmarts of the world. There's the Amazons of the world. We have a pure play in Chewy. What insight can we do better than anyone else? If you go talk to pet parents, 80% say I want to do the best thing for pets.

Bill Thorne:    Right. 

Ron Coughlin:    But only 50% know what that looks like. Hence the opportunity between those two numbers. We reposition the company into becoming a health and wellness company. What that meant was getting rid of things like artificial ingredients, a hundred million dollars of product out the door, number one cat’s SKU, number two cat’s SKU. We kicked out the door in that move.

Bill Thorne:    Wow. 

Ron Coughlin:    We built out veterinary hospitals. We got rid of shock collars. So one was turning into a health and wellness company from a positioning standpoint, a portfolio standpoint. Then the second insight is, around 54% of pet parents want a one-stop shop, take the Coughlin household. We were going to a vet in one place. I never met the vet. The vet tech came and took my dog and then gave me a big bill <laugh>, went to a boutique groomer, went to two different places for food. And then I came to Petco. I'm like, wow, I could do this in one place.

Bill Thorne:    I can do this in one place.

Ron Coughlin:    Yeah. That's what they want. We can then move data around the house. If your dog is diagnosed with a skin issue by our vet, guess what? When the groomer grooms, they know not to put something that's going to exacerbate that skin issue. When you're in center store, we're going to say, ‘Hey, do you want to look at the Hills product for sensitive skin?’ So we can move that data around the franchise. That, that's a powerful—

Bill Thorne:    That is very powerful. You brought a lot of people in and so obviously some changes had to be made in culture.

Ron Coughlin:    Mm-hmm. <affirmative>

Bill Thorne:     What would you, how would you describe the culture at Petco?

Ron Coughlin:    Yeah, what I've come to learn, and people have said this, that culture is the most important thing. COVID showed it to all of us. What we focused on pre-COVID, and then it got on steroids during COVID, is turning the company upside down. What that means is, I'm at the bottom and the team members at the top. Now, lots of people talk about that. But when you actually do it, one of the things you have to convince people of is actually, I really do work for you. So, if you are waiting for an hour and a half for IT to get back to you and your register's down, guess what? You're out of business. 

Bill Thorne:    Right. 

Ron Coughlin:    That's not OK. IT works for you because no sales go through the IT department in San Diego.

Bill Thorne:    Correct. 

Ron Coughlin:    They work for you. If you are sweating in a grooming salon because it's too hot in July, guess what? Facilities works for you. 

Bill Thorne:    Right.

Ron Coughlin:     They need to fix that. If they think they're at the bottom, then they're afraid to ruffle feathers and get loud. My point is, if you don't get it fixed by in two times, call me, call a store leader. It needs to be fixed. You need to take care of customers. So we turn the company upside down. What you learn when you do that is, for example, one of our younger employees came up to me and says, ‘Ron, I can't afford to have a baby at Petco.’ Right. So, I walked down the aisle to our head of HR. I said, ‘What's our parental leave program?’ Well, we don't have one.

Bill Thorne:    Ooh.

Ron Coughlin:    Guess what? Week and a half later we had a parental leave program. 

Bill Thorne:    Nice.

Ron Coughlin:    I had no idea. 

Bill Thorne:    Yeah.

Ron Coughlin:    If we didn't have that door open that people could say what they need, then we wouldn't have facilitated that. I think that's the second thing. Then when COVID hit, crises either break you or bring you closer together. 

Bill Thorne:    Sure.

Ron Coughlin:    We had this organic movement called Petco Strong and it came from the stores. We really bonded together. Whether that's keeping each other healthy, or we gave five consecutive COVID appreciation bonuses, the feeling was we're looking after each other and the company is caring for you. It just made us stronger and more of a community.

Bill Thorne:    That's fantastic. Yeah. You know, it was interesting. It is interesting. It remains interesting that during the time of COVID, retailers had to act quickly. Sometimes you have an idea or concept and you have to go through all of the testing and you narrowly send it out there and then bring it back and look at the results and figure out, can we tweak it this way? Can we tweak it that way? Where during the pandemic retailers just said we can do this, get it done. It was done and it's really gotten sticky. I mean, people are still doing it and still taking advantage of that. Do you think that it will ever go back to the way it was where businesses will test, test, test, test, test. Or are they going to be nimble?

Ron Coughlin:    A great example of that is we stood up 600 ship-from-store locations in two weeks. 

Bill Thorne:    There you go. 

Ron Coughlin:    So, in two weeks, because everything was going e-comm. 

Bill Thorne:    Right.

Ron Coughlin:    Because people weren't going out and boom, we just did it. Now you would probably do a little more financial analysis. I would say, I'd like to meet it halfway.

Bill Thorne:    Right. 

Ron Coughlin:    I'd like to keep that speed, but we're no longer in survival mode. 

Bill Thorne:    Right. For sure. 

Ron Coughlin:    In the early days, none of us knew what was going to happen. 

Bill Thorne:    No.

Ron Coughlin:    So, we were in survival mode and that forces you to be fast. 

Bill Thorne:    Yeah.

Ron Coughlin:    Quite frankly, command and control happens in those environments. Now we want to benefit with more of the team's thought and we want a little more validation, but in no way do we want to go back to where we were. I would say speed with financial acuity, <laugh>.

Bill Thorne:    Yeah. Well <laugh>, you definitely need the financial acuity. From your perspective, what does the future of retail look like and what excites you most about the future of retail? 

Ron Coughlin:    I would say, I talked earlier about going to tech and the change that happens in tech and the speed of tech. I think retail's the same right now. If you look at what's happening, take Petco as a microcosm, right? Is a retailer a hospital that takes care of a Siamese? Is a retailer a salon that makes a shepherd beautiful or a school for Chihuahua? No, it's morphing in its meaning. You look at supply chains today. Whether you take the old school DC supply part of the supply chain being completely transformed by automation or the use of the stores as micro-fulfillment centers. Brian Cornell has been a kind of visionary on that front. My fellow PepsiCo guy. 

Bill Thorne:    Yep. 

Ron Coughlin:    So, supply chains being transformed, or look at the customer standpoint. When I was at PepsiCo, we were one of the best consumer marketers in the world. We would say, OK, let's do a segmentation. There's 5 million of value-conscious consumers. There's 10 million of image-conscious consumers. Okay, let's market to those millions. You know what the segments are now? They're Bob, they're Sue, they're John.

Bill Thorne:    <laugh>.

Ron Coughlin:    They're segments of one. 

Bill Thorne:    Yeah. Yep. 

Ron Coughlin:    So it's honing your product to that segment of one, honing your engagement to that segment of one, honing your marketing to that segment of one. That's a sea change from the old Kotler marketing 101 4 Ps. 

Bill Thorne:        Well, during the mid 2000-teens, I'd say around 2017, what was really taking root in the mind of the media certainly was the death of the brick and mortar stores. Would you agree that brick and mortar’s kind of on the going down and online’s going up?

Ron Coughlin:    I cannot tell you how many people in my first year told me how many stores I needed to close and how brick and mortar was dying. That is absolutely not true. Our stores are thriving <laugh>. Have we closed some? Yes. Have we opened others? Yes. To me it's a continuum. 39% of my customers are omnichannel customers, which means sometimes they shop in stores.

Bill Thorne:        Right.

Ron Coughlin:    Sometimes they shop online.

Bill Thorne:        Yep.

Ron Coughlin:    Another 29 are brick and mortar only customers. My brick and mortar has been growing, I think it's for 10 consecutive quarters.

Bill Thorne:        So that's phenomenal.

Ron Coughlin:    That's not the case. And now they're even more powerful because of the micro-distribution centers and the fact that we can bring services in. I talked about having over 200 veterinary hospitals in our stores. So guess what happens? We offer veterinary services, but we take out 2,500 square feet when we put in a hospital.

Bill Thorne:        Right.

Ron Coughlin:    Of merchandise.

Bill Thorne:        Wow.

Ron Coughlin:    What's happening to our merchandise?

Bill Thorne:        It's going online.

Ron Coughlin:    It's up five to six points in that location.

Bill Thorne:        <laugh>

Ron Coughlin:    So, I put in a hospital—

Bill Thorne:        That’s pretty unbelievable.

Ron Coughlin:    I take 2,500 square feet of merchandise and my total merchandise sales go up because of the traffic, because of the shopper.

Bill Thorne:        Right.

Ron Coughlin:    So, this is part of the whole transformation that's happening in retail. Let me ask you a question. If a pet parent goes on their app and buys a bag of dog food and it's same-day delivered, pulled from the local store, is that an online order or is that a store order? I don't know.

Bill Thorne:    <laugh>

Ron Coughlin:    I don't know it. It doesn't matter. 

Bill Thorne:    It doesn't. 

Ron Coughlin:    It's the leverage across the ecosystem that really matters. 

Bill Thorne:    Yep. 

Ron Coughlin:    So, I've heard all those stories and all I look at is how my customers want to shop. 39% want to be omnichannel customers. The 29% want to be brick and mortar. So, we're going to meet them there. 

Bill Thorne:    Yep. So what is your best advice for those just starting in retail?

Ron Coughlin:    First find something you believe in. That's one beautiful thing about our business is we have a mission. We save 400,000 pet lives a year. So our folks care and they're doing something they believe in. Yes, they're making sales. But guess what, every time someone checks out with us, they're pretty much making a donation to Petco Love and that allows us to save 400,000 pet lives and do a bunch of other stuff in cancer, et cetera. So find someone, something you care about and groups that you want to work with, number one. Number two, be ready to work hard and be ready to work on non-conventional — you're going to be checking your sales on Christmas Day or New Year's. That doesn't mean you're open, but you're going to be checking them. 

Bill Thorne:    Yep. 

Ron Coughlin:    It doesn't stop because people keep ordering. So it's hard work, but it's very satisfying work. Then lastly, make sure you're in a community that you feel comfortable in. It's one of the powerful things we've done at Petco over the last few years is making a community that people feel comfortable in.

Bill Thorne:    That's fantastic. I appreciate all the work that you all do. I appreciate your mission. As a pet owner, as a dog owner, as a dog lover, I think that the focus that you all have in saving those lives, and we had talked about before we started going through those shelters and—

Ron Coughlin:    Mm-hmm <affirmative>.

Bill Thorne:    Just the weight that you feel in your heart when you come out. Even though you may have saved one, you wish you could’ve taken all of those dogs and those cats and those pens. But—

Ron Coughlin:    My final mission is to eliminate unnecessary euthanasia. 1 million pets get unnecessarily euthanized every year and it just doesn't have to be. Before I leave this seat, I'm going to get that down to zero.

Bill Thorne:    Ron, it's been a pleasure talking with you.

Ron Coughlin:    Thank you. 

Bill Thorne:    Thank you for being our guest and thank you for everything you're doing for pets all over this country. And thank you all for listening to another episode of Retail Gets Real. You can find more information about this episode at I'm Bill Thorne from the Javits Center in New York City at Retail's Big Show with Ron Coughlin. And this is Retail Gets Real. Thanks again for listening. Until next time.

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