Read the Conversation
Meeting highlights:
- Brazil, as the 2nd largest market for Zoetis, has experienced in recent years a significant increase in companion animal care.
- Market trends: Increased pet population as well as increased investment in pet care; Market consolidation in both companion animal and livestock.
- Zoetis innovates to meet unmet needs in dermatitis, pain management via monoclonal antibodies, as well as parasiticides.
- Brazil as a key exporter of animal protein: economic and environmental sustainability provided from Zoetis’ efforts to ensure healthy livestock.
- Brazil, while experiencing some inequalities in animal health care, possesses world-class facilities and a large number of veterinary schools, underscoring the importance of both companion animals and livestock.
- The importance of Zoetis’ local R&D and production facilities for national production and the study of tropical disease.
- Luis’ executive leadership philosophy and his thoughts on Zoetis’ culture of cultivating strong visionary leaders who recognize both threats and opportunities and are able to foster a unified, adaptable workforce.
EF: How have you seen the animal health market evolve over the last 20 years, and how have you changed as a professional to stay current with the industry?
LR: The amount of sales generated by companion animals as opposed to livestock is one of the most important factors that comes to mind when considering the significant evolution of the animal health sector. Twenty years ago, the proportion of sales for livestock (compared to companion animals) was far higher, ranging from a 60% to 90% share in developed countries. That has changed significantly since then; currently, companion animals—pets—account for a larger portion of our sales. I can discuss a few of the many factors that contribute to that. The companion animal market in Brazil at the time I joined was probably worth $5 million or so for Pfizer.
As we fast-forward to the present, the companion animal market in Brazil has grown from $5 million to approximately $140 million, a huge boost in growth. When comparing the companion animal market to the livestock market, that percentage for Zoetis is currently far higher in other markets, such as the United States. The primary causes of that are twofold: first, the growing significance of the pet population stems from both population growth and economic improvement and second, the increased care provided by households, which includes medicines and veterinary care they give their pets.
When I grew up, pets belonged outside, but since then, they have moved from our backyards to our homes, and then to our bedrooms, and now, many of them even sleep in the bed (and pillows) with us. Hence, the market for animal health has undoubtedly been pushed by this humanization of animals and the humanization of animal care, in addition to population growth. Additionally, our new products have been crucial in helping us stay relevant in the market. I am extremely proud of the work Zoetis has done to introduce products in key markets that we have addressed, particularly in Atopic Dermatitis, where we have introduced products like Apoquel, and also the first monoclonal antibody in this field, Cytopoint.
We are thrilled to report that we have also introduced innovative parasiticides, the most popular parasiticide product in the world right now being a Zoetis pet medicine. In addition, we have introduced additional monoclonal antibodies that represent a clear innovation in the pain market, a market that has long existed but has received insufficient attention. We are now offering a far longer-acting, safer pain relief option for cats and dogs alike. Such products, together with the observed market expansion, have resulted in a significantly quicker growth in Zoetis's companion animal revenue than in its livestock revenue.
These are a few of the changes that I have witnessed in the last 20 years. The market's consolidation is another. Animal health companies have experienced a lot of acquisitions and mergers, which resulted in synergies and commercial expansion for specific businesses as well as driving the industry as a whole. It has been really dynamic, and a lot more will likely happen in this sector over the next decades. Additionally, there are still unmet needs, which gives us the motivation to keep working and keep innovating.
EF: What is currently driving growth in Brazil? In what areas are you experiencing the greatest success, and how significant is Brazil to Zoetis' global strategy?
LR: The companion animals market, which is expanding faster than any other business in Brazil, is a big growth driver. For instance, Brazil ranks number three in the world for the number of pets but ranks number seven in terms of animal health expenditures. Brazil has an opportunity to get up to number 3 in expenditures, yet certain factors, like the population’s pet healthcare awareness, as well as the population’s purchasing power, are currently the limiting factors. We know there is a lot of potential there. Our ongoing consumer education efforts will continue to fuel the demand for veterinary visits, which will propel the market as a whole and propel our companion animals’ unit growth.
At present, ruminants (herbivorous grazing livestock) remain very significant. Brazil's livestock sector remains well-positioned when considering the global competitive dynamics for animal protein production. Brazil is known for producing quality beef, and it just achieved foot and mouth disease (FMD)-free status without the need for vaccinations. This is quite important as it opens up new markets for the export of beef and other animal products. The new designation of FMD-free without vaccination gives Brazilian producers access to a lot of markets, including those in South Korea, Japan, and even Mexico, which were previously a closed market for Brazilian products.
It's also caused difficulties since, in the past, farmers were obligated by law to assemble their herds and vaccinate them against FMD twice a year, along with other treatments. Since they no longer need to be vaccinated for this particular disease, farmers could give up other treatments as it is a lot of work to assemble herds. We are currently working with the farmers and producers to make sure they understand the necessity to continue treating and caring for the animals in order for them to continue being productive, and I believe that overall, animal health is in a very excellent position. Sustainability is a major focus of ours as well and goes hand-in-hand with animal production since healthy animals are more productive. However, protein production occasionally receives negative press due to its contribution to the carbon footprint. With improved animal health and technology, especially in smaller farms, Brazil will be in an even better position to provide affordable animal protein to the world’s growing population.
We acknowledge the significance of sustainability and strive to promote it by providing animals that are healthier and more productive. All of this is related to the requirement to maintain efficiency and sustainability, which drives economical and sustainability benefits at the same time.
Brazil is a highly strategically competitive market for increasing protein production when it comes to livestock farming, and it will stay that way. Brazil has the capacity and means to maintain and improve its current level of sustainable protein production, and this incentivizes us to keep providing those farmers with the solutions they need to be competitive and keep the world supplied with food.
EF: How would you rank the willingness to adopt innovative practices among veterinary specialists and doctors?
LR: As a very large country with significant income inequality, veterinary care in Brazil can be as modern and efficient as any other place in the world, while at the same time still maintaining older practices in other regions. This disparity is one of the reasons that we, as animal health providers, must keep up our collaboration with the veterinary community, help them advance their skills, and continue to supply all of these companion animals with medication. On the production side, this presents us with enormous opportunities. We have significant integrations in the swine and poultry industries, such as with protein companies BRF and JBS, among other extremely large, technologically sophisticated organizations. They have the best management techniques in place and are capable of being very effective and technically advanced. When it comes to generating animal protein, they are extremely intelligent, highly developed, productive, and capable of competing with anyone in the world. Cattle farming is less consolidated than swine and poultry but is also highly technologically advanced. A lot of things are happening to keep the level of sophistication high.
EF: Are you optimistic about the future of Animal Health in Brazil?
LR: The fact that there are still a lot of unmet needs excites me. Zoetis has experienced great success with some of our products, opening up the market for dermatology and atopic dermatitis, which we service with our products, Apoquel and Cytopoint, which have generated over $100 million in sales globally. In a similar vein, the monoclonals for pain control will remain successful for years to come. They have only been introduced into a number of European markets over the past three years, and they are proving to be highly successful. We introduced them in Brazil a year ago as a dog monoclonal for pain, and a few months ago for the cat. They are working incredibly well, and we keep hearing incredible stories from pet owners about how this has completely changed their lives by allowing them to give their animals the best possible care.
Unmet needs exist for both companion animals and livestock. There are still under-served areas where we could improve, which is why it certainly excites me that Zoetis is working on solutions. These include anything that can help with compliance, ease of application, ease of use, and anything that can minimize the handling of livestock. There are also newly discovered diseases that have surfaced recently; for instance, the African swine fever still lacks a conclusive treatment. Though a few businesses have developed vaccinations here and there, none of them have shown to be particularly effective against this devastating disease, and fortunately, Brazil is free of this terrible disease that has had a disastrous effect on the swine sector in other countries.
Having our own research and development center in Brazil, where animal production is highly competitive, is one of the things about Zoetis that I am most proud of. We are making sure that all unmet needs for tropical disease in protein production are taken care of, that local solutions to diseases are being developed, and that significant financial resources are being invested to try to develop and launch these products locally. We are quite pleased with the fact that we have introduced products in the previous few years that were locally developed in Brazil by a local team, and we have had great success in all our animal production sectors.
EF: What kind of skillset should a professional in animal health have to succeed, and how do you attract the top talent in the field?
LR: In my opinion, a leader must have a clear understanding of the factors that drive their company. They must also, above all, have a vision for the area they are overseeing, including how they see it developing in terms of potential threats to their current position and, more crucially, what opportunities they see to improve. A leader must make sure they have a crystal-clear understanding of the company's vision when collaborating with their team and other leaders before creating a strategy to achieve their vision. We at Zoetis have a global vision that is crafted by our CEO, Kristin Peck, and her leadership team, the Zoetis Executive Committee. We then work locally to further the vision and determine how those global strategies and global vision also affect us, and we naturally develop our strategic plans to meet those goals.
We've been quite successful in attracting leaders, and it is exciting to see that people like Irma Egoavil (GM of Zoetis Mexico; recently also interviewed by Executive Forecast) and others who recently joined the organization will also be very successful in the future. Above all, it is essential to possess that kind of thinking, that kind of motivation, and that kind of vision to make sure we can keep inspiring colleagues and producing positive results. As a multinational corporation, we operate in over 100 markets. With over 14,000 employees, Zoetis is a company with a lot of moving parts. We have figured out how to make this work with the help of our CEO, executive team, systems, and established procedures. With a market valuation of roughly $80 billion today, investors are essentially telling us that what we're doing—maintaining earnings growth and profitability, while taking care of animal health—is effective. We have a strategy that works, a vision that works and is producing results. This has been great for us, and it keeps inspiring the 14,000 colleagues we work with every day.
EF: You will be commemorating 20 years in 2025 at Zoetis. What achievements would you like to recognize, and what choices are you making now that will affect the business and the industry in the future?
LR: In addition to my own personal milestone, we will also celebrate Zoetis's 15 years as an independent company separate from Pfizer in a little over 3 years. We have remained true to the vision of healthier animals, even though the details of this mission will constantly shift due to unforeseen events and changing market conditions. This was especially true when COVID struck. I had the great fortune of working with an amazing team that came together to discuss and determine how to approach the challenge—one that we had never faced before.
At that point, we were able to navigate through extremely challenging conditions, preserve the motivation of our coworkers, and continue to provide outcomes that were even beyond our expectations. We have demonstrated our resilience and adaptability as we have managed to go through some extremely difficult periods. In three years, we will look back and say: "These qualities—resilience, drive, adaptability, and accountability—will continue to drive success for us and propel our growth at a much faster pace than the market." I'm thrilled to have this to look forward to.
