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- RESEARCH & AWARDS
Pets are now in more than two-thirds of households. According to the American Pet Products Association (APPA), 68 percent of households have at least one pet.
Americans will spend a record $58.51 billion on their furry family members in 2014, up five percent from 2013. Food represents more than one-third of expenditures ($22.62 billion), and roughly one-quarter ($13.72 billion) is spent on supplies and OTC medicine.
Changes among major players
With sales relatively flat in mass outlets as reported by IRI for the 52 weeks ending April 20, 2014, the market is becoming increasingly cutthroat, and major pet food marketers are jostling for position. Retailers are struggling to develop products that stand out. Most store brand categories showed declines in unit sales: of 14 segments, 11 were down. The bright spot: frozen and refrigerated dog food, which is growing rapidly due to an interest in natural products.
In an increasingly cutthroat market, maintaining focus is crucial. Several big brand players, including P&G and Novartis, are getting out because they couldn’t give the pet market the attention it deserved, according to the April 2014 “U.S. Pet Market Outlook, 2014–2015” from Packaged Facts.On the other hand,“We’ve seen several players go all-in in the last year: Del Monte Foods sold off its non-pet business to emerge as Big Heart Pet Brands, while Eli Lilly increased its commitment to animal health,” the report states. Mars’ recent acquisition of P&G’s pet care business will add a new dimension to the industry in 2014.
Pets on a pedestal
According to Euromonitor’s May 2014 report, “Pet Care 2015,” natural and organic premium foods have kept the industry advancing.Most new launches are in this segment, as consumers pay close attention to their pets’ wellness and seek the safest, most-nutritious products available.
“Just as pet parents are gravitating to health-and-wellness products and foods for themselves, their goals are similar for their pets—a better quality life, longevity and fewer trips to the doctor/vet,” said Bill McKee, vice president of U.S. private brand sales at Simmons Pet Food, Inc.
In response to widespread unhealthy diets and the obesity epidemic, “Preventative care and medicinal products are what consumers are looking for,” said Kevin McAleer, vice president, sales, at Pro-Pet LLC. “This segment is growing fast.”
Aging is the core market driver, as more pets suffer from age-related conditions such as joint deterioration and cognitive dysfunction. As in human products, popular ingredients include glucosamine, omega-3 fatty acids and probiotics, along with trendier ingredients like bee pollen, green tea and elk velvet antler.
Upscale products are high in protein and low in filler. “The foundation is a protein source, fresh meat and even bison, with healthy ingredients like vegetables added,” said McAleer. “Also included are health-oriented products such as those with glucosamine, chondroitin and antioxidants.”
According to McKee, upscale pet foods have “nutrition-focused ingredients, including some exotic proteins such as duck and venison. You will also see the use of healthy inclusions such as sweet potato, spinach and cranberries, among others. But what is omitted is just as important.” Upscale pet foods often avoid use of artificial colors and flavors and byproducts. They’re also frequently grain-free, omitting corn, soy and wheat. Some are even gluten-free, he noted.
These standards also apply to treats. “The quality of those ingredients, the smell and flavor, and the way a product is produced and presented makes a pet treat upscale,” said Debbie Bohlken, president of Claudia’s Canine Cuisine. “Our treats are made in the United States with human-grade ingredients, while using strict manufacturing controls.”
The challenge for retailers
Through their private label efforts, retailers need to respond to the current marketplace by competing on price, incorporating premium and natural products into the product mix, improving merchandising, and becoming destination information sources.
“‘Health and wellness’ is the emerging opportunity for store brands. Since most of the national brand offerings are channel-exclusive, a health-and-wellness program can be a significant competitive advantage for retailers,” said McKee.
McAleer sees growth in Walmart and Target stores, with pet specialty stores having the strongest showing. “Grocery has a decade-long loss in pet food,” he said. “Performance in drug is not as bad.” In drug stores, “there is the convenience factor,” he said. Drug store demographics also come into play, with shoppers skewing older. It’s practical for them to buy pet foods as they pick up prescriptions. “With changing population characteristics, more drug stores are looking into this, and see it as an opportunity,” he said.
“There will always be opportunities for the classic private brand approach in pet food,” said McKee. “With a base of customers who want NBE quality at value versus the national brands, those retailers who approach the pet aisle in a complete and comprehensive fashion are winning and keeping consumers.”
A thorough approach will benefit retailers. “Super-premium brands educate shoppers. Store brands don’t have the marketing funds, but just offer a lower price. Retailers need to build programs to go after that segment—devote marketing resources and funds.” suggested McAleer. “For example, drop product offers in the pet food bag. The consumer dumps it out like a Cracker Jack prize, and it gets their attention.”
Eye on the national brands
Energy bars for dogs?To make sure active dogs stay at the top of their game,Nestlé Purina PetCare has expanded its line of canine nutritional supplements with Purina Pro Plan Sport PRiME and ReFUEL protein and carbohydrate bars. Billed as “nutrient-dense and protein-rich,” PRiME nutritional supplement bars are supposed to be fed to dogs half and hour before exercising. The ReFUEL bar reportedly helps replenish muscle energy stores and promotes muscle rebuilding after activities. Nestlé Purina PetCare believes dogs, just like humans, experience muscle breakdown, fatigue and depletion of energy stores.
Sounding like he was speaking about their owners, not pets, Dr. Brian Zanghi, Nestlé Purina Canine Sports Nutrition Researcher, said that they are “naturally great athletes, with very unique nutritional needs, and by feeding the proper food—a diet high in fat and protein to increase metabolism and endurance—you can actually improve athleticism.”