A Dog-Eat-Dog-Food World -- Tyrrells Aims To Please Pets And Their Owners

TYRRELLS INC.

-- Employees: 47

-- Headquarters: Seattle

-- Business: Pet-food manufacturing

-- President: James Hart

-- Fiscal 1991 sales (ends March 31): $9.5 million

-- Major customers: Safeway, QFC, Associated Grocers

-- Major competitors: Alpo, Ralston Purina

-- Strategy: Capitalize on low shipping costs to underprice competitors and increase market share in the United States and overseas.

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Forget all you've heard about laid-back executives. You've not seen anything unless you've met the manager who controls much of what Tyrrells Inc. produces.

If you can wake him up, that is.

``Meet our vice president for new-product testing,'' says Rod Sampson, vice president and general manager of Tyrrells, pointing out his second-floor window toward an adjoining deck.

There, snoozing on his back in the warm, late-winter sun, the vice president is oblivious to the introduction.

But that doesn't bother Sampson. It only means that his influential co-worker, a golden retriever named Pardner, had a satisfactory meal earlier that day.

How much Pardner sleeps and how enthusiastically he gulps his meals are crucial indications of consumer acceptance for Tyrrells, the Northwest's sole remaining maker of cat and dog food that sells canned and dried products under its own name and other labels throughout the

region.

For years, Tyrrells - whose cans, until recently, had a distinctive red label - has been the leading seller of canned dog food in Seattle and Tacoma, with about a 20 percent market share, according to company estimates.

But pet contentment and mealtime enthusiasm are only one measure of Tyrrells' marketing challenge. Tyrrells makes one of the few products in the region that must appeal to two completely different sets of consumers: pets and their owners.

Moreover, as the pet-food industry becomes more segmented and as manufacturers look overseas for new customers, the marketing challenges will compound for Tyrrells and its Anchorage-based owners, Bristol Bay Native Corp., one of Alaska's 13 native corporations created by Congress in the early 1970s.

Tyrrells' performance in recent years has been - pardon the pun - a dog. Even though it expects to see sales of $9.5 million in fiscal 1991, which ends March 31, and $10.5 million in fiscal 1992, profits have been elusive.

Because of management problems and unfocused marketing efforts, Tyrrells has been in the black in only one of the past nine years, says Jim Hart, chief executive of Bristol Bay. Hart, who also has served as Tyrrells' president since early 1990, predicts that the company will return to profitability no earlier than fiscal 1992.

These problems prompted Bristol Bay, Tyrrells' owner since 1981, to contemplate selling the company late in 1989. Bristol Bay, whose other holding, the Anchorage Hilton Hotel, was suffering from Alaska's economic slowdown, figured that unloading the pet-food operation would improve cash flow, Hart says.

``We thought we could use the proceeds to offset debt service on the Anchorage Hilton,'' he says. ``But by early 1990, we had a little brighter picture at the hotel.''

Moreover, few takers had come forward for Tyrrells. None of the major pet-food manufacturers was interested, and the most other potential investors were willing to pay was its liquidation value.

``We decided we could liquidate any time,'' Hart recalls.

So instead of selling, Bristol Bay revamped Tyrrells' management, appointing Hart president and bringing on Sampson, former president of Pacific Marine, a Seattle wholesaler of hardware and marine products, in May 1990.

Under the new management, the company streamlined production and marketing efforts and focused on creating a niche based on price.

Tyrrells' top-of-the-line dog food sells for 55 cents to 60 cents a can in Seattle, compared with $1.15 a can for premium brands.

``One reason is that we've got very low shipping costs to Seattle and the rest of the Pacific Northwest compared with national brands,'' says Sampson.

Tyrrells employs 47 at its factory in Seattle's Fremont area. The facility's maze of conveyor belts and production ramps can handle 220 cans of dog and or cat food a minute, a fraction of the 1,400 cans that competitors' factories often handle.

Nevertheless, Tyrrells for years has gone head-to-head throughout the West with national brands such as Alpo, Kal-Kan and Purina. Today, the company's products are sold in nine western states by QFC, Safeway, members of the Associated Grocers cooperative and other retailers.

``Tyrrells' canned dog food has been our No. 1 seller for quite a while,'' says Annette Otis of Associated Grocers, the Seattle-based cooperative with 350 members in the Pacific Northwest and Alaska.

Additionally, Tyrrells makes pet food for private-label sales, such as the Western Family house brand sold in Associated Grocers stores, and for major manufacturers such as Carnation.

Tyrrells' niche also comes from a unique production process developed by the late W.G. Tyrrell, who founded the company in 1941. Making a variety of meat-and-vegetable mixtures, Tyrrells cooks its products after they've been packed in cans, using large steam chambers that resemble pressure cookers. As a result, the company's canned foods contain no preservatives, Sampson says.

Some 45 percent of Tyrrells' revenues come from sales of its own brand. The remaining 55 percent come from pet foods packaged for sale under other labels. Dog food accounts for three-quarters of its revenues.

It recently redesigned the labels for its canned and dried foods.

``Having labels that aren't outdated is a critical part of marketing,'' Hart says. ``We felt we had to change the label as an early indication of a new direction.''

Cans and bags with the new labels began to hit the market just last month, so it's a little early to gauge their impact. Sampson notes, however, that January showed the strongest sales in the company's history.

Pet foods are big business in the United States. In 1989, the last full year for which statistics are available, dog- and cat-food sales hit $5.7 billion nationwide, according to the Pet Food Institute.

And that market could be growing. In recent years, increasing numbers of pet owners have turned to premium pet foods, some costing more than twice the price of conventional brands, on the theory that their ingredients and nutritional value will help their pets live longer.

At the same time, pet ownership has risen overseas, particularly in the Far East, where dogs and cats have become status symbols.

Tyrrells sees market opportunities in both trends. The move toward premium-brand pet foods will attract customers to Tyrrells' preservative-free products and competitive prices, Sampson says.

``High-end product has been where almost all the growth in the pet-food business has been in the past several years,'' notes Sampson. ``We don't have a high-end product to directly compete with them. But we maintain that specialized diets only are needed in special conditions. For the vast majority of pets, special diets aren't needed.''

Tyrrells also is betting that it can establish a foothold in Asia. The company has agreements with Toyo Bussan Co. Ltd., a subsidiary of Japanese trading giant Mitsubishi, and with Taiwan-based Welcome Co., to develop pet foods geared toward Asian consumers.

That's proving to be a challenge. Tyrrells has had to concoct a new dog-food formula, ``one that's attractive to Japanese consumers when they open the can,'' Sampson says. ``The smell, color and texture of the food is very important to those customers.''

Sampson adds that the recession isn't prompting Tyrrells' push for overseas business. Since consumers continue to buy for their pets regardless of the economic climate, the company appears to be recession-resistant.

``In tracking sales over the past nine years, there've been no movements or shifts in sales during economic slumps,'' he notes.

Strategy appears weekly in the Business Monday section of The Seattle Times.