Puttin’ on the Pets

July 1, 2004
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Puttin’ on the Pets

by Molly Strzelecki
Private label pet food and supplies sales may be declining, but manufacturers are opening up doggie-doors of opportunity to boost the category.
A dog doesn’t mind if the rubber ball he’s playing fetch with cost his owner $50 or 50 cents. Cats have no opinion on the scent of their cat litter. And most fish don’t care what kind of flakes they are eating, so long they are eating and not being eaten. As long as you give your pet a little love, and rub his ears or scratch his tummy (or fins) every once in awhile, pets are pretty happy creatures. Wouldn’t you be, if your life involved nothing more than eating, finding that sunny spot on the rug to sleep in, and having people play games with you, games that usually result in getting a treat?
Though the pets might be different, one thing pet owners have in common is love for their pets. But the gap between lower-end and higher-end consumers of pet products and supplies can be one that is tough to fill for pet food and supply manufacturers. And as the gap increases, as has been the trend these days, manufacturers of pet food and supplies are all over the map with their target consumers.
“The way we look at it, the whole world of pet buyers breaks down into three groupings,” says Bob Vetere, managing director of the American Pet Products Manufacturers Association (APPMA), Greenwich, Conn. “You’ve got one group that is very price-conscious and looking for the best value they can get for their money. You’ve got another group that kind of fits in the middle, and they’re looking for a little more glitz in what they get and they’re more willing to splurge on their pet. And then you’ve got a rather interesting group of folks where money is no object and they will buy things like a $2,000 dog bed or a $10,000 dog house.”
Frank Arviso, national sales manager with St. Louis - based Land-O-Lakes Farmland Pet Food, notes that the Baby Boomer generation is a leading target market in pet food and supplies, and as the industry takes note of that, the logistics of the category will change.
“The empty-nesters or those whose spouse has died don’t have to buy a car or an education for the pet, so what do they do? They go out and buy the best dog food and toys. The whole idea and concept of purchasing power is really changing and it’s going in that direction,” Arviso says.
It doesn’t matter which tier of consumer is being targeted, the private label pet food and supplies category is nothing to howl about lately.
According to Chicago-based Information Resources Inc., private label sales for pet supplies are down 7.1 percent for the 52 weeks ending May 16, 2004. Private label cat food and dog food are down 8.4 and 8.5 percent respectively.
“It’s a little stagnant right now, but I think it’s going to reverse itself again,” Arviso notes. “Right now it’s still a very strong business but the growth has slowed up a bit. Branded products have been doing a good job, and that’s diluted the private label sales somewhat.”
Pampered Pets
Branded products, in any category, are the obvious opponents of private label products, but the division of power is not as great as it once was. Private label products, once the underdog, now have great opportunities and potential to come out as Top Dog in the pet food and supplies category.
“Those who do a better job of truly making a brand out of [private label], thinking about the quality level that is in there and offering really solid products and really strategic focus, those are the ones that really drive the share and then create a brand with their corporate brand,” explains Drew Clarkson, director of category management for Dad’s Pet Care, Meadville, Pa.
With innovations abound, and private label darling Wal-Mart leading the way, private label products can help get the pet food category out of the doghouse, if manufacturers take a hard look at branded products’ innovations. Granted, not everything on the branded side is going to work on the private label side of business, as many private label consumers have a value-conscious mindset, and glitz and glamour of products is not the first thing on their minds. But for the most part, basic additions to private label pet products are something pet product purchasers will appreciate.
“You’re starting to see a lot of the flavors, the varieties, the vitamin enhancements, the additives, also being incorporated into private label,” Vetere says. “When you have someone like a Wal-Mart being such a big player in the private label end of the business, you’ll find that a lot of folks quickly jump into that same positioning. A lot of the treatments you first see in branded products are carried over naturally to private label. I think if a consumer walks into a store and sees vitamin-enriched Purina Dog Chow on the shelf, and right next to it there’s a private label brand that’s vitamin-enriched, then they’ll feel like they’re still being good to their pet, but in a value sense they’re also able to be good to their pocketbook.”
Arviso notes also that when branded-giant IAMS got into the super-premium segment of pet food, it shed new light on the category.
“Different flavors and varieties have been tried at one time before, and some have made it and some didn’t, but it’s impacted the super-premium side,” Arviso says. “IAMS coming on board has had a major impact on the category, and private label is starting to take an interest. Some of the bigger [private label] customers are looking to emulate IAMS and come up with their own version. The time is right to jump into that segment.”
Jumping up to a slightly higher notch, gourmet pet foods are having a surprising impact on the pet food category. Would you ever think of gourmet dog food coming to a store near you? Sure enough, consensus among industry executives is that the gourmet segment is the place to be. Private label boutique-style products are the latest trend in cat and dog foods, tapping into those consumers on the high end, but priced well enough to appeal to those consumers in the middle.
“You’re getting more boutique products out there,” says Joshua Scherz, chief operating officer of Blue Galleon, Wayland, Mass. “Before it was just a handful of boutique producers that were doing it, and now you’re starting to see it everywhere.”
Wheeling, Ill.-based Evanger’s Dog & Cat Food Co. has been canning gourmet dog and cat food since before it even became trendy, using the freshest vegetables and meats available for their products.
“The freshness is what sells the product. Everyone wants natural, and I’m getting requests for exotic vegetables like squash,” says Holly Sher, president of Evanger’s. Last year, the company even put out a vegetarian pet food, per customer request. Scherz agrees that many manufacturers are leaning toward the boutique-y trend, in a way that is acceptable to all retailers, not just high-end ones. He notes that the industry is “seeing a lot more ‘real food’ and ‘100 percent food,’ like real turkey or 100 percent chicken or turkey, [pet foods] that are pre-packaged and have to be refrigerated.”
Additionally, Sher notes, many customers are requesting organic pet foods, tapping into a new area of the gourmet segment, which most manufacturers see as the natural progression of super-premium.
While pet food is innovating faster than you can say “Fetch!,” other products are taking a slightly slower approach. In the litter products section, Colin Gleason, senior vice president of Toronto-based Northdown Industries, notes that branded manufacturers trying to continually innovate over the past year and a half have done more harm than good. IRI data backs up that notion, showing that cat and dog litter was down 1.0 percent for the 52 weeks ending May 16, 2004, and private label cat and dog litter was down 2.3 percent for that same time period.
“A lot of the big brands in cat litter seemed to be fighting amongst themselves. A lot of trade dollars brought, for a period of time, the pricing down fairly close to the private label pricing, to the point where there wasn’t a lot of differentiation in price in specific chains at specific times. And we certainly believe that impacted sales,” Gleason says.
About four years ago, the big trend in cat litter was the use of silica gel, a combination of silica, sand and water that provides excellent odor absorption, Gleason notes. However, the gel got to be very pricey, driving the cost of cat litter up. These days, manufacturers have turned to using a mix of silica and regular litter, lowering the price, but still offering an excellent product to consumers.
“You’ve got the ease of use in terms of the clumping,” Gleason explains, “but then you’ve got odor control in terms of the silica. And it’s not as expensive when you mix it over an entire package. That’s where a lot of the growth is.”
Additionally, Gleason says, there is a lot of growth and growth potential in alternative litters. Litters made out of pine or corn cobs have increased in popularity, and lean toward the all-natural and flushable varieties of litter and have “gotten to the point where it’s big enough that we can start private labeling,” Gleason finishes.
Pet-Friendly Packaging
Private label packaging is always a volatile issue in the industry, the common notion being that the packaging of private label products needs to be on par or better than that of a national brand. Never has that been truer than in the pet food and supplies area.
“[Retailers] are pushing us as suppliers to make better, more attractive packaging and better product in a bag,” says Tom Feather, director of trade marketing for Dad’s Pet Care.
Pet supplies and products can be tricky to handle, with many possibilities for spillage when it comes to products such as dry food or litters. With many of the products in bulk-size bags, the sturdiness of the bag will factor into a consumer’s purchasing choice. Companies like 2N2 Inc., Redondo Beach, Calif., have helped solve the problem of bulky bag handling, getting “a handle” on reinforcement for medium- to large-sized bags.
The handle is an injected-molded piece of plastic that is heat sealed into the bag during the bag-making process, explains Ken Siegel, president and chief executive officer of 2N2, and is ideal for use in bags more than 10 pounds.
“When you pick up a bag, you now have some reinforcement to the handle, it’s not just a die-cut hold through the film which seems to bite into your hand,” Siegel says. “And the area of the handle is 200 percent stronger, because we heat-seal that surface area of the film.”
Other companies, such as Blue Galleon, have taken their packaging up a notch, adding a variety of sizes to its already pioneering pouch-packaging.
Sizing products is always something to keep a close eye on, industry executives will agree, and is a factor that highly depends on what channel the product is in.
“The industry is constantly moving up in size,” Gleason says, whose company deals mainly in pail-packed products. It’s now 14-pound pails and the biggest growth is showing in the 20- to 30- pound range.”
Whether the pets are big or small, old or young, fishy or furry, the private label pet food and supplies category has something for everyone. And while the category may not be the cat’s meow at the moment, innovation, new products and packaging will continue to drive the market, as long, of course, as people don’t go barking up the wrong tree.

PET SUPPLIES Performance
Category Dollar Sales
(in millions)
% Change
Vs. Yr. Ago
Dollar
Share
Unit Sales
(in millions)
% Change
Vs. Yr. Ago
AVG. PRICE
PER UNIT
Pet Supplies
Total private label $118.7 -7.1% 12.3% 33.2 -10.2% $3.56
Total category $965.7 -1.6% 100.0% 249.2 -2.9% $3.87
Non Dog/Cat Pet Food
Private label $39.9 -8.9% 16.8% 11.9 -15.6% $3.35
Total subcategory $238.1 0.4% 100.0% 67.3 -5.3% $3.54
Cat/Dog Litter
Private label $97.3 -2.3% 13.5% 33.5 -4.4% $2.90
Total category $720.4 -1.0% 100.0% 156.9 -3.3% $4.59
Cat Food
Total private label $149.0 -8.4% 7.4% 238.0 -15.3% $0.63
Total category $2,014.5 -2.7% 100.0% 2,252.2 -5.6% $0.89
Cat Snacks/Beverages
Private label $.441 -10.9% 0.4% .375 -14.5% $1.18
Total subcategory $103.9 1.5% 100.0% 67.6 -3.4% $1.54
Dry Cat Food
Private label $77.5 -2.7% 8.1% 20.9 -3.8% $3.71
Total subcategory $961.4 -2.6% 100.0% 225.8 -6.7% $4.26
Wet Cat Food
Private label $69.6 -14.0% 7.4% 215.9 -16.3% $0.32
Total subcategory $940.3 -3.1% 100.0% 1,953.1 -5.5% $0.48
Dog Food
Private label $261.1 -8.5% 9.4% 166.3 -14.6% $1.57
Total category $2,786.2 -1.7% 100.0% 1,345.2 -7.0% $2.07
Dog Biscuits/Treats/Beverages
Private label $65.4 -2.6% 11.5% 28.7 -5.1% $2.28
Total subcategory $570.4 -0.5% 100.0% 213.3 -2.2% $2.67
Dry Dog Food
Private label $128.5 -8.2% 8.3% 24.2 -10.8% $5.31
Total subcategory $1,549.1 -1.1% 100.0% 193.1 -3.8% $8.02
Wet Dog Food
Private total label $58.0 -14.5% 9.3% 110.8 -1.5% $0.52
Total category $621.2 -3.6% 100.0% 928.5 -8.6% $0.67
Source: Information Resources Inc. Total supermarket, drug and mass merchandiser sales for the 52 weeks ending May 16, 2004, excluding Wal-Mart.
*Totals include subcategories not listed on this chart.

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