Retailer Features
Cover Story - 2012 PLMA Show Preview

Taking Care of Pet Family

November 28, 2012
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As thousands of visitors from dozens of countries will walk the exhibit halls of the Rosemont Convention Center outside of Chicago this month for the Private Label Manufacturers Association’s annual Private Label Trade Show, many will get a new look at a familiar category in private label.

PLMA has created a Pet Care Pavilion this year to showcase manufacturers of private label pet food and pet supplies. According to figures from Euromonitor International, the category as a whole is about $90 billion annually today, and is projected to reach $105 billion by 2017.

That’s one reason why PLMA President Brian Sharoff said his organization wanted to draw private label makers to the forefront of this year’s show.

 “We are looking for a category with the retail business that somehow may be overlooked, or not fully understood,” he said. “Last year we selected Latino and
Hispanic business … using the same approach, the pet market is huge. Many retailers don’t understand how they should be expanding or exploiting the pet market for private label.

“It’s one of those categories where not only do you have it in stores and supermarkets or mass merchandisers, but there’s also specialty chains that spend all of their time worrying about pets and pet foods and pet care. It has all those elements. It’s more of a marketing challenge.”

From Walmart, Target, Trader Joe’s and Walgreens to Petco and Petsmart, private label pet products are available at most major retailers. But Sharoff said just having a handful of products does not mean retailers fully appreciate the category’s reach.

“All the traditional retailers have pet food and pet care in their store, but very few of them see it as a major statement of who they are and what they’re doing as a retailer,” he said. “If you talk heat-and-serve food, lots of retailers define themselves by the things a person brings home and heats in the microwave, and recreates a night in Italy or wherever they went. Very few define themselves by what they do in pets.”

But a trend called humanization of pets might be changing that in the category.

PETS AS PEOPLE

Humanization, pet owners treating their pets more like children or people than merely furry companions, has been under way for years. But where the trend might have been looked at as a fad or a small minority of owners, Euromonitor Head of Global Petcare Research Paula Flores said.

“Humanization has been around for quite a while, so it’s not exactly new, but it increasing more,” she said. “We’re treating pets as part of the family, or a child, so we’re willing to spend a similar amount of a purchase for ourselves.”

That is lending the category to create a kind of pet foodie. Because of the rise in humanization, Flores said, premium products in the pet category also are expected to grow strongly in the future. That includes all-natural and organic products, weight control, fortified and functional products, as well as improved packaging and sustainability.

“Niche areas that are going mainstream are gaining importance,” she said. “Dog and cat food that’s organic, anti-allergies, all-natural products are gaining increasing prominence. Grain-free (products) are also gaining momentum right now."

“Companies that are tapping into all of these, they’re ticking all the boxes. Using clean packaging and trying to convey ultra-premium positioning.”

Among the more prominent companies moving into premium private label pet food is Walmart. Tim Dodge, the company’s senior merchant for pets, said the retailer’s history with private label stretches back to 1981, with the introduction of its Ol’ Roy line of dog and cat food, treats, and cat litter.

“Walmart has a very deep portfolio in private label pet with dry and wet dog food, cat food, and treats,” Dodge said. “All of our private label items are made with solid formulas and manufacturers to provide both a savings and value to our customers. It’s our mission is to save our customers money so they can live better, and this includes their four-legged friends that many consider family.”

The newest addition to its portfolio is a premium dog food line called Pure Balance that Walmart launched this summer.

“The addition of Pure Balance allows us to provide a premium product in a segment we had not be serving before,” Dodge said. “We’ve received very favorable feedback from our customers, online in social media like Facebook, and on blog sites like Dog Food Advisor.”

But Walmart is far from the only site where premium products are becoming the norm in private label. Bill McKee, vice president of U.S. private label sales for
Simmons Pet Food, said he was seeing the continuation of a trend that has been in motion for a few years now.

“I’m excited about the further evolution toward premium style of products, in terms of ingredients, in terms of packaging, in terms of execution,” he said. “That’s a real exciting thing.”

And going back to the theme of a pet foodie, McKee said the premium products are bringing unusual flavors to the shelves of retailers.

“We have this trend toward humanization that has really permeated itself in pet food, even from varieties like duck and wild rice, Alaskan king crab, these are things we want to eat,” he said. “Homestyle-looking stews. That trend is different than what we’ve seen.”

Doug Haslem, the executive vice president of sales and marketing at Simmons, said the move has been larger than expected.

“It’s been a trend that seems to have grown over the last number of years – it’s not just a premium product, but whole segments that are premium,” he said.

“We’re seeing (humanization) it implemented more now. Retailers seem to have embraced it as a fact rather than something salespeople are talking about.”

SUCCESS IN RECESSION

Flores said those trends have continued, and are expected to continue, despite the difficult global economic conditions. Much as families tend to cut back on the parents’ spending before they cut back on their children, consumers seem willing to continue to find ways to pay for items for their pets.

“We have seen that per-pet expenditure has been increasing, even in very difficult times,” she said. “ We usually tend to say it’s recession-resistant. It will be the very last kind of place where they cut on their expenses.

“In a way, what we have seen in the data this year is that, despite all the economic downturn, it’s still growing in premium pet food. In certain markets there is a tipping point, extremes like Greece and Spain. (The budget) can stretch a lot, but eventually they’ll start to cut back and go to private label.”

Although private label is not always recognized for its premium position in categories, Flores said there were opportunities to provide better-than products in the mid-tier range that can appeal to consumers looking to trade down from premium national brands. But there also were plenty of changes for private label manufacturers and retailers to capture market share at the top end of the tiers, she said.

“People who are buying at economy price or mid-price platforms, rather than getting Purina or one of the more expensive brands, they can trade up in private label, but still be much cheaper than the brands,” she explained. “In more developed markets, people are upgrading in private level. Maybe they will trade up, and other people – mid-price people – may upgrade to an upper-tier private label.”

The quality of the products, though, is key. In a Consumer Science survey conducted exclusively this month for PLBuyer, less than 5 percent of respondents said that private label pet products were better quality than national brands. More than 60 percent said national brands were better quality.

“People have to know the retailing conditions in certain markets,” Flores said. “In Germany, it’s really important. Private label accounts for 29 percent market share of dog and cat food. In other markets it’s quite developed, too. At the end of the day they’ll buy it from retailers that they have this trust with. …

“In Germany that is not just at the pure retailers but also the pet superstores and pet shops with their own private labels that people trust. Like Fresnof.”

THE SPOTLIGHT IS ON
Among the companies that will be exhibiting at the Pet Care Pavilion at PLMA is Evanger’s Dog and Cat Food Co. A 75-year-old company based in the Chicago suburbs, President Holly Sher said her company was the only family owned and operated firm making canned private label pet food in the U.S.

“It’s us and nobody else,” she said.

And although her company has exhibited at PLMA before, she was pleased to see pet products getting its turn to shine at the show.

“(The spotlight) always helps. It brings more people in,” she said. “They have to know the pet people are here to be able to find us. I will get more people focusing on the pet food side at the show, and that’s good. We ship all over the world, and we want to get that international person, too. This helps.”

Haslem, whose company has a booth in the new SkyHall at PLMA, said it was time for suppliers to be able to show retailers the importance of pet products for private label.

“(The pet pavilion) gives pet food the type of exposure that it’s probably been owed for a while, because it’s an important category,” he said. “It’s particularly important for the consumer that has a pet, and about 50 percent of households do. That’s a great consumer for private label, and this is a great time to put the emphasis on a category that sometimes gets missed because not everyone has a cat or dog, and because we don’t consume it ourselves.”

McKee said Simmons would feature a 3.5-ounce gourmet cup for dogs that contain breakfast items at the show, reinforcing the trend of humanization in the company and the industry.

“Breakfast is the most important time of the day, right?” he said. “We’re all for greater emphasis on the pet category. There’s a lot of opportunity for private label pet products. And if this is crystallizing that, we’re all for it.

“For me I think (the pet pavilion) is a great way for us to get out there and meet not just with our customer, but at various levels and to get some really good, quick feedback on our approaches and programs, as well as figuring out other directions to pursue.”

And leading up to the show, Sharoff said he was seeing some good buzz about the move from registrations for the show.

“We’ve gotten a very good reaction from the retailers,” he said. “Some major retailers registered pet buyers for the first time ever to come to the show, so that would be a signal to the audience. I know we’ve increased the number of companies exhibiting.

“But retailer reaction is the reaction that counts. Manufacturers want to sell what they make. So we want to give them a show where they can exhibit and we can deliver retailers that turn out to be buyers.”

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