Pet Supplies: Something to Bark At

April 25, 2008
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Controversy has surrounded segments of the pet supplies category recently, but change is in the air, and the category is using its setbacks to build for the future.

Americans certainly love their pets. In the United States, ownership of pets is still at a peak level - 63 percent of households have a pet, according to the United States 2007-2008 American Pet Products Manufacturers Association’s (APPMA) National Pet Owners Survey. The survey also points out that pet owners “on the whole report higher household incomes than the total U.S. population, with dog owners reporting the highest income at $49,000.”

To take care of their pets, Americans spend a large portion of that income. Total domestic pet supplies sales for the 52 weeks ending March 25, 2007, amounted to more than $1.1 billion (excluding items sold at Wal-Mart Stores), an increase of 8.5 percent, according to Chicago-based Information Resources Inc. In the same time period, sales of private label items rose 21.7 percent to $207.9 million.

Some industry professionals have a very positive attitude toward private label pet supplies. “Private label is a win-win opportunity for all channels of distribution,” says Frank Arviso, national sales manager for private label pet food at St. Marys, Ohio-based Pro-Pet LLC. “Private label offers excellent quality at a value price throughout. The retailer wins because of high turns with an excellent margin return, and the consumer wins because of the value and savings that private label offers. Pets win because they get an excellent, 100 percent nutritional formula diet that is high in palatability.”

According to a report from Chicago-based Euromonitor International titled “Pet Food and Pet Care Products – USA”, a positive outlook regarding the overall pet supplies category could be maintained, or even strengthened, by the significant and continuing changes in pet owners’ attitudes toward pets, and also by the changing demographics in the U.S. population. The humanization of pets continues to impact the pet industry, and that trend is being driven in part by the growing number of baby boomers, often evolving into empty nesters. Additionally, there is an increasing number of young single professionals who own pets, and they are treating them as their children.

The Euromonitor report also notes that these population groups have higher consumption levels due to their living situations and, as a result, are spending more on their pets.

“Pets have definitely become members of the family in our society,” Arviso says. “Our pets are pampered with much better care - better diets, better health care (vet visits), treats and toys.”

The food segment in the overall pet supplies category is being particularly affected by the pet humanization trend. According to the Euromonitor report, as pet owners become more conscious of what they consume, they also are paying more attention to what their pets eat, offering them premium, all-natural and sometimes organic products.

“The trend is toward natural as well as premium foods,” says Carol Schrott, category manager for Spartan Stores, Grand Rapids, Mich.

Two major retailers recently have entered the high-end pet food segment with their own brands. Minneapolis-based Target’s entry is called LIFELong, and the food is for dogs and cats. According to Target, the line features five scientific formulas - each offering high-quality protein, such as real lamb and chicken; antioxidants, such as vitamins E and C and selenium; omega fatty acids, such as linoleic acid; and other premium ingredients.

Meanwhile, Bentonville, Ark.-based Wal-Mart Stores debuted its Natural Life pet-food last year. According to the retailer, the line is intended to appeal to animal lovers who say they wouldn’t feed their pets food that wasn’t as high quality and healthy as the food they serve their family.

Because many pet owners agree with this philosophy, the trend toward organic and natural items in pet foods has been strengthening. And the mid-March nationwide recall of pet food because of industrial chemicals found in imported ingredients has increased quality awareness significantly with consumers.

“Even before the pet food recall, there was a tremendous increase in interest from buyers from all types of stores for all-natural cleaners, including pet shampoos, conditioners and colognes,” says John Manolas, president of Gurnee, Ill.-based Whyte Gate Inc.

Holly Sher, president of Evanger’s Dog & Cat Food Co. Inc., Wheeling, Ill., also says that her company was doing well in the organic sector before the pet food recall and now it can’t keep up with demand for those types of foods.

“Pet owners are scared,” she says. “People want healthier food for themselves and for their pets. People want to know what’s put in pet food, especially after the recall.”

Some within the industry believe that the trend toward organic and natural pet supplies will continue its strong momentum long after the negative press of the pet food recall subsides. “As more people choose natural and organic items for themselves, they also will pursue that area for their pets,” Manolas says. “As consumers become more environmentally aware - for such reasons as global warming and pesticide use - they will be more willing to try all-natural pet cleaners.”

“The jury is still out,” notes Pro-Pet’s Arviso. “This segment is still fairly small, but growing. Human habits and diet choices eventually will transfer over to their pet food choices. As the demand for organic/natural human food grows, so will sales of pet food in those areas.”

Arviso does say, however, that private label pet food has made a major impact in the premium dog and cat food segments. “But it has yet to make a major impact within the super-premium segment. I think private label will eventually be accepted as a viable alternative choice with both super-premium and organic/natural pet food formulas, but it will take some time.”

As for the recall, Arviso says that it definitely hurt the entire category and the credibility of manufacturers. “But I believe everyone will recover and the industry actually will become a better source of supply because of stricter quality controls and ingredient testing.”

Another “positive impact” from the recall is that it has stimulated interest in international safety standards for food products that cross country borders, according to Duane Ekedahl, who is president of The Pet Food Institute, Washington, D.C.

“This will be a challenge for a country such as China that has an agricultural system based on many small rural farmers,” Ekedahl says. “Yet it’s in their interest to develop a system of safety verification - perhaps independent third-party certified laboratories - to meet what consumers will demand worldwide.”

The Proactive Approach

Changes in the pet supplies category certainly have not been confined to ingredients. There also have been noted developments in packaging, product development and merchandising that have changed the shape of the pet care category.

“We always try to give our customers the most updated graphic and packaging available,” Arviso says.

So Pro-Pet LLC now offers a new poly-woven bag for its dry dog and cat food SKUs with more crisp colors in conjunction with an almost indestructible bag, and it has received very positive responses from retailers and consumers.

According to Sher, there is a trend toward making packaging of pet foods appear like packaging for foods targeted at humans. “People want the best items for their pets, and that type of packaging makes them feel that they are getting such products,” she says.

To stimulate awareness and sales of pet supplies, retailers and vendors use a variety of tactics. For example, says Karen Peterson, special projects manager, corporate communications for Salisbury, N.C.-based Food Lion LLC, “Food Lion merchandises all of its pet supplies, products and foods in the same aisle, and we promote these products by way of end caps, MVP discounts (customer loyalty cards), and special aisle platforms, referred to as aisle stacks.

“Our suppliers provide us with information on assortments, promotions and also on merchandising. We work closely with them,” she adds.

Furthermore, Spartan Stores offers one-stop shopping for different types of supplies in the pet category aisle. They include foods, beds, collars, leashes and treats, according to Schrott. In addition, super-premium food products are located together in a special 4-foot section of the aisle.

Retailers and manufacturers should do well in the years ahead due to the pet humanization trend and concerns about product quality in the pet supplies category.

Changing demographics of pet owners, as well as a newly changed perception of pet safety as it relates to health concerns have caused hesitation in the category, but in the long-run undoubtedly will help continue the category’s growth.

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