Category Review: Pet Products -- Opportunity Barks

September 5, 2008
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In 2007, U.S. pet owners spent $41.2 billion on their pets, the American Pet Products Association says, and will spend an estimated $43.4 billion on them in 2008.




It’s no secret that the United States has become a pet-pampering nation - indulging its faithful companions in everything from gourmet treats to designer duds.

According to the American Pet Products Association’s “2007-2008 National Pet Owners Survey,” 63 percent of U.S. households own a pet, with cats and dogs being the most popular choices. In 2007, U.S. pet owners spent $41.2 billion on their pets, the association says, and will spend an estimated $43.4 billion on them in 2008.

But data from Chicago-based Information Resources Inc. (IRI) actually indicate a slowdown in some traditional pet product categories over the past year. The total cat food category, for example, saw a unit sales decline of 8.3 percent during the 52 weeks ending May 18, 2008 (excluding Wal-Mart, club stores and c-stores). And unit sales in the total dog food category fell 8.1 percent during the same timeframe.

What’s going on - have pet owners suddenly become stingy when it comes to their furry friends?

We highly doubt it. It’s much more likely the data reflect the aftermath of the massive 2007 wet pet food recall tied to contaminated wheat gluten, which involved more than 150 national and private label brands. The problem food sickened numerous cats and dogs, and even was associated with some animal deaths.

In a move to protect their treasured companions, many pet owners began mixing up homemade pet food concoctions in their own kitchens. In fact, the Associated Press reported a significant jump in the sales of pet food recipe books in the two weeks following the nationwide recall.

Although some pet owners have since made the move back to food and treats on retail shelves, others might never return. As manufacturers and retailers learned during an earlier foodborne illness outbreak tied to E. coli-contaminated spinach, it takes time - a lot of time - to win back consumer trust.

Despite the recent recall, manufacturers remain optimistic about the pet care category as a whole, and about private label as a growing category subset. Even the current economic downturn bodes well for the pet products sector.

“Consumers are spending more time at home and more time with their families,” explains Debbie Bohlken, president of Maumelle, Ark.-based Claudia’s Canine Cuisine. “Coming into family play is the humanization of their pet. … More times than not, owners are making room inside their homes, and inside their hearts. These family ties and emotional bonds are spontaneous and are helping to fuel the growth that we are seeing.”

David Brinker-Wessel, national sales manager for Synergy Labs, Ft. Lauderdale, Fla., agrees that the “pet humanization” trend is creating an emotional/psychological connection with consumers, creating “exorbitant growth” in the pet care industry.

“Oral care, premium foods and a host of other functional products have exploded on the market over recent years,” he says. “As baby boomers continue to age and their children grow up and leave home, the traditional family pet becomes the new child. As this occurs more and more over the next five years, the industry will continue to grow and trend toward its human counterpart.”



Pampering Goes Premium

That means pet owners no longer will settle for substandard ingredients in the food and treats they feed their furry “children,” Bohlken says, nor for substandard materials in pet toys, collars and other accessories.

“For their treats, they want to know about the nutritional value, the taste and what they are allowing their pets to ingest,” she says. “They want quality.”

And today’s private label pet care offerings are up to the quality challenge, Brinker-Wessel notes.

“Private label customers are spending lots of time and money to define themselves in the marketplace, using custom bottle molds, top-of-the-line cosmetic-grade ingredients and unique eye-catching graphics,” he says. “No longer is the private label brand the ‘step-child’ to the national consumer good.”

Bohlken agrees, adding that many retailers strike out here because they think the customer wants only the cheapest food and treats, as well as the “no-frill” toys.

“On the contrary, consumers now are shopping for a pet who has become a full-fledge family member,” she says. “They want the best for that pet, and they are willing to spend a few extra dollars, especially if that pet product is appealing.”

Product-wise, the greatest opportunities continue to be in the dog and cat categories, Brinker-Wessel notes, while the aquarium and small-animal categories continue to lose market share. Within the dog and cat segment, oral care, treatment products, vitamins, supplements and other functional products offer the best private label opportunities.

“These opportunities present themselves more now because of the heightened sophistication of the consumer due mainly to the Internet,” he adds.

Yet another growing private label opportunity is pet first aid. According to Susan Smith, CEO of New York-based Rayco International Inc.’s First-Aid USA, pet first-aid and evacuation kits are becoming more important to consumers worried about the welfare of their pets during hurricanes, floods and other potentially catastrophic events.

A while back, Smith’s company developed a line of pet safety first-aid kits for the American Kennel Club. The company now offers a full line of pet first-aid products and kits, as well as pet safety/evacuation products ranging from waterproof writeable collars to reflective vests and bandanas, for retailers’ private label programs. Smith says retailers can customize the kits or offer individual components to suit their specific customer needs.

“As a consumer, you need to be prepared for any situation, and that’s what the pet safety category is all about,” Smith says. “I think it’s a huge category for manufacturers and store owners.”

With premium and newfangled items in the spotlight, retailers have a huge opportunity to grow sales and penetration in the pet products category. But doing so will require creativity not only in new product development, but also in store decor.

“Pet aisles can no longer afford to be dim, monotone or drab,” Bohlken stresses. “They need to become a destination oasis for the shopper.”

She suggests infusing the pet aisle with variety, expression and color. And good lighting also is important.

“Developers and marketers have to learn to think beyond dog food,” Bohlken adds. “Mix it up, splash about some color and bring in some dynamic private labels.”

To accomplish this, Brinker-Wessel highly recommends that retailers partner closely with their store brand suppliers, working closely with them to stay current with product and marketing trends.



Paws-itioned for Success

Once a retailer has the right goods to attract the “moms” and “dads” of today’s pampered canines and felines - and the appealing pet aisle to show them off - it’s time to market those products to shoppers. Bohlken points to packaging and displays as two critical areas needing attention.

“Displays and packaging must be attractive,” she stresses. “The product should be visible to establish trust with the consumer and to help tell the story of the product inside.”

Consumers not only want to see and feel the product, Bohlken says, but also want to know the product is made from quality ingredients or materials under the strictest standards.

“Offering an introductory special will help establish trust in a product,” she adds. “Offering a free sample with a coupon or a buy-one/get-one free special will help move product off the shelf and into the hands of the consumer. As with human foods, trying the product to experience the quality leads to increased sales.”

Bohlken also notes that Claudia’s Canine Cuisine is well positioned to help retailers turn their pet aisles around. The company offers a full range of gourmet dog treats and recently received an “Excellent” rating from the American Institute of Baking for fulfilling the requirements of the AIB Consolidated Standards for Food Safety, the same baking standards used to rate human-grade bakery items.

For its part, Synergy Labs offers its private label customers training seminars, sales collateral, and custom packaging/bottles and formulations to support both low-end and high-end consumers, Brinker-Wessel says.

“Private label has grown 60 percent as more and more companies are coming to us for high-end quality private label products,” he adds.

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