![Premiumisation proves an uphill battle for private label pet food](https://globalpetindustry.com/wp-content/cache/thumb/01/7887d31017e5901_960x540.jpg)
The share of global dog and cat food sales accounted for by private label is under pressure as owners in developed economies trade up from economy to mid-priced and premium products, with private label remaining marginal in most emerging markets.
The importance of branding
Euromonitor International data states that the share of global value sales of dog and cat food accounted for by private label slipped from 12% to 11% over 2009-2013. In Western Europe, and particularly North America, private label has struggled to maintain share of sales in this category in recent years. Despite a hostile economic environment, consumers have steadily traded up to mid-priced and premium products from economy offerings, where private label is much more prominent.
The fact that the share of value sales accounted for by private label in the North American premium segment dipped from 5% to 4% over this period is particularly illustrative – with such ‘alternative’ pet foods as grain-free, raw and human-grade offerings increasing in popularity. As pet owners in this region increasingly perceive themselves as pet parents, branding has become more important than ever.
Environment for private label
The environment for private label is less hostile in Western Europe, with such products accounting for 18% of value sales of mid-priced dog and cat food in 2013, up from 17% in 2009. Across fast moving consumer goods (FMCG) markets, Western European consumers tend to be much more receptive to private label products than their North American counterparts. This is particularly the case in Germany and, increasingly, Spain, where economic conditions have been especially difficult.
However, private label accounted for a mere 2% of value sales of premium products in Western Europe in 2013 – a lower figure than in North America. This suggests an opportunity for growth, particularly for such pet superstore chains as Fressnapf and Pets at Home, which tends to be more trusted by consumers in this category than the likes of Tesco, Carrefour or Aldi.
Opportunity in Eastern Europe
In general private label is less visible in emerging markets. This is particularly the case in China, where a series of food contamination scandals has led consumers to become extremely brand conscious. More generally, purchasers of pet food in emerging markets tend to be relatively affluent, so price plays a lesser role in their purchasing decisions. Pet shops remain an important distribution channel, particularly in Latin America, where private label accounted for a mere 3% of dog and cat food value sales in 2013.
Eastern Europe is a notable exception – the share of dog and cat food sales accounted for by private label in this region rose from 7% to 9% over 2009-2013. In Poland, the share of private label in dog and cat food soared from 11% to 18% over this period. The expansion of supermarket chains such as Tesco has played a role in this.
This figure is currently much lower in Russia, but doubled (to 4%) over the same period. Moreover, with modern grocery retailers accounting for 45% of value sales of dog and cat food in 2013, and the purchasing power of local consumers badly undermined by surging inflationary pressure, local consumers may now be much more receptive to the value proposition of private label.
Can private label bridge the gap to premium?
While private label is likely to remain strong in low-cost dog and cat foods in developed markets, it is in the mid-priced and premium segments where the major growth opportunities lie. While convincing consumers of the merits of private label in an environment where quality is paramount will not be easy, pet superstores may be able to leverage their brand equity as retailers into the premium category with private label.
With the exception of Eastern Europe, private label remains a long-term bet in emerging markets, yet even here there may be opportunities for savvy retailers, particularly Western players with a reputation for quality.
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